Amid the love fest taking place on Wall Street, it was easy to miss the good ISM (Institute of Supply Management) reports of underlying economic data last week.  We learned that manufacturing improved nicely in October, with the ISM Manufacturing Index coming in at 56.4.  (Anything above 50 indicates an increase.)  While production increased 2% in the third quarter, most economists expect a 5% annualized gain in the fourth quarter.  This is big!

Also, foreigners strongly increased their orders from U.S. manufacturers, with the ISM New Orders Index rising from 52.0 to 57.0, and that is the eleventh straight month they have ordered more from us.  This is a very positive leading economic indicator.

Lastly, the ISM Prices Index showed only minimal inflationary pressure.  Just 8 out of 18 industries reported higher input prices.  This is very comforting, especially to the Fed.

Let’s see:  production is up, foreign demand is up, inflation remains low, tapering of QE is postponed until Spring, China has avoided a hard landing, and unemployment is dropping, albeit slowly.  The love fest on Wall Street seems justified.

However, Wall Street is considered “smart money,” and it seems unconcerned about the continuing charade in Washington, as well as the under-capitalized banks in Europe.  There is even talk of a dangerous “melt-up” in stock prices, when stock prices rise at an unsustainable rate.  While I’m aware that a “melt-up” merely lays the groundwork for a subsequent “melt-down,” I don’t think we’re close to that yet.

So, I like it . . . for now . . .