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The Daily Reckoning Weekend Edition Saturday, October 24, 2009 Taipei, Taiwan --------------------------------------------------------- A "rented rally" and a curious divergence by the financials, The mighty greenback: not the "Members Only" jacket it used to be, Plus, the capitalist meme marches east, Ben Franklin to Cheng Siwei and plenty more... --------------------------------------------------------- Joel Bowman, reporting from Taipei, Taiwan... Rough week, eh? Anyone would think the markets had developed an acute sense of multiple personality disorder the way they are behaving. One moment it's Pollyanna, whispering sweet nothings... then the eyes glaze over and the voice drops a few octaves...something more sinister has crept in. Even the intra-day activity was difficult to pin down. After a huge spike following their earnings announcement on Wednesday morning, Wells Fargo slipped 7% for the day, "a classic 'outside day' reversal," as Eric Fry pointed out in Thursday's issue. Indeed, the Dow Jones Industrial Average itself collapsed 165 points, top to bottom, on Wednesday, with a triple digit haircut in the last couple of hours alone. That's not the kind of "confidence" you want to see confirming a "recovery." But markets don't move in straight lines, dear reader...neither up nor down. After all, a sucker's rally is nothing without the suckers. Ergo, Mr. Market must lure in as many victims as he can with promises of better sunsets and fatter cigars for all. For his part, the sucker is ready and willing to believe anything that confirms his delusion. He was ready to buy a house he couldn't afford...ready to believe stocks would always go up...ready to believe he could always get something for nothing. And if he'll believe all that, he'll surely believe a jobless recovery with contracting earnings and ballooning deficits is all but a sure thing. But he's living on borrowed time, as Dan Amoss explains. "A rational, disciplined investor would be fearful about buying today, after prices have been jacked up by an unprecedented seven-month rally," warns Dan, the mind behind the Strategic Short Report. "Nearly every economic and corporate development over the past few months has been translated into a reason to buy stocks. But underneath the elation over Dow 10,000 lies the palpable feeling that this rally is to be 'rented,' not 'owned.'" Every day the rally persists, in other words, the probability that it will perform a "black swan dive" off the cliff increases. Stocks are rapidly approaching - and in some cases have eclipsed - valuations that presuppose a robust, multi-year recovery is well underway. The S&P 500 index sells for over 19x FALLING earnings...earnings that are unlikely to improve in any meaningful, sustainable way. Companies, meanwhile, are slashing employees like a bad horror flick. Initial jobless applications rose by 11,000 to 531,000 in the week ended October 17, according to the Labor Department. Economists fret that people working fewer hours and earning less money might tighten their belts a bit going into the Christmas season. They worry about what might happen to their consumer economy when the consumers economize. We could take a guess...but we wouldn't want to spoil the ending. Besides, thoughtful, reasonable individuals have already read the book. They have a pretty good idea how it all shakes out...and they're running for the hills. --- Dan Amoss' Strategic Short Report --- CEOs LIE for a Living When times are good, they lie a little. When times are bad, they lie A LOT. 99% of the crowd (including analysts, the gov't and the press) swallow these lies whole... And you know what? 99% of people are doomed to fail... But you're part of the 1% who holds CEOs accountable - and gets very rich in the process Because you could start building huge wealth TODAY with a fast 1,500% gain...Full Details Here. --------------------------------------------------------------- ALSO THIS WEEK in The Daily Reckoning... Demographics and the Capitalist Meme By Addison Wiggin Mumbai, India "In India, there are people everywhere...living everywhere...sidewalks, riverbanks, parks, monuments. There are shanties built on any available spot. You hear the sound of people...the murmur of voices, bicycles, car horns. Even today, when the weather is a beautiful 30 or so and the breeze steady, the air is tropical, dank and full of all manner of indescribable odors." Brand Disloyalty By Chris Mayer Midtown Manhattan, New York City "The US dollar is a sort of monetary brand. And like any other brand, it can fall out of favor. Even iconic brands can rapidly lose their 'must-have' caché. Sometimes, a brand can disappear entirely, as did Pan American Airways or 'Members Only' jackets. But there is always something else waiting to take its place." Falling Down the Wells By Eric Fry Laguna Beach, California "Bad news is bad news after all... Yesterday morning, Wells Fargo posted a cosmetically pleasing profit of $3.2 billion, or double the tally from the same quarter last year. So when the opening bell sounded, exuberant investors rushed into the market and bid up the shares of WFC." Macro for Dummies By Bill Bonner Waterford, Ireland "'He who goes a-borrowing, goes a-sorrowing'... The quote comes from Ben Franklin. But it was recalled to us neither by America's president, nor Britain's Prime Minister. Instead, the Telegraph in London reported it from the mouth of Cheng Siwei, a 'top member of the Communist hierarchy.'" --------------------------------------------------------------- The Daily Endnote: "This might well be your most expensive trip home to date, young fella," quipped your editor's father over the phone earlier this week. "Those greenbacks are looking a bit sickly these days, huh?" Indeed, the Aussie dollar has outpaced even gold's herculean rally against the US dollar over these past few months. The Reserve Bank of Australia was the first "developed" economy to raise rates, thereby declaring victory over the reality of natural market corrections. For the time being, that's good news for Aussies traveling abroad...but bad news for Americans traveling to Australia...and ESPECIALLY bad news for expat Aussies - who draw US dollar paychecks - returning home to visit family and friends, as your editor will do next week. "Yeah, but what's the cost of a few beers between father and son?" we replied. "Of course, if you want to get the first round..." Until next time... Cheers, Joel Bowman Managing Editor, The Daily Reckoning P.S. If you spend a single dollar this weekend (even if it is only an American one), do yourself a favor and spend it on a $1 trial of Mayer's Special Situations. Chris's premium research goes for almost a thousand dollars a year, so to take a peak at his analysis for just a buck is a pretty darn good offer. Here's a single page order form in case you're interested.   The Daily Reckoning - Special Reports: Gold: The Truth About Gold Fiat Currency: Using the Past to See into the Future "THE GREAT AMERICAN RECOVERY RP-OFF" Brace yourself for what's about to go down as the BIGGEST FINANCIAL SWINDLE in world history.