Most news outlets reported that investors were 'cheered' by the Fed's most recent rate-cut, but we know better. For it was nothing even remotely resembling cheer that pushed the Dow Industrials into a spectacular, 420-point surge last week, and into 200- and 300-point rallies since then; rather, it was the unmitigated panic of bears who had bet that stocks would fall. This dynamic is called short-covering, and we would be very surprised if those two words combined have ever been uttered by a network news anchor. Despite this, we have always maintained that short-covering is the basic fuel not only of bull markets, but of breathtaking bear rallies such as have been occurring almost weekly of late. Mere optimists are incapable of such buying stampedes, even when the business pages are filled with the kind of news that brightens investors' spirits. No, it is only bears who get caught in the ringer who can muster the kind of urgency it requires to push the broad averages past heavy supply and above prior peaks. Pack Journalism Are the news reports that describe this action as 'bullish' therefore wrong? Yes, we would argue. Moreover, the inability of mainstream commentators to tell it like it is represents a key difference between major news outlets and the not-yet-ready-for-prime-time world of newsletters such as this one. Having been a newspaper reporter myself for seven years, I can empathize with the tendency of journalists to report the obvious at the expense of the truth. As a fledgling reporter, I learned this the hard way covering a campaign 'coffee klatch' for a powerful New Jersey politician at the home of a black ward-heeler in Atlantic City. She had baked a cake because it was his birthday, but he was so eager to move on to the next
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