Day three is now underway in this correction. Corrections are important to reign in animal spirits. Some faulty logic has been widely espoused along the following themes:

-a hope that less bad economic data means "green shoots" as in the economy will be back to healthy growth rates soon. Not quite.

-a hope that rising commodity and oil prices means manufacturing and industrial demand is on the rebound. Not yet. China and other countries with cash have been stock piling for anticipated demand later. See World Bank says China recovery hopes premature.

The world has also been showing an aversion to the US dollar again the past couple of months. This aversion has pumped up the value of U$ priced commodities like oil, gold and copper. But these price hikes don’t signify a rebound in demand or organic growth, just the same old hedging and speculative investment that we saw spike and then crash markets in 2008. Remember that commodities and energy are late cycle leaders. Price spikes there do not lead a sustained economic expansion—just the opposite. Price spikes in these sectors serve to thwart the new economic expansion everyone so desperately wants. The unfortunate consequence is then increased costs (inflation) with stagnant consumption demand...   more »