Nice cover image from the Economist on the brown shoots.


“But, welcome as it is, optimism contains two traps, one obvious, the other more subtle. The obvious trap is that confidence proves misplaced—that the glimmers of hope are misinterpreted as the beginnings of a strong recovery when all they really show is that the rate of decline is slowing. The subtler trap, particularly for politicians, is that confidence and better news create ruinous complacency. Optimism is one thing, but hubris that the world economy is returning to normal could hinder recovery and block policies to protect against a further plunge into the depths.”

Here’s the cover image:


Hat tip Gary


A glimmer of hope?
The worst thing for the world economy would be to assume the worst is over
Economist, April 23rd 2009

Category: Contrary Indicators, Economy, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

141 Responses to “The (False) Glimmer of Hope”

  1. DL says:

    leftback @ 6:16

    I think I was an undergrad at the same place Ritholtz went (Stony Brook).

    I took a year and a half of physics there (among other things).

  2. KJ Foehr says:

    Re the Chrysler BK news on zerohedge.

    Below the article, which was posted at 3:27PM, there was this:

    “Update: Dow Jones up 90 points on the news in 5 minutes.”

    Was this really what triggered that late day move? How is it good news? Because it is C-11 and not C-13? Or What?

  3. karen says:

    Andy, agree with you that gold is in a downtrend, and 920 is the number to break (i’m not as dumb as you think and you know how i like a straight edge!)… anyway, i posted that in the BP Cafe yesterday… but now i’m waiting for it to do it’s thing.

    Here’s a trick, so yesterday’s 60 minute, 10 day H&S on the $spx started to play out at the close yesterday, and looks to be completely negated today.. and on a 30 minute chart, 5 day, chart there’s even a ‘glimmer of hope’ for a cup and handle.. ha ha ha.

  4. leftback says:

    @DL: I did a year of Physics at Cambridge. I was appallingly mediocre, but it is a fine discipline.

    @Karen: Did you mention my bottom? I didn’t know you cared, Golden Girl….

    @KJ: Mucho controversy about the veritas of the Chrysler BK story. Of course it is inevitable…

  5. Andy Tabbo says:

    the ol cup and handle pattern….ha.

    my concern about the sp500, as a bear, is that it’s going to lapse into a pennant/triangle type formation on the 60 min charts….maybe go to 870 then fall back to 835 then back to 860′s….just sort of congest before we get one more little move to 900 ish…really test the shorts out. That’s not what I’m positioned before, but that’s my alternate case if we don’t collapse in the next 24 hours….

  6. leftback says:

    AT: If SPX 875 DOES give way to the upside – doesn’t 875 then constitute a significant support for a more prolonged upward move to the 950 range? I don’t buy this rally continuing but it’s good to have a Plan B. Does your model predict a drop right here, on Friday or Monday?

  7. KJ Foehr says:

    @The Curmudgeon:

    “Is there anyone in the universe that gets the reality that high unemployment does not cause deflation or vice versa? That the one COULDN’T cause the other, because they’re not even correlated? Correlation is not causation, but a lack of correlation surely means there can’t be causation.
    Have we all forgotten 1979/82?
    Double-digit unemployment; double-digit inflation.”

    I think it has to do with the law of supply and demand.

    Also, the high unemployment in ‘82 was not the cause of the inflation, which had been building since the early ‘70s. The high unemployment was a result of Volcker’s attempts to break the back of inflation, via even higher interest rates, which worked. Inflation had been building from the early ‘70s.

  8. insaneclownposse says:

    I like this blog, but I have to agree that the posters and comments are way too bearish way too early. I don’t know squadoosh, but one thing I’ve learned over the years is that as a retail trader you have got to be flexible enough to survive long enough to learn how to make money.
    The markets can ignore fundamentals for very long periods – they can rally on mechanics. Eventually fundamentals matter of course, but the markets just went down for 18 months without any decent rally – even the Nov., Dec. pump after the panic was weak.
    My point is that this is the first strong upside market action we have seen. At least consider that it might not implode after only six weeks.

