I remember a time when the stock market served as a barometer for the overall economy. Generally stocks would rise in anticipation of improving economic conditions and begin to fall before the cracks appeared.

To be sure, in the short-term, we often saw divergences between the economy and the market. The stock market is, after all, the collective opinion of emotional and frequently irrational human beings. It can’t help but get out of line at times. But viewed from a long-term perspective, secular bull markets have gone hand in hand with prosperous times while secular bears have served as an indication of something considerably less pleasant.

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We’re off to a beautiful start in 2005. The S&P 500 and Dow are down 3.6% and the Nasdaq Composite is off 6.5%, the worst January in decades. Crude oil is pushing $50 per barrel and prices at the pump are on the rise again. Inflation is up (although official figures are still tame, as they are likely to remain forever and ever) and consumer confidence is slipping.

Tough to be confident when you’re socking away a whopping $6.67 a month toward retirement. That’s for the average American family, mind you. Some folks are of course doing considerably better, socking away $10 and even $20 a month. And then there’s the obliviously clueless bunch who believe that borrowing against their homes somehow makes them wealthier when in fact only the mortgage company gains.

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Welcome to the land of milk and honey, America 2005, a wondrous place where problems are no such thing and nothing really matters. We’re on course for unending growth and military triumphs whenever and wherever we desire them. In our world, houses only increase in value over time, despite the fact that everything within them degrades over time. Interest rates may rise and fall but are destined to remain with a range that makes everything affordable for everyone, always. We’ve reached ultimate economic equilibrium and economic pain & suffering will be relegated to a tiny footnote referencing the charming but improperly managed pre-21st century world.

Am I so off? Before the crowd chimes in with the usual chorus of “He’s on another one of those hysterical rants,” consider the world we really live in.

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Last year went out with a whimper and 2005 came in with a bang. Unfortunately for the bulls, the bang was to the downside. Those who believe that the first five days of January have some mystical bearing upon the rest of the years have good reason to take 2005 off and do some sailing. Or seek solace in the tendency of years ending in “5″ to have been quite profitable historically.

For those of us who believe that the first five days of January are just the first five days of January and that a number on a calendar has little bearing upon stock market direction, our work has just begun. What will 2005 bring?

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