Stocks continue to inch higher as investors remain stumped.
This is the most hated rally in my 29 years of managing money.
Nothing in the economy supports these new highs, except of course one thing: Ben Bernanke is making it rain (and so are his good friends at the European Central Bank (ECB) and the Japanese central bank (JCB)).
Ben is afraid of being lonely, and "You don't fight the Fed chairman.
" Most investors feel the Fed will eventually have to quit printing money because they are creating hyper-inflation.
The reality is that we are in a negative inflationary, otherwise known as a deflationary environment.
Economic reports were eye-opening for many on Wall Street, although certainly not for readers of this newsletter.
Factory output, manufacturing production, and industrial capacity utilization, all dropped like a rock as global demand is waning.
The alarming report came from the Producer Price Index (PPI), which shows the inflation level, which came in a massively surprising negative.
7%.
This was the largest decline in wholesale prices in almost 4 years.
Clearly the entire global stimulus measures can't stand up to the massive demographic headwind faced by the entire developed world.
Although this is harrowing news for the economy, as a whole, it is good news for investors.
How can this be, you may ask? Well, said the blind man as he picked up his hammer and saw, this data gives the Federal Reserve incredible leeway to keep stimulating the economy with an easy monetary policy.
Or in other words, the world's central banks are making it rain.
My fear continues to be the end of Quantities easing, which does not appear in the cards anytime soon.
With global demand waning, and deflation not inflation the fear, money will continue flow and stocks will benefit.
This will continue to be the most unloved rally in history, at least for a while.
However, when we start to see overwhelming investor pessimism turn to optimism, which will be the signal to run for the hills.
Investor Strategy With the commitment by global banks to continue the money printing, and with cash and CD's giving a negative return after inflation, investors have to be invested.
The "sell in May and walk away" correction was far too expected this year, and has likely been pushed off until later in the summer.
The market does not crash when everybody expects it to.
Investors should be invested, but very selectively, looking to get decent returns based on your personal needs, and ignoring the averages.
Invest for need and not for greed™ has never been more apropos.
When this market corrects and/or the rally ends, it's going to be very ugly and you do not want to be in the wrong place or doing it yourself.