No one really knows anything!

Spencer Jakab, a columnist for the Wall Street Journal (WSJ), warned that the market rebound triggered by the Federal Reserve's announcement of a 50 basis point rate cut in September was very similar to the eve of Lehman Brothers' bankruptcy in 2007, when a big rise was followed by a collapse. He believes that the current Fed's easing cycle cannot save the market.

Spencer wrote: "The initial reaction of the U.S. stock market to the rate cut last Wednesday (September 18) was exuberant, but this has often been proven to be false, and we still don't know how this movie ends."

He used the start of the 2007 rate cut cycle as an example. Coincidentally, this cycle started on the same day of the year, with the same federal funds starting rate and the same amount, 50 basis points, the same trend as last Wednesday. The effect was amazing at the time, with the Dow Jones Industrial Average posting its biggest gain in more than four years, up 336 points, equivalent to about 1,000 points today. Lehman Brothers' stock price performed best, soaring 10%.

"But, as we now know, the stock market was just three weeks away from its bull market peak, a recession would begin in January 2008, and Lehman Brothers would collapse less than a year later in the largest bankruptcy in U.S. history. By then, the Fed had cut rates six more times, by 25, 25, 75, 50, 75 and 25 basis points," Spencer noted.

 Right now, the headline news is all about the bright prospects of the economy and the stock market. Nearly no one is concerned about the upcoming recession. Really so bullish?

To illustrate, here's a fun trip down memory lane from the year 2000, shortly before the Dot Com meltdown (which started in March 2000):

• "Why the Markets Will Keep Booming" – Newsweek, February 7, 2000
• "The Ever-Expanding Stock Market" – The Washington Post, March 9, 2000
• "Economy Still Flying High, Fed Says" – CNN Money, April 5, 2000
• "Stocks Are Safe Again: The Economy's Solid, Inflation's Under Control" – U.S. News & World Report, January 17, 2000
• "No End in Sight for the Bull Market" – Wall Street Journal, February 14, 2000

And let's not leave out 2007/2008:

• "Subprime Woes Won't Derail Economy" – Reuters, April 3, 2007
• "Why the U.S. Economy Will Keep Growing" – BusinessWeek, March 5, 2007
• "No Recession in Sight, Say Economists" – The New York Times, July 18, 2007
• "The Market's Resilience is Impressive" – Forbes, August 6, 2007
• "Stocks Set to Soar" – Barron's, April 28, 2008
• "The Global Economy is Sound" – Financial Times, March 7, 2008

Just a reminder that no one really knows anything.