Promises are only valuable when they can be relied upon AND when they finally turn into reality. This market is full of promises and yet, the realities are not so certain.

A few weeks ago the market was pumped up by the promise that the UAW and GM were making great progress during the negotiations. Here’s a quote from a 09/13/07 BusinessWeek article:

The Dow Jones industrial average rose by more than 130 points after General Motors Corp. surged 10 percent amid reports that talks between the automaker and workers over the thorny issue of health care costs have perhaps been fruitful.

Of course, the national GM strike over the past few days ended up happening anyway. The market loved the promises from weeks ago that failed and yet, when negotiations fell apart, the indices did not sell off. Now that we have a “tentative” deal between GM and the union, the market is loving it again.

This is one of the things I look for in evaluating market sentiment. The bulls are still in charge and regardless of whether it is justified or not, useless stories like this prove it for now. The market hoped for Fed rate cuts, stocks went up on the promise and the FOMC delivered. You might think that proves that the promise turned into reality. But what reality did we get? A rate cut is reality, but the economic benefits are still just a promise. GM and the UAW may have a contract, but that contract ends at some point. Did the agreement result in a harmonious relationship between employer and employee - I doubt it. Does this solve GM’s problems? Will GM be profitable now? Will GM design and manufacturing issues be resolved? Promises Promises Promises.