Dear Clients,

In a recent commentary I stated that over the past year plus I have written to you almost exclusively on days when the stock market is down. While my intent is to help you see through the myopic media coverage, in reality, over the past year I didn’t have a whole lot of choice – as most days were in fact down for the stock market.

I write you today after a week that was actually positive for the market. I almost don’t know how to act! Especially when, at the end of last week, the reported unemployment numbers were nothing short of horrendous – nearly 600,000 jobs lost in January alone. And what happened? The Dow went up 217 points.

Could it be that what they say is true? That the market will begin its turn around in the midst of the worst possible news? My answer is yes. Since that’s been my observation over the past 25 years. And that’s what the charts of the past century have told us as well.

Now does this mean that we’re finally there? My answer is I don’t know. The news has felt like the worst possible for months now and the market has done nothing more than tease us with a few false springs. And last week’s gains may simply reflect the hope that our leaders in Washington can fashion together a stimulus package that will jump start us out of this recession. But make no mistake, government stimulus or not, sooner or later one of these seemingly false springs will turn into the real deal and lead us right into summer.

With what this bear market has put us through and with all the persistently bad economic news, you might ask how in the world I could suggest that a sustainably positive stock market is in our future.

Honestly, predicting a warm-temperature turn around is the easy part. The hard part, which I won’t attempt, is predicting when.

One reason I feel that a very healthy rebound (at some point) is indeed in our future is simply the fact that there’s a virtual mountain of cash on the ‘sidelines’ (money market instruments earning almost zero). According to CNBC this mountain is now 9 trillion feet high. That’s right! There’s supposedly $9 trillion in cash sitting on the sidelines, earning less than nothing (when you factor in a little future inflation).

OK, but $9 trillion or not, who in their right minds would want to own stocks after what we’ve seen the past 15 months, you might ask. I’d say only the folks who recognize that the market has recovered from every single recession/bear market history has ever thrown at it. And those who believe that they’ll be buying new computers, cell phones, cars, shoes, socks, food, cameras, medicine, houses, furniture, toenail clippers, nose hair trimmers, deodorant, make up, airline tickets, etc, etc, etc, for years to come. Only those silly fools – and I guess I’m one of them.

Yes I know this is the same simple message that I repeat all too often. And I know it’s sexier to write about the “Bad Bank” proposal, or more about why I think protectionism is bad news for our economy, or how companies aggressively slash jobs and inventories during the latter stages of a recession. And while these are worthy topics (and I’ll no doubt go to these in the future), when it’s all said and done, it’s the American spirit that makes our economy great. And that spirit has survived a Great Depression, multiple recessions, world wars, impeachments, terrorist attacks, bursting tech bubbles, floods and droughts – you name it, we’ve survived it. And I see absolutely nothing that will keep that spirit from surviving the recession of 2008/2009.

Now that I have you jumping out of your chair with unbridled patriotism, know that the stock market will continue to be a very volatile place going forward. For the foreseeable future, a whole lot can happen