The Big Chill - 08/24/10

• The downturn runs deeper than all-too-familiar malaise that has accompanied the market during late August.
• This is precisely the sort of desultory setting in which a recovery in stock prices can emerge.
   

"Wise up, folks. We're all alone out there, and tomorrow we're going out there again."
-- Nick (William Hurt), The Big Chill

There is a big market chill that runs deeper than the normal and all-too-familiar malaise that typically has accompanied the market during late August.
The market's fan base (as Jim "El Capitan" Cramer described its constituency on "Mad Money" last night) has been depleted by 10 years of underperformance, both relative to bonds and in an absolute sense. The 2008 investment shock also turned off a generation of investors, and whatever stragglers remained have been paralyzed by the flash crash in the spring of this year.

In yesterday's opening missive, I tried to logically build a more bullish case, but it is almost as if the causal relationships (of interest rates, valuation, etc.) have lost their relevance in a market in which investors are so downtrodden.

But, to this contrarian, this is precisely the sort of desultory setting in which a recovery in stock prices can emerge.