The Dow Jones Industrial Average climbed 207 points yesterday.
The increase was based on a rumor that Obama/Pelosi/Reid are about work out a deal with Boehner/McConnell on taxes. There will not be a fiscal cliff.
Obama was out of the country. Congress is home for Thanksgiving. No one with any authority could conform this rumor or deny it. So, investors being what they are, they assumed the rumor is true. I mean, it has to be true. It ought to be true. It would be nice if it’s true. Buy!
The federal government is facing a $1 trillion fiscal deficit next year. Again. Buy!
Europe is in a recession. Buy!
Japan is in a recession. Buy!
Obama still insists there must be higher taxes on the rich. Buy!
Boehner still insists that Republicans in the House will not accept this. Buy!
Why? The rumor has to be true. It just has to.
Is the S&P 500 lower today than it was in March 2000? Yes. What does this tell American investors? “It’s time to buy stocks.” Why? “Happy days are here again.”