****************************

Two nice videos below with Barry Ritholtz, who I always call the "grandfather of financial blogging".  Barry had been very bullish for much of this rally but the breakdown we saw in late October, including the 5-6 intraday reversals we noted had him reconsidering.  But he appears back in full bull mode.  As I keep saying, things that in the past you used as historical guides as warning signs (such as the market behavior in 2nd half October) have been tossed aside as if they don't exist.  So as of November 1st, all our yellow lights were blown to pieces and its effectively been back to (bullish) normal on the major indexes and big caps at least.  Not quite so wonderful in the small/mid cap space as a whole as many stocks are simply treading water or down a bit.

For those of you new(er) to the stock market, and who cannot reconcile what is happening in the market to what you might see in your everyday life (Main Street economy) I think this first video is very important to watch.  At this current moment we have the perfect Goldilocks stock market... good news means good things, and bad news means easy money forever.  Hence there is no bad news.  Yesterday's Fed statement minutes, which parallels this line of thinking, had me laughing out loud.  They offer "good news" for the future but conclude they still must offer drugs at an epic rate.  Another "have your cake and eat it too" analysis.  They conclude that the economy will grow almost at trend growth (2.5%) as we go forward.  Which sounds great!  But then why do we need record levels of interest rates, purchase programs, and stimulus?  I mean if we are going to almost be "at normal" growth rates why all the morphine?  The other thing that made me laugh is anyone believing in a forecast from these folks who completely missed the bubble, who thought unemployment would peak below 7% as of 20+ months ago, and who generally are as wrong as the typical CNBC pundit.  I guess past performance means nothing.

But getting back to Barry's video - we are now reaching the point where the market will not want "too much" good news.  Because the more good news we get the end data (in theory) for all the easy money in the economy.  That's how it USED to work anyhow.  I have stated for well over a year now that the easy money will be us for a very long time, and interest rates will not be increased in the entire year of 2010.  A year ago that was laughed at but now its becoming the consensus... even 3 months ago summer 2010 was assumed to be the first series of rate increases.  So there is even a chance that "good news" won't push the Fed into increasing rates ... talk about a perfect world for Wall Street.

As for the second video, Barry agrees with much of what my views have been as well.  Until any form of reality returns to mortgage rates, and the government begins to finally step away from subsidizing every step of the housing process we will not have a true bottom.  That said, many "temporary" government programs never cease to go away, so our new normal might be a permanently subsidized housing market.  Speaking of, as of this week, the Fed has successfully pushed mortgage rates back to their all time lows.  Rejoice.  When I see mortgage rates back over 6.25% or so, and then see the effect on housing prices - I'll be more inclined to start talking bottoms.  At this rate that may be 2013.  But from here I expect a less dramatic housing market, that begins to become more regional in nature (i.e. back to normal) and the drops in pricing less so than we saw in 07-09.

On to the videos:

1) A Bad Economy Could Spell Good News for Wall Street for Years to Come