When Bad News is Good

So the stock market has largely been going up the last couple of weeks. That is of course good but is not of and by itself all that interesting. What is interesting is why it's been going up. At first blush, most of the headlines talk about stocks rising higher on good economic news. But when you read a little closer, you realize that it's not good news at all; it's bad news that's not as bad as it was expected to be. A sample just from today. Right now the Dow is up 100 points and the headline on Yahoo! Finance reads "Wall Street Pares Losses After Better-Than-Expected Economic Data." So what is this "better-than-expected" data? Pending home sales rebounded in March from a record low in February (in other words, March is the 2nd worst month on record), an index of manufacturing activity contracted in March but by a little less than expected, and construction spending dropped in February for the fifth straight month but at a slower pace than in January. So by and large nothing is getting better; it's just getting worse more slowly.

I'm not at all trying to dismiss the positive gains that the market has made, nor am I trying to say that people shouldn't be feeling a little better about the economy in general. The name of the game during a recession is trying to find a floor, and the slowing of the rate of deterioration is definitely a sign that we could be nearing that floor soon. But just a cursory glance at historical economic data will show you that both recessions and expansions are wrought with false troughs and peaks. I just find it a bit ironic that data which would ordinarily be seen as very bad news in this context is now seen as a reason for optimism. It's kind of like hearing that a school burned down and everyone inside died, and then throwing a party when you find out that one kid actually made it out alive.

In other news, we are exactly 5 days away from the Cubs opener. I am hoping to put together my annual Cubs preview over the weekend. I know that you all can't wait.