The actual title of this Telegraph piece is FTSE gains 100 on BP Spill Hopes, Optimism over U.S. Corporate Profits but my title works as well. First the BP “hope” that investors are supposedly buying into:

BP shares gained 2.9pc as investors awaited news that tests on a new cap would show the leak in the Gulf of Mexico has been brought under control after 12 weeks. The shares have rise nearly 13pc so far this week, buoyed by takeover talk and reports of assets sales.

In reality BP is done. The Obama administration will gut the company and BP will need to sell off most of itself to pay for the damages to the gulf. A cynical person might put forward that both America and England need BP to be worth more when it sells off it’s assets so maybe they have arraigned some market movement to milk every last dime out of them. But I’m a well known optimist.

The U.S. news is just as “good” for investors:

Banking shares were lifted by positive sentiment about US quarterly results after a bullish statement from Alcoa, the largest US aluminium producer, yesterday. JP Morgan, Citigroup and Bank of America all report this week.

Barclays rose 4.2pc and RBS 3.85pc as Britain’s index of leading shares is heading for its sixth straight gain.

“What we have generally seen over the last few days are traders betting that the US earning season will be a fruitful one and are therefore cherry-picking stocks that to them may look cheap,” said Giles Watts, head of equities with City Index.

Alcoa lifted its outlook for global consumption of aluminium, which led to a rally among miners. Eurasian Natural Resources gained 3.3pc, and precious metals group Johnson Matthey, rose 3.6pc. Recent worries over a slowdown in Chinese demand were forgotten.

Did I say fairy dust? I meant wishful thinking. Anyone who thinks China can indefinitely float the world and pull us out of a depression should spend less time reading DNC press releases and more time looking at economic indicators. The same article that announces this ‘good news” (China needs aluminum …for what?  Bombers?) slips in a little unimportant nugget. Portugal just had their credit rating downgraded.

Oh, and economic powerhouse China has lost almost 2% as investors there sold off shares of property developers and lenders, the two industries supposedly powering China’s economic boom.

But the reality here is that investors are desperate and want good news. No one can believe that BP and U.S. corporations are really going to be doing well. It’s insane. Insane but instructive.

It’s this type of magical financial thinking that got us in trouble in the first place. Instead of common sense safe investing strategies people look to make quick bucks on market movements driven by herd mentality. That can work for a short time, but the wise investor now will be ignoring the herd and taking the steps he needs to top protect his wealth from the next crash that is coming this year.