Another Day of Surreality on Wall Street

OK, let's try and put this into terms that a fifth-grader (or even a Wall Street MBA) might understand.

1. If the economy is recovering -- or even close to doing so -- why is the Federal Reserve maintaining that short-term interest rates will remain "exceptionally low" until late-2014 -- that is, below the levels that prevailed at the beginning (or even the middle) of every single recovery in the post-war era, as well as below their multi-decade median of five percent?
   

2. Why are investors piling into stocks and growing increasingly bullish at a time when the Fed has essentially confirmed that their optimistic assumptions about the economy are not in synch with reality?
   

3. If, as Federal Reserve Chairman Bernanke says, there is still "enormous" negative equity in U.S. housing and, as U.S. Treasury Secretary Geithner says, "housing finance is still a mess," why did homebuilding stocks today rally more than twice as much as the overall market, and why have they gained nearly 90 percent since October?
   

4. And finally, if one assumes that today's developments will somehow help the economy to get back on its feet (an extremely dubious assumption in light of the experience of the past several years), why did stocks and bonds (with yields already approaching multi-year lows) end higher on the session?
   

Another day of surreality on Wall Street.

(The good news about today's announcement, of course, is that it should do wonders for sales of my new gag book, Modern Central Banking: Simplified).

Michael J. Panzner