No, Wait - We 're Headed Down Again

After being confused about whether the market was going to to up or down, I read The Dow Will Hit 10,000 Soon. So What? in the Wall Street Journal which clarified that the market was likely to surge up in the fourth quarter, but then drop again heading into 2010. Here is some excerpts:

A fund manager I know suggested this week we might see a big run-up in the fourth quarter. The market, he said, might be forced higher as more people come off the sidelines—most likely at the worst possible moment. Institutional investors have been too cautious through the rally of the last six months. That's true for the public, too; they sold through the crash, and the latest data shows they were still selling shares in August.

Yet even if the market's rise attracts more investors, stocks are becoming less attractive long-term investments. Shares don't get better as they go higher. They get worse. A share is just a claim on future dividends. The more you pay, the worse the deal.

And a rising stock market does not necessarily mean the economy will keep getting better. The current rally ignores some ominous economic trends. Bank lending has slumped, and so, too, have long-term Treasury yields. Neither is a happy omen. And of course, in the real economy, the pain continues. Unemployment has risen to 9.7%, even as Wall Street has rallied.

So instead of the 4th quarter drop followed by better times as per BusinessWeek we should expect a 4th quarter runup followed by worse times.

Or something like that.