Uh Oh

I'm sitting here enjoying another day in the stock market and then CNBC has to ruin it.

"Is day trading making a comeback?"

I'm generally of the belief that when everyone is getting interested in the stock market that's when it's time to get out or at the very least be extremely careful. Why? Well Wall Street has a term for most individual investors and people who rush in when the market is doing well and rush out when it goes bad. "Dumb money". It makes sense. People sell out of their stocks after losing money in the dot com bust. But that was when to fully invest because it was at the bottom. So everybody who is in the market does well. After a good span of time, in which the "dumb money" is on the sidelines, the "dumb money" decides to get back in. This generally happens right when the market is peaking and the smart people are hedging or preparing in case of recession, busts, etc. Well if people are starting to day trade again, thinking they can come in and just trade rapidly and make tons of money, well that concerns me a tad. Everyone seems to be optimistic in the markets as well (myself included, I'm generally long-term bullish) but there are several things that actually concern me not related to the "dumb money". Last I checked commodity prices have collapsed from their highs including oil. Copper is the most important to me though because copper is "the metal with a Ph.D in economics". Anyway, if all these commodities have fallen it could be an indicator that the global economy is slowing down. It may be a soft landing, or it may not be. I don't know. Also the housing market continues to fall. Analysts keep calling a bottom and then worse numbers come out. The troubles are spreading to subprime lending which could be a dangerous chain reaction. Will this turn out to be much ado about nothing? I don't know. Also the Fed Funds futures seem to indicate that if there's a change in interest rates, that they'll go up instead of down. Moving them down might help keep the economy afloat, but another move upward may be too much. But they're still concerned about inflation so it's a tough call. Another odd thing is the Dow and some of the other major indices haven't had a big down day (2% or more) in a really long time. I don't remember the exact timeframe, but it's been a long streak. The law of statistics and averages has to catch up to reality sooner or later. I guess what I'm getting at is this. I majored in economics. But I have no idea what the economy is going to do. And most economists don't either. There are a lot of warning signs of a recession or slowdown out there, but they're not overwhelming. I'm cautiously optimistic that this year will remain pretty strong but a recession looks increasingly likely to me by 2008-2009. The problem is we won't know if we're in a recession until several months in and maybe not until it's after it's over. That's just the way economics is.