Have we seen the bottom or are we in for another cruel joke from old Mr. Market?  As you know, the market is random in the short term, and this bear has lived up to that reputation.  But, there are a lot of signs that point to an improved investment climate in the coming months. 

By the time you read this Brief, I will be in the ‘Mecca of Elvis,’ Memphis, Tennessee, along with 70 to 100,000 faithful pilgrims.  In the unlikely event you haven’t heard, the twenty-fifth anniversary of the King’s death is today.  It just happens to coincide with my taking my second daughter Emily, to school at Ole Miss.  The University of Mississippi lies in the quaint town of Oxford, Mississippi, one hour south of Memphis.  As it is difficult to fly to Oxford, Memphis is the gateway by air.  But even Memphis may become a tougher destination for Elvis pilgrims and Ole Miss students if the current descent of commercial aviation continues. 

July was the worst month for the S&P 500 since September 2001.  Few stocks were spared abuse.  Most of the best performers were stocks bouncing off oversold bottoms as telecommunications and technology stocks were among the leaders.  As mentioned in last weeks’ Brief, short covering accounted for most of the gains in stocks.  Lately, though, market specialists say they are seeing some real buying.  It may be due to money managers re-balancing their portfolios towards equities as bonds have become over-weighted during the past couple of years. 

Optimism is a wonderful trait, and we Americans seem to own the rights to it.  We are born with it in vast supply and our unique culture richly nourishes it.  Entrepreneurs, CEO’s, investors, and stock analysts are poster children of American optimism.  Problem is, it got out of hand in the late 90’s and we must now pay the price, as economic and company results fall relentlessly short of expectations.  In truth, the results aren’t really quite so bad as they seem; it’s our expectations that are too high.