Let me tell you why I am even considering the issue.  Last week, Ben Bernanke, before Congress, said that the Federal Reserve was going to start taking some liquidity out of the system. First, they were going to stop the Fed’s 1.25 trillion dollar mortgage buying spree.  This will send interest rates higher. Secondly, the Fed chairman said that he hoped to accomplish his goals without triggering inflation. The reaction to that was higher Treasury yields and a stronger dollar.

Since money goes where it is treated best, it is hard for me to fathom that money won’t work its way out of stocks and into bonds as yields rise. Here’s the real problem. If the stock market goes down before all of investors pessimism has been ameliorated, real fear creeps back in and the market goes down. When that happens, people stop spending and investing and we could stop all of this hard earned growth quickly.

Whether or not the scenario plays out as laid out begs the question; the anticipation of a decline may be as harmful as an actual decline. Now, we have another issue. The jobs report comes out on Friday while the bond market is open but the stock market is closed. The geniuses who created that schedule need to be taken to the woodshed, but at least, we should get a clearer idea of the direction of interest rates heading into next week.

It has long been a Wall Street axiom to buy on the rumor and sell on the news. So, with the events of last week including health care reform, it is not surprise that the market had a little weakness. This morning, we saw early gains, but hardly a verification of Dow 12,000. And speaking of prognostications; whenever I see headlines like that, I rarely react to them. For example, a few weeks ago, with Gold trading at 1200 dollars an ounce, I heard a guy say that Gold was going to 5,000. It immediately has gone back to 1000 dollars.

Hyperbole sells papers, not investments.

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