The Grinch Who Stole Christmas

This was supposed to be the start of the comeback trail for stocks. Their strongest seasonal period. Abetted by the Federal Reserve's strong and publicly stated preference for cheap money over cheap assets. And the coming stimulus. And cheap gas. And falling interest rates. By all rights, we should by now be deciding how best to spend the proceeds of that nice December rally. Not planted in a snowbank next to a rusting for-sale sign. Yet here we are.

So what happened, besides the worst monthly job loss number in 34 years, which actually made the giddily perverse market do a cartwheel? Well, corporations lined up to confess that what in October was still passed off as a "lack of visibility" had recently resolved into an iceberg amidships, heralding a business ice age.

And then Bernie Madoff hit the news, the Wall Street legend who confessed to having made off with a legendary $50 billion of other people's money. Since Madoff allegedly ran a pyramid scheme, that's money most of the victims never really had. But the distinction will be lost on the many charities now closing, or on the thousands of private investors who, in addition to notional wealth, lost whatever faith they'd managed to retain in Wall Street.

The wealthy are the "strong hands" who ought by now have been backing up the Navigators to the back door of the New York Stock Exchange, loading up on cheap equity as an alternative to depreciating real estate and low-yielding bonds. Instead, even if they didn't get ripped off by Madoff, they're thinking that maybe there are worse things in life than federally insured cash in the bank. Hedge funds, already sitting on billions of investors' money that the investors would just as soon have returned, needed this like a staple gun to the forehead. But then the whole get-rich-in-stocks ethos seems dead, a relic of a bull market that ended nine years ago. Today's Wall Street Journal has the official obituary.

But wait, there's more. Holiday shopping, already determinedly modest, just got more meager as snowstorms in the Northeast and the Northwest ruined the biggest weekend of a shortened season. Macy's is down 12% today, J.C. Penney 6% and Saks a mere 4% after selling off its unwanted shmatys at 70% off. And the grim retail scene will only increase pressure on commercial real estate, which is only staring to climb its mountain of loan defaults. Developers want their slice of the bailout pie because they can't even refinance loans on the viable and income-producing properties, to say nothing of those for sale, lease or barter pending the next strip-mall boom.

The Dow being down 23 points on this news might conceivably be framed as a show of resilience. Except the market has shown such resilience for a month and still has absolutely nothing to show for all that effort, notwithstanding a couple of loud rallies. Also, the Nasdaq is down a hefty 2% and small caps a heftier 3% in today's thin trading, with no evidence that the masses are ready to cozy up to stocks again tomorrow, next week or next year.

The hot technical analyst of the moment, Mary Ann Bartels at Merrill Lynch, thinks the Dow could sink below 8,000 again before mounting a sustained assault on 10,000. But I wonder if anyone besides me and Ms. Bartels still cares. It sure doesn't feel like it.