Quantifying Human Spirit
Every day that goes brings another dose of bad news. Think of the bad news layered into a ball. At the core is the deflating home sector and consequently the falling banks. Factor in job losses there. Now on the next layer is manufacturing, namely the auto industry. More job losses. The negativity (and economic spread) inherently spreads over consumer spending. The month of December will be most indicative of the weakness in spending...yet I remain foolishly hopeful.
Two things keep me hopeful about an end to gloom for the economy. The first is economic policy. The U.S. is throwing what will amount to trillions of dollars at this layered negative ball. A trading rule is "don't bet against the fed." This time should be no different. Even if this "solution" is short-term, the markets will still move up for maybe even a few months.
The second thought that comes to mind is human spirit. Look at how the markets behaved during the Olympics. Maybe what the world needs are more festive events and celebrations that would bring people together. People get together, socialize, network, are a happier bunch who will not have their mind on the ailing economy. I for one would rather have a positive spirit, and I would certainly want to spread that around. Aren't smiles infectious? As a point of contrast, it should be recognized that one would not be smiling after losing a job.
Human spirit cannot be quantified by economic models or equations.
Now, back to some observations that we might be seeing some reasons for the market to stabilize and even trade up at least in the short-term:
1) Retailers have been discounting items so much that consumers are still spending (See Best Buy stock, for example)
2) Oil prices have popped considerably, which should make inflation a non-issue as more money floods the economy
3) The newly-elected US government will have massive spending plans in January 2009.