  9. karen says:

    I just want to see what happens near 875… push thru and uh-oh. otherwise, back to the 830s or worse… so tomorrow it is… but it wouldn’t surprise me if we get strung along a bit longer.. this market wants to try everyone’s patience. : )

  10. DL says:

    Leftback at 6:26

    Just about the only thing I remember from physics is:

    Bad boys rape our young girls but Violet gives willingly

  11. leftback says:

    @insane: Anything is possible, obviously, but if you read the various pieces on bear market rallies, even the big ones are usually 20-25%. The recent rally of 30% is right at the top end of the range of amplitudes, with the single sole exception of the 50% rally in the 1930s. Take a look at the Hussman piece posted by ben22 above.

    The bears here don’t usually pull stuff out of their arse for no reason, and several of us (including Barry) were extremely bullish on March 6th. I bought at SPX 670 and sold at SPX 845, as an example.

  12. call me ahab says:

    @ clownposse-

    otoh- why would it continue to go up? Where is the good news? Not saying it can’t, just saying that it doesn’t make much sense- especially if a person is even somehwhat observant that the bank numbers were delusional

  13. DL says:

    insaneclownposse @ 6:38

    Momentum is certainly waning.

    At least, one shouldn’t be long at this point.

  14. moneyneversleepsblog says:


    The biggest concern right now should be the level of negativity which is now very uniform. When everyone writes off the rally as a sucker’s rally how can you not step back, be objective and say maybe we’re missing something? Maybe instead of trying to focus on what’s wrong you have to switch and say what could actually go right that no one is thinking (aka positive black swan events)? When the smart folks got negative a year or two ago, they were lone voices in the crowd, that’s where the play is.. when everyone joins the same side do you stay there or move over?

    This rally is very similar in percentage terms to the November rally but the breadth/vol looked better. We had a similar rally in October but it was super quick!

    The question shouldn’t be where is the good news? The question should be where is the bad news that is not already in the market? Banks are clearly working some serious magic on the numbers and that has been well documented.

    The market is stretched, the only real debate is do you expect a pullback or new lows? Big difference, and that is the only question to answer right now… :)

  15. Andy Tabbo says:


    Not sure about that 875 becoming big support or a push to 950. If we do take out 875 I think it might become a bull trap. I get the feeling lots of technical traders short in the 870s, so it would be a classic trap to take out the 870′s….get a rush to 900..then a big failure. I have decent sized zone between 870 – 906 (cited a few weeks ago) that is my bigger resistance area.

    My trading focus is very, very short term right now. I’m looking for a strong dump tomorrow before 857….if I don’t see that…then i’m expecting a grind into 865-871 and then we have a decent pullback next week, but nothing terribly powerful. If we take out 875 next few days, color me wrong and surprised. Would have to clean the slate and reassess the action…

  16. insaneclownposse says:

    why did the crapdaq go to 5000? If you went short at 4000, you got your ass handed to you. Sometimes the markets don’t make any sense and that’s why I think it’s best to be patient and wait to go short right now. The one thing you can be sure of in trading is that senseless action will definitely go one much longer than you ever thought possible.

  17. leftback says:

    “The biggest concern right now should be the level of negativity which is now very uniform”

    Very very good point about pullback or new lows, and that is well taken. A pullback to SPX 805 could bring in new volume on the long side for sure. I am completely agnostic about this and would play what I see.

    Maybe sentiment is negative here, but probably not at some of the other sites. Good point but you should look at some of the “stupid trader” sites and let us know what you see. You know, the ones with the very poor spelling and punctuation and other diagnostic indicators….

  18. DL says:

    Plenty of bad spelling and punctuation here. (including some of my posts).

  19. DL says:

    insaneclownposse @ 7:00

    “why did the crapdaq go to 5000?”

    Yeah, it happened. But it was a highly improbable event. I prefer to place bets on what’s likely.
    But no one’s arguing against flexibility, either.

  20. insaneclownposse says:

    Everyone’s looking for the pullback. If there was going to be one, I think we would have seen it. There are a pile of shorts and a tremendous amount of potential performance chasers out there sitting on a large amount of cash. I totally disagree that the market is somehow stretched to the upside after the epic wave of deleveraging that just crashed through it before this latest rally. There could easily be an explosion to new highs.
    What happens is anyone’s guess. We shall see.

