The Bull Case
“Know the enemy and know yourself; in a hundred battles you will never be in peril. When you are ignorant of the enemy, but know yourself, your chances of winning or losing are equal. If ignorant both of your enemy and yourself, you are certain in every battle to be in peril.” — Sun Tzu (Chinese military strategist, "The Art of War," circa 6th century B.C.)
The Stock Trader's Almanac laid out the Bull's case last week: Jeff and Judd are fairly Bearish into year's end --they are looking for Dow 8500 -- but they like to occassionally switch things up, and change perspectives. Its a good mental exercise, and can often be revealing.
Those in the Bearish camp -- I call them (us) realists -- need to do a few things prior to putting on their Bull tinted glasses:
"Suspend your belief that we are in a bear market. Ignore the fact that we are in the worst six-months of the most dangerous section of the presidential election cycle. Discount the inverted yield curve, the fact that we haven’t had a serious recession in decades and the fed resembles a rudderless ship adrift. Accept that the housing market is going to have a “soft landing”. Forget about the missiles flying in Iraq, Israel, Afghanistan and North Korea."
OK, got that? Now you are good and bullish -- and here is why the real Bulls think you ought to stay that way:
1) Corporate earnings have been good and no major company has had significant earnings warnings so far. As long as the corporate balance sheets remain strong the markets will push forward.
2) Iraq is not as bad as the media makes it out to be. Oil production is up and the US has accomplished a lot of good things that don’t get reported. The Bush doctrine may still prove successful and if it does, stability in the Middle East will follow.
3) The economy is strong and inflation is in check. Moreover, the Greenspan/Bernanke measured rate increases may slow the economy perfectly just as it did in 1994-5.
4) This economy has weathered unbelievable shocks and has come out of it relatively unfazed. The market has grown callus to hurricanes, war, terrorism, energy prices and scandal to name but a few. Geopolitics and crisis no longer impact the market as it has in the past.
5) The US consumer is inexhaustible. If $70+ barrel oil hasn’t changed spending habits nothing will. Americans are rich and will stay that way.
That is the Bull case. If you agree with these 5 items, you should be long; Hell, you should be leveraged long. For those of you who disagree, you should be neutral at best, short or leveraged short when the time is right.
When should you become Bullish (for real)? Most likely, according to Jeff & Judd, when we pull our stakes and set up in the Bull camp, (and most likely will be in the minority again).
Stock Trader's Almanac
June 20, 3006
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"Iraq is not as bad as the media makes it out to be. Oil production is up"
Iraq is WORSE than "the media makes it out to be", and oil production is lower now than before the invasion. The situation with the water, electricity, and sewage is far worse.
"The US consumer is inexhaustible"
* The total amount of money Americans have to spend after taxes relative to overall output of goods and services has hit the LOWEST level in 25 years
* The savings rate went NEGATIVE for the first time since the Great Depression
* Poverty has INCREASED every year this administration has been in power (in contrast to DECLINING every year of the previous eight years)
* Not to mention the record trade deficit, record current accounts deficit, record budget deficits, and a jobless recovery
"inflation is in check"
Over to you, Barry....
11,722.98 – DJIA close on January 14th, 2000
11,047.20 – DJIA at NOON today
The "Bull Case" is a case of bull.
Posted by: VJ | Jul 11, 2006 1:48:29 PM
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