And, of course, by viewers like you.

It has been made abundantly clear this past week that many of us would much rather be watching Sesame Street than Wall Street – although both are full of valuable life lessons. In fact, had more of our financial leaders watched Sesame Street, we might have less greed, more sharing, and more honesty and integrity throughout the marketplace.

Perhaps we wouldn’t even be in this mess. However, it is evident that there are far more Oscar the Grouches than Big Birds hanging around.

So, “V” might be for vendetta, but as of late has stood for volatility. The 0.3? The percentage that our GDP has decreased in the last quarter.

The bad news – as if anyone’s even listening anymore

Does anyone even remember the DJIA being at 14,279? I feel like I wasn’t even there. At least it sure doesn’t feel like it, given that we’ve shed quite a few pounds off that number.

The good news is that gasoline, by the gallon, is cheaper than milk most places across the US. That’s the only good news. Headlines have not turned optimistic lately – to the contrary, as if any of us thought possible, they’ve gotten worse.

The latest fad in cataclysmic reports is the topic of layoffs. As dismal earnings are released, they are commonly accompanied by companies releasing a number (sometimes in the hundreds, but last week were sporting a comma) that quantitatively tells us how many people will no longer receive a paycheck from that company.

The latest? Merck laid off 7,200 workers. That’s literally 12% of its workforce. Goldman? Buffett-backing or not, it’s sending 10% of its workforce job-hunting.

I won’t even speculate on the final layoff numbers for America’s automakers. Almost a million jobs have been lost this year, and I have a feeling that number can’t possibly shrink.

Sidenote: Monster.com (MNST) stock is down 70% since this time last year. If only they made their money off of the number of people scouring their pages who suddenly have forty more free hours per week …

With thousands of corporate layoffs fostering the realistic possibility of an unemployment rate of 8% right around the corner, bailouts, bailouts, and more bailouts, the value of the dollar falling once again, and earnings for companies not named Exxon getting demolished, the market has not only refused to collapse, but has actually made small gains.

We cannot forget that investors and traders look forward…it’s the basis for the desire to own shares of any company. Looking forward, things looked grim – hence the recent cliff-diving we’ve experienced. However, that also means that much of this worst-case-scenario business has already been reflected in the market’s prices.

So here’s the thing – people are getting sick of the bad news and aren’t paying much attention anymore. Please follow my reasoning:

“R” is for Recession. “N” is for “No s_ _ _”

Let me begin by saying how the definition of the word “Recession” is outdated. Though I do recognize an outstanding debate, the generally accepted definition of a recession is currently “two or more consecutive periods of negative GDP growth”.

Technically, we’ve only had one quarter of GDP “shrinkage”… but that was some awfully cold water indeed.

We live in a fast-paced technology-based world, and the market moves much more quickly than it did ten or twenty years ago. Anyone with two eyes and two ears – or at least one of each – does not have to wait until January’s possible results of 4th quarter GDP shrinkage in order to tell himself that we’ve already entered a recession. That’s like waiting until you’re in the hospital to determine whether or not you’ve cut your wrists.

Disclaimer: Please do not cut your wrists. The market will come back.

Here’s my contention and my observations on which it is based:

Bad news – market goes up. Worse news – market goes up.

Conclusion = fear is priced in, bad news is priced in, and further bad news falls on deaf ears.

So here goes.

I’m putting it all out there and saying that this area is the near-term bottom. Not here specifically, but the area between 800 and 900 in the S&P that we keep playing with is the bottom.

I’m not saying we won’t test it. I’m not saying it will be a smooth ride. But I’m saying the worst is over.

Now I am not so naïve to ignore the fact that I have been wrong before – I was wrong about oil. I thought there was no way it would dip below $80. However, I also strongly suggested a shorting the market in my early September article, Very Superstitious Writings on the Wall, when the S&P was at 1,274.98. Take that one for a ride.

Volatility is great for traders and the emotionally stable.

Speaking of rides, market index swings of 3, 4, 5% or more barely cause an eyebrow to be raised anymore. Most investors have no confident forecast of what’s going to happen, and the VIX seems to be setting records on a weekly basis (it used to be considered extremely volatile when it would tap 40… it recently doubled that number).

John Brady, an analyst for MF Global was on CNN last week explaining that traders could abuse the S&P down to the upper 700s, where the next technical levels exist. I happen to see the support levels slightly above that, as I mentioned before. Now, I realize that we tore through Dow 10,000 – and 9,000 – like they didn’t even exist, but as a matter of simple arithmetic, the lower the markets go, the fewer sellers there are available.

Something else Mr. Brady said that I agree with is that many purchases as of late have been for trades, not for long-term investment. This is, of course, what feeds the insane amount of volatility we’ve been witnessing.

I mentioned in my last article that I have begun purchasing… stuff. Some for investments, some for trades. I have seen my account go up and down 8-10% in both directions in the past couple of weeks.

Guess what? There’s not an instrument or device that science has produced that is accurate enough to measure how little I care. I’m sticking by it. We will be longing for these prices in a few years.

John K. Whitehall
Analyst, Oxbury Research