A grumpy market watcher

So markets are up and racing again. Everyone seems to be hooked on optimism and seeing those ' green shoots' of recovery spouting everywhere - except me and a few other middle-aged Jeremiah's. Sure, I can accept that the plunge towards armageddon has stopped/moderated but I can't see where the sharp rebound in demand is going to come from that will justify current multiples. Can't really believe that economies are going to grow when credit is contracting - even allowing for all the stimulus that's being pumped in .

I guess if I look hard enough there are some positive straws blowing in the wind.The Bank of Japan said this morning that it expected further contraction in the economy with a forecast of a negative 3.1% GDP figure this year against the previously posted negative 2% number. Having said that , factory output actually rose 1.6% last month for the first time since Q3 last year leaving Japans ouput down a mere 34% from March last year. That's ok then.

In Europe, Germany's jobless level rose less than expected to 8.3% from 8.1% but the tentative 'green shoot ' is promptly trampled on by the additional information that a further hike in unemployment by 1 million is expected over the next year. With a collapse in credit fuelled demand there is a lot of excess capacity floating around in those exporters around Stuttgart which everyone assumes is going to be utilised again quickly. I'm not so sure.

Am grudgingly watching the market go up.However, the banks , which have led the charge upwards,seem to be living in denial.Do they disagree with the IMF's view that they need another $4.5 trillion in order to recapitalise to viable levels? I'm waiting to see the fudge that the stress tests will bring whenever they are eventually released - on or about May 4th.Since when has a bank balance sheet leveraged 33 times been prudent? After the wonderful creativity in the financials Q1 results ( almost as fictional as the burlesque that passed for the Chancellor's UK budget )perhaps we can all get on with looking at further downside earnings surprises,jaw dropping commercial real estate and credit card writedowns,and accelerated deleveraging that will continue to starve industry and the consumer. Some of the sector will see effective nationalisation.With credit contracting at the rate it is, a lot of those German factories are going to be staying idle for some time.

It's painful seeing the market surging but I'll wait for the savvy, strong balance sheet market leaders see their share price come off and then step in and buy them . For the time being I'll stay unfashionable risk averse let others view Chrysler's impending bankruptcy and a further fall in UK house prices as positive news.