It's Amazing What 12 Months and a Bottomless Checkbook Can Do

Do you remember
The 21 ^st night of September?
Love was changing the minds of pretenders
While chasing the clouds away

- Earth, Wind and Fire

OK, so it was two days earlier on the 21 ^st , actually, that the Treasury Department announced a temporary guarantee for the U.S. money market mutual fund industry - but the elements of the universe got it close.

Now here we are almost a year later with this program about to expire and several other government support programs waning. To be sure, last September 19 felt like the financial world was collapsing, a far cry from today when we merely realize that collapse is a possibility - and not even an imminent one at that.

We have certainly come a long way in the last year.

First, we dipped further into the abyss as payrolls fell faster than ever seen before, lead by construction and finance jobs, but soon followed by most every other sector. Then the markets came roaring back from their depths as the second derivative of growth turned positive (meaning our journey toward the wall slowed somewhat, but did not reverse).

Today, it is fair to say our situation "feels" better, though I can't fully describe what that means. Maybe it's the 50+ percent recent rally in the stock market that feels so good, but losing north of 200,000 jobs per month should never really "feel" good. And the fact the market remains 40 percent below the highs experienced in the fall of 2007 certainly shouldn't feel good.

I think more to the point is the fact that investors no longer believe we will have a collapse of the financial system. Proponents of the government's strategy during this time will argue the countless alphabet soup of programs should be lauded and that the players in this tragedy - Bush, Paulson, Bernanke, Obama and Geithner - should be given credit for tossing aside the "free market" in this obvious time of stress. (OK, for most it's hard to put Bush and Obama together in that sentence, but as they say where I'm from, "facts is facts!")

Opponents of such tactics will argue the recovery could come sooner and be stronger if the government had never "meddled" with Adam Smith's invisible hand, which shifts capital from poor positions to good over time.

Who's to say who's right? And does it matter? I argue probably not.

The important thing is that people are feeling good and it almost doesn't matter why. What matters is that we keep this balloon in the air long enough for the real economy to catch up through increased investment, productivity, job growth and profits.

So, take a moment to think back over the past twelve months, recalling your own personal roller coaster ride of emotions (and portfolio values!). If the clouds haven't been chased away somewhat, then perhaps you need to rethink your outlook.

Key Developments

Domestic auto sales jumped +22.7 percent in August after a 15.7 percent increase in July to a 10.2 million annual pace, which is the highest level in one year. "Cash for Clunkers," of course, is the cause of the recent spike, but it will be very interesting to see how this industry fares without the government incentives going forward.

Nonfarm payrolls fell by another 216,000 jobs and the unemployment rate unexpectedly rose to 9.7 percent. Though the economy continues to lose jobs at a rapid pace, this report confirms that the pace of loss continues to decline. What remains to be seen is the impetus for this data to turn positive. With many people taking lower paying or part time jobs, there is much overhang to be worked through before we see real additive job growth.