Faith-based investing

Even the Brahmins at Barron’s are skeptical of the current stock market. Countrywide announced hideous earnings and a huge write off last Friday which triggered, you got it, a big rise in the stock price as the Bloomberg cheerleaders joined in singing “I can see clearly now, the pain is gone.”

Barron’s called this “a touching display of faith-based investing,” implying such irrationalities can not last for long. (Yes, part of this was short-covering, but clearly the market is desperate for a reason, any reason, even a faulty one, to go up. So such inanities as Countrywide saying they will be profitable next quarter were greeted unskeptically.)

Nouriel Roubini echoes Barron’s, saying the coming economic dislocations will be severe and that the current Happy Face consensus of a mild, soft landing has little basis in reality.

The soft landing consensus is increasingly delusional in believing that the biggest housing recession in US history will not have severe macro effect.