“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.)
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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).
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Source:
Stock Trader’s Almanac
June 20, 3006
“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.
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“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….
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REALITY CHECK:
11,722.98 – DJIA close on January 14th, 2000
11,047.20 – DJIA at NOON today
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The “Bull Case” is a case of bull.
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But they managed to throw a “Buy!” switch at 1:30pm. What was that all about? Did Norh Korea unilaterally disarm? What did I miss?
Just the bulls to the rescue. The q’s were sitting right at the October lows and someone came in and blew us upward. Depending on how we close, tomorrow will likely be a strong up day.
If not, it was likely a cash/futures arb program and someone is setting up for a big trade.
Didn’t Barry say he’d have something interesting to say about the QQQQs and big cap tech? Wow! You go Barry! Way to step in there!
I’m all for looking at something from the opposite side of your book- but this smacks of lobbing softballs to yourself in order to reinforce your original argument.
The Almanac clearly doesn’t believe the substance of any of these arguments, which makes their thought experiment worthless.
As a cyclical bear for the moment, the main threats to my view are in the broad market, high returns on capital, and relatively (to recent history) low valuations.
Stagflation is looming and don’t be fooled by the disguised figures like the deficit is shrinking ( overinflated and then pull the plugs to comfort oneself instead of comparing actual fighres ) and Iraq is a black hole for not only life but sucking in more funds…Who would say that we are in a bull run????
Steven from Beijing
Here is the bull case if you want to be a bull:
1) P/E ratios on the S&P 500 are not all that bad
2) Even if US growth slows, there will be plenty of international growth for many companies to keep growing their earnings
3) For the first time in a long time you can actually find value in the market
4) Bernanke does not take inflation seriously. This is not great for the economy as a whole in the long term but it is probably better for the stock market than an aggressive fed. If the fed starts lowering, financials and housing stocks will start coming back
I’m not a bull because I think this market is technically broken but it is possible to be one, even in this market
please, no more Sun Tzu quotes. I am not exactly sure how Corporate America fell in love with him, but if you are not talkng about war, then Sun Tzu has no more bearing on anything than Marshal von Falkenhayn. Typical management workshop groupthink training. Let the sales sharks and pr bunnies ramble on about history they never read, but please spare the rest of us.
I like Sun Tzu quotes and thought it applied. The exercise in being a bull helped.
The majority of the herd seems to be
Bears right now, I am starting to wonder
if late August will be a tremendous
time to buy.
My only fear is a terroist attack,
I think the markets will use
any serious terroist attack as an
excuse to fall.
Heck… I’m from Texas and when we do these here things, we kind of like to do them right… If you know what I mean…
We’re long stocks, long stock call options, short stock put options, long index futures, long calls on index futures and short puts on index futures…
That there is what we call a Texas hedge… Is that bullish enough for you, Mr. Larry Kudlow….? I’d also like for you to meet my wife who by the way, also happens to be my sister…. Ya’ll come back and see us gain, Hea….!