  21. call me ahab says:


    but that’s always the dilemma- entry- when?

  22. leftback says:

    @AT: Thanks for the “bull trap” theory. Another thing to keep in mind when everyone is looking at 875.

    Tomorrow, is another day.

  23. ” Because it is C-11 and not C-13?”


    when I first read that, I was wondering: “Why is he talking about Carbon isotopes?”

    @AT, as w/lb, that sketch you drew out re: 870-906, sounds like a good one..

  24. KJ Foehr says:


    Actually it should have been C-7, not 11. C-7 would be a radioactive isotope (like C14?), whereas, C-11 apparently is a stable isotope of the green shoot element.

  25. usphoenix says:

    IMHO, day traders are playing against some very smart supercomputers at Shaw and GS and probably ….

    That could easily be the source of the PPT. Perhaps also with some political bias, knowing how to hedge better than we do.

  26. rktbrkr says:

    Renault bought AMC, it was a match made in hell, sold AMC to Chrysler. Daimler bought Chrysler, it was a match made in hell. Now Fiat is buying Chrysler in BK court, talk about a match made in hell’s sub basement. The Chrysler creditors are claiming they have first choice of the assets, their choice(s) will be Jeep and/or Chrysler after market parts business, everything else has negative value.

    AMC brought out those jacked up 4WD wagons years after Subaru had pioneered reliable, fuel efficient 4WD wagons and other passenger vehicles. You still have to be a masochist to buy Chrysler/Jeep products – and if you buy a Fiat designed, Chrysler assembled vehicle then you’re really a Village People type.

  27. Transor Z says:

    BTW, when I got home I asked my toddler what the cover picture was from: “Nemo!” QED

  28. rktbrkr says:

    Remember the old International Harvester Scout? They gave up on them before SUVs started becoming popular. Maybe after this depression ends we’ll remember how to manufacture profitably again – assuming we wake up before Geithner signs over the whole country to GS of A

  29. call me ahab says:

    I do remember the IH Scout- made in my hometown- Ft Wayne IN- still like them to this day- don’t see many around- discontinued on 1980- but it’s right up there with the original Ford Bronco as a cool retro vehicle

  30. EAR says:

    In the midst of the recent rally, I told a wise man how odd I thought it was that the market was up in such a horrible economic environment. He said “What choice does it have?”

  31. Onlooker from Troy says:


    It’s one thing for the market to keep going up like the Naz to 5000 when things really do appear to be good inm the economy or for 2007 for that matter. But in the face of the absolutely atrocious debt deflationary slide the world is in right now it’s hard to see it being in denial for more than a quarter or so.

    Time will tell.


    Don’t confuse smart money sentiment with dumb money sent. If you’re judging the sentiment from this blog and others where skeptical people who aren’t swallowing the green shoots line and who are way ahead of the mainstream press, then I think you’re reaching the wrong conclusion. That’s the smart money, IMO. Combine that with the insider selling and lack of buying, the rush to issue stock by the banks and REITs before the opportunity passes, Dr. Hussman’s (Hussman funds; look at his record) refusal to buy the rally, Richard Russell, etc.

    I think you’ll find that the contrarian view of sentiment that you’re looking for should be based on the average mutual fund investor who’s always late to the show and is probably excited by this rally and the media’s spin (CNBC) and is getting back in to catch the “new bull.”

  32. moneyneversleepsblog says:

    @ Onlooker from Troy

    I expect a skeptical take from this group, tends to attract that kind of crowd. I think the avg Joe is not buying in to this and the reason is their view on the economy. That’s a problem because the economy and the market can diverge at times. The “smart” money, which is a stretch, got short term excited (looking at AAII) but consumer sentiment sucks and the dumb money is afraid to jump back in the pool. It is highly unlikely that the mutual fund investor is all in after getting burned.. they will be very slow to get back in and by the time they do.. most people don’t even realize the rally we have had since the March 6th low.

