Barry Ritholtz is sort of the godfather of financial blogs - very much an early adopter and runs one of the most popular sites: The Big Picture. It was a site I used to read very often, when I had more time ... obviously once you do your own blog, you don't have the same hours in the day left over. I still try to get over there once every few weeks to see what he is up to.

Barry is back on Yahoo Tech Ticker, after making a nice call mid March [Mar 13, 2009: Jon Najarian, Todd Harrison, Barry Ritholtz all Bullish (for now)] for a quite huge rally. Considering we were an unprecedented 40% below the 200 day moving average the previous week that was not too much of an outlier call - but the duration of this move has certainly taken many aback. Ritholtz is not ready to say it's over yet. I like what Barry has to say because much like I do, he casts a cynical eye to much of what is happening but as I repeat often, to be an investment manager you have to compartmentalize everything and be able to adjust to whatever the lemmings are doing. He does a good job of that so always a worthwhile listen.

(I) The Recession is Over! Or is it?

Forget the unemployment rate remains north of 9% and foreclosures are near all-time highs; the recession is over!The Conference Board said Thursday that its index of leading indicators rose 0.6% in July - its fourth consecutive gain - suggesting the economy has bottomed and the recession will end this summer, if it hasn't already.That's right, the recession may already be over. Ken Goldstein, the Conference Board’s economist, says gross domestic product may be positive this quarter.Barry Ritholtz, CEO of FusionIQ and author of Bailout Nation, believes things have improved but he's not ready say we’re healed. After hell, purgatory isn’t so bad, he jokes. Ritholtz says much of the positive economic data is simply the result of government action. Increased industrial production? Thank the cash for clunkers program. Higher average wages? That’s the new minimum wage increase kicking in. Ritholtz won't be convinced of an economic recovery until:

  • We no longer need stimulus to keep the economy from tanking.
  • Interest rates are allowed to rise above 0%.
  • Massive government intervention in the economy is no longer needed.

With that kind of criteria, it may be a while.

(II) Professionals are Buying the Stock Market Rally. Are You?

After starting the week with a big knock, the stock market has resumed its rallying ways, with the Dow closing above 9300 on Thursday while the S&P again surpassed the 1000 level. Professional money managers are buying into the rally in a big way, according to a Merrill Lynch Survey of Fund Managers :
  • 75% believe the world economy will improve in the next 12 months. That's the highest level in nearly six years and up from 63% in July.
  • Average cash balances have fallen to 3.5%, the lowest since July 2007.
  • 34% of managers surveyed are now overweight stocks, the highest since Oct. 2007.
  • Risk appetite is also increasing, to the highest levels in two years.

The contrarian in you probably thinks that signals a market top. But Barry Ritholtz, CEO of FusionIQ and author of Bailout Nation, isn't ready to call an end to the move. We've worked off lots of that oversold condition, he admits, but that doesn't mean the rally can't continue for some time. Ritholtz, who told Tech Ticker in early March we were in for a monster rally, has 1050-1080 as an upside target for the S&P 500, with a slight chance it can go as high as 1200. If the rally does extend to those outer limits, Ritholtz sees the Dow topping out somewhere around 12,000. Regardless of your position, long or short, Ritholtz’s key message is to remain cautious. This is a trading rally not a multi-year rally, he says. Eventually something's got to give: We've never had six-month period before where we’ve lost two million jobs and the market’s gained 50%, he says. That's simply unprecedented.

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We've never had such desperate government Barry - the emperor wants to make sure we believe they wear clothes. And that we are wearing clothes too... they'll hand out gifts and print until we're assured the no job growth economy is giving us all prosperity. Since so many are happy to accept gifts without asking where they come from, its apparently a win-win-win.

(III) Anyone But Summers : Reflections on Bernanke and Possible Replacements

Ben Bernanke took a trip down memory lane and a bit of a victory lap Friday in a speech at the Fed's annual Jackson Hole confab entitled Reflections on a Year of Crisis.

Recalling the Fed's extraordinary policy actions, the Fed chairman declared we have avoided the worst and the prospects for a return to growth in the near term appear good. The speech comes as Bernanke is generally being applauded in economic circles for having averted the Great Depression 2.0.

While initially slow to respond to the crisis and arguably a contributor to its rise as Fed governor, Bernanke nonetheless deserves credit for avoiding total disaster and thus another term as Fed chairman, says Barry Ritholtz, CEO of FusionIQ and author of Bailout Nation. Bernanke has done a much better job than Alan Greenspan, he says, if only because Bernanke listens to other voices whereas Greenspan famously ignored warnings from (among others) former Fed Governor Ed Gramlich about problems in subprime lending in the mid-2000s.

But whether Bernanke will be reappointed when his current term ends in January remains unknown, and President Obama is reportedly considering replacing Bernanke with a number of other candidates.

That's a political choice of which I have zero expertise [but] my vote is anybody but [Larry] Summers, says Ritholtz, recalling the former Treasury Secretary's role in the repeal of Glass Steagall and support for the Commodity Futures Modernization Act, which effectively deregulated derivatives trading and helped spur the securitization boom of the early 2000s. I don't think he should continue to fail upwards further than he already has.

It's also hard to imagine a less politically independent Fed chairman than one whose last job was director of the National Economic Council for the president who appointed him, as would be the case if Obama taps Summers for the job.

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I will also get behind the Anyone But Summers movement. Preferably, someone who is appointed only to shut down the Fed itself, but since that will never happen... A.B.S. it is.