Since it peaked in 2007, the UK stock market lost 60% of its value. As of yesterday, it had recovered half of what it had lost.

All over the world, the story is about the same. Markets have recovered half or more of what they gave up.

The US is a laggard. While the S&P is up 60%, the Dow isn’t yet at the halfway point. Some foreign markets, meanwhile, have 100% + gains.

Fund managers who missed the rally are kicking themselves. They’ve failed to keep up with the benchmarks.

Even before the market headed up in March we echoed Richard Russell’s words: “One of the surest phenomena in the financial world is the bear market bounce,” he said. We also guessed that the bounce would go to about half the previous losses. We based that on what had happened after the Crash of ’29.

Well, we’re still not there. But an analyst from Morgan Stanley tells us that markets tend to do better than that. The typical bounce is about 70%, says he.

Whew! That’s a pretty serious bounce. If we’d known it was going to be that big we would have encouraged dear readers to bet on it. Instead, we judged it a dangerous countercurrent…like a back eddy or rip tide. Yes, it can take you places…but not necessarily where you want to go!

Our outlook here at The Daily Reckoning is very long term. We don’t like betting on countercurrents…even important ones. Instead, we like to go with the flow…and keep going with it until it arrives at its end.

That’s not as easy as it sounds.

In 1999, it looked like the bull market had come to an end. We…

….read more HERE.

In this issue:

It’s The Best of Times
The Elements of Deflation 
It’s More Than Half Full
Argentina, Brazil, and Uruguay

What’s a Fed to do? We get talk about tightening and taking away the easy credit, but we got the fourth largest monetization on record last week. This week we examine the elements of deflation, look at some banking statistics that are not optimistic, and then Iwrite a reply to my great friend Bill Bonner about why it’s the best of times to beyoung. I think you will get a few thought-provoking ideas here and there.

…..read more HERE.

‘“Super Freakonomics” by Steven D. Levitt and Stephen J. Dubner (HarperCollins Publishers, 2009) is the follow-up to their enormously popular book “Freakonomics.” Need one say more?

The theme of both books is incentives. Why? Because, as they emphasize right from the start, people respond to incentives. And how people respond to incentives is what Levitt and Dubner find interesting. Of course, Levitt is an economist and, as the authors explained in their first book, economics is the study of incentives.

…..read more HERE.

Front and center this morning we’ve got the Aussie dollar (AUD) rallying strongly, and a lot of that move is coming to us by way of an interview with Reserve Bank of Australia (RBA) Governor Stevens.

….read more HERE.