    No one can really see any potential or faint “glimmer of hope” for this economy.. and from a contrarian point of view, that is actually slightly comforting… kind of like October 2007 when you just couldn’t figure out how the economy could possibly continue to grow…

    perhaps this magazine cover will end up being a contrarian indicator… now that would be some black swan stuff right there…

  33. The main point to remember in this fiasco, is that it is a marathon not a sprint.
    To liken it to a baseball game, we are in the top of the 2nd inning.
    Long time till we bring in the closer.

  34. Joe the miner says:

    Forget the glimmer of hope, at least for now as we seem to be looking at the next leg down for the DJIA as the bullish index ($BPINDU) has hit an inflection point; it hit a high on april 19th of 63, we are now at 47 but the DJIA is still trading just shy of 8,000. The only question is how big of a let this will be. Time to pick up some DXD & make some $$$

  35. Joe the miner says:

    Rather, “The only question is how big of a “leg” down this will be”.

  36. Todd says:

    I did read in WSJ today that Mutual funds had net out flows from their money market funds. Retail is starting to get back into the market.

    I do think that the Chrysler event next week, no matter how well it’s being telegraphed will still be taken as a surprise. Why? Joe retail still holds out hope that the govt wouldn’t just let it happen.

    Your average 401k retail investor is not even looking at their statements right now. They know it’s bad, they don’t want to know how bad. All they know is that if they are going to have a chance to retire is to keep working and keep putting money into their 401k.

    I’m usually very optimistic, usually you can gain something positive out of every event. I’m also a realist. Conditions may be better right now, but they are not great. Credit has only loosened for the Fortune 100 type companies. The smaller you go the tighter it gets. We are just lucky that usually the smaller a company is the less leverage it usually carries. So these companies can continue going longer, it is just long term if credit stays this way more and more companies will start running into problems.

    For a positive. I do think information tech can shorten some of the pain that was experienced in the past. Supply chains are a lot tighter now than they were, so over and under corrections will not be as extreme as the 30′s.

  37. bangkokexpat says:

    Obama administration is all smoke and mirrors and still hides real situation from the world. Banks forced to take TARP funds then objection raised by government when they try to pay back. Government is not good in business as they can never stay within thier budget. Hands off and let people pay for their mistakes is better approach. Convict and harshly punish white collar criminals so they will police themselves rather than face the consequences of being criminally misleading. As for bonuses tax the incentive out of them.

  38. drollere says:

    it’s official: cramer told his viewers to “sell sell sell”. “people tell you it’s not ok to sell, and they’re wrong.” i laughed out loud. he must have his shorts all in a row.

    i keep hearing about this leg down, this big leg down … and now that cramer says it, i’m starting to wonder. this is the oxycontin market. see no pain, feel no pain. whatever happened to that rising wedge formation? any chartists still feeling that wedge?

    zerohedge is interesting, and i like the trader screen shots and deep dish info, but tyler reads too much paranoia into the data. you can tell he’s young. it’s a market, in the middle of an economic catastrophe. it’s not supposed to make sense. it has no future plans. set your stops and go for a walk.

  39. rktbrkr says:

    What prompted Cramer to launch into sellsellsell? I know he’s just an entertainer. Right now I’m on a CNBC moritorium.

  40. drollere says:

    cramer comes after the money honey and the same time as pbs news hour in my market. i sometimes see him when i turn on the set to switch over to pbs. so i didn’t hear his rationale. he was waving little black bears around i think, if that means anything.

    i think buffett has great sense to talk only to becky, she’s very cool and high class. maria is still a classic performer but she’s been long on the job and can be a little carnival with her barking. erin is totally hot and tight but a little too nervous. they are all whip smart imo.

    and then there’s cramer and the oversexed bachelors on fast money, saliva on their lips and eyes bulging … it’s like the gals broadcast out of new york and the guys out of las vegas.

    i’d guess ratigan will go to atlanta, where he can resume the beck franchise and go after the beck audience. angry populism! it sells sells sells!

  41. [...] Barry Ritholtz, The Big Picture, April 23, [...]