Postcard From Nowhere

What we do know is that selling pressure has eased dramatically from the cathartic levels of October and November. Fear is receding but investor sentiment remains depressed as the economy shrinks at the fastest rate since 1982. Corporations have turned predictably pessimistic as well, hurrying to write off 2009 as an act of God, not to be confused with the whim of the CEO.

If there's another mob of eager sellers waiting to ambush the market it's done a spectacular job of keeping quiet, while stocks have inched higher under a hailstorm of bad news. And the bad news has produced the only bonuses most Americans will see this year: $1.65-a-gallon gas and the prospect of a refinancing boom.

We're headed for an epic clash between forces of economic chaos and a government determined to restore order at all costs. And the markets are now part of the battlefield, where bureaucrats will act when private parties will not. The Dow could end this test of wills at 5,000 or at 11,000, depending on who prevails. But I'm inclined to bet on order over chaos, on the innate optimism of Americans and against the notion that all the economic gains of the past decade were a financial illusion, nothing more.

One implication of the economy's sharp downdraft is that the excesses that got it into trouble -- real-estate and commodities speculation, huge leverage, a love of risk and unsustainable borrowing and spending -- have either already been cleansed or are correcting quickly. And the stabilizers have deployed in the form of government action, reduced costs and private bargain hunting. So while stocks are no higher, the market is clearly in a better place than it was two months ago, when it got the bad news but not yet the auxiliary benefits.