The Dow Jones is up roughly 225 points on the news that 240,000 people lost their jobs in October.  This perverse sort of reaction defines how Wall Street works.  Wall Street cheers this sort of news, because it implies that another rate cut is on the way.

So the logic boils down to this: The worse the news, the greater the chance that the Fed will shower us with even more cheap money.

In a more perfect monetary system, good news would be rewarded and bad news would be punished but that is just not how Wall Street works.  Quite the opposite.

At the local Old Navy store, in a big mall, a very strange thing was recently spotted… the floor space of the store has been cut in half, using fabric curtains hastily hung from the rafters.

When asked, the manager said, "We’ve downsized; this is how big the store is now."

Excuse me, but what?

What kind of a strategy is that?

All that saves is a small bit of inventory carrying cost and perhaps a couple of employees. But unless they renegotiated the lease rate, their fixed overhead burden just shot through the roof. 

Goodbye, profits.  Hello weird, unsettling shopping experience.

At the time, some thought that my characterization of the bailout as a "looting operation" was too strong, and told me so.

I am more certain of that language than ever.

A friend of mine in the RV business, who has owned his own place for 35 years, says that his business has never dropped off as far or as fast as it has over the past 6 months. Manufacturers in his industry that have operated for more than 50 years are simply shutting down. 

Even as the nation focuses on an election and the "improving credit markets" the real economy is still spiraling downward at a fast rate.

The 45% "decline" in GM’s sales are a stunning drop-off more consistent with the worst recession (depression?) in several generations than a simple "decline".

First, check out these headlines from the front page of the Bloomberg site yesterday.  Do these look like the stuff of big stock rallies?

Even as the stock market grinds on through its bear market rally, the real economy continues to slide off its narrow shelf like a boneless chicken seeking someplace lower.

First, factory activity plunged to its lowest reading since 1982.  How significant is this?  Well, in 1982 we were in the depths of a very severe recession.  (This one hasn’t even officially started, according to the NBER, who are squirming desperately to avoid proclaiming one right before an election). For factory activity to plunge like this at the outset of a recession speaks to a very deep economic hit in our near future.

Even as the stock market stages a bear market rally, and the banks are showing some small signs of happiness with their newly-received trillions in public money, the signs from the real economy are pointing down, and hard.

Our most recent economic ‘strength’ was an illusion built on borrowing. Unfortunately, our preferred measure for our economy, GDP, counts borrowing-fueled "growth" as though it were real.

For example, if two people live next door to each other, and both earn $50k/year, but one of them borrows a million dollars and spends it all,  GDP would measure the borrower as having an economy 20x stronger than the other.

Happy Halloween! 

One of my kids is going out dressed as the queen of hearts…only the front flips open and it says in blood red inside "Your 401k – down 50%!"

We’ve already decided to split any candy that spills to ground between the kids and dad.

I nominate this for understatement of the year: