17 REASONS TO BE BULLISH
24 July 2010 by Cullen Roche
23 Comments
Regular readers know I tend to focus on the negative aspects of the markets as opposed to the positives – anyone could put on a smile and skip through oncoming traffic, but the truth is, the investment world can be a very dangerous place so skipping along as if there are no risks involved is beyond foolish. But ignoring the positives is equally foolish. In this world of heightened market risks and particularly clear uncertainty here are 17 reasons to consider the bullish case (via David Rosenberg at Gluskin Sheff):
- Congress extending jobless benefits (yet again).
- Polls showing the GoP can take the House and the Senate in November.
- Some Democrats now want the tax hikes for 2011 to be delayed.
- Cap and trade is dead.
- Cameron’s popularity in the U.K. and market reaction there is setting an example for others regarding budgetary reform.
- China’s success in curbing its property bubble without bursting it.
- Growing confidence that the emerging markets, especially in Asia and Latin America, will be able to ‘decouple’ this time around. We heard this from more than just one CEO on our recent trip to NYC and Asian thumbprints were all over the positive news these past few weeks out of the likes of FedEx and UPS.
- Renewed stability in Eurozone debt and money markets – including successful bond auctions amongst the Club Med members.
- Clarity with respect to European bank vulnerability.
- Signs that consumer credit delinquency rates in the U.S. are rolling over.
- Mortgage delinquencies down five quarters in a row in California to a three-year low.
- The BP oil spill moving off the front pages.
- The financial regulation bill behind us and Goldman deciding to settle –more uncertainty out of the way.
- Widespread refutation of the ECRI as a leading indicator … even among the architects of the index! There is tremendous conviction now that a double-dip will be averted, even though 85% of the data releases in the past month have come in below expectations.
- Earnings season living up to expectations, especially among some key large-caps in the tech/industrial space – Microsoft, AT&T, CAT, and 3M are being viewed as game changers (especially 3M’s upped guidance). Even the airlines are reporting ripping results.
- Bernanke indicating that he can and will become more aggressive at stimulating monetary policy if he feels the need and yesterday urging the government to refrain from tightening fiscal policy (including tax hikes).
- Practically every street economist took a knife to Q2 and Q3 GDP growth, which has left PM’s believing we are into some sort of capitulation period where all the bad news is now “out there”.
Source: Gluskin Sheff
“Widespread refutation of the ECRI as a leading indicator … even among the architects of the index”
They are not refuting ECRI’s WLI validity, they are trying to sell you their product by saying that it’s invalid when taken out of context.
Call me when credit stops contracting and average unemployment duration stops rising. I question whether DR isn’t performing a bit of ass-protecting here…which makes me think we’re getting a bit bubbly already.
Mr. Rosenberg was using this list of evidence of “what the bulls are seeing.” Don’t mistake it for a change in his personal view.
Indeed. This is taken out of context, regardless if there is a short term trading opportunity.
How very clever. To my financially-challenged ears, almost every itme this list screams: “RUN don’t WALK!” Am I a hopeless financial cripple?
One thing is clear. I’m also spelling- and grammar-challenged.
just don’t think for a second that makes yuo spceail
I have to agree w/ Jon B above.
Tell me when we’ve worked off the shadow inventory of housing, jobs become available and unemployment reduces, and all that toxic debt is destroyed, and the HH’s rinse themselves of their debt loads.
That isn’t to say death is around the corner. We’re a surprisingly resilient country from a business point of view. I am stunned we entertain as much business as we do w/ the Fed Gov’s boot on their proverbial necks – heck, I wouldn’t be inclined to hire EVER w/ all the check boxes that have to be met! And still, they can connive a profit – go figure!
Do you think it is possible that the markets now have a complete disconnect with unemployment? The rates were quite high throught Q2 and look at the earnings being reported by any company that has an inetrnational exposure. It looks to me like the market really doesn’t care what happens with the employment picture in the US. After all, the most recent report on new claims was above expected and a bad number in general, but the market ran up with ease.
I am just beginning to think our economy, or least our equity markets, will be just fine with our current, or evern worse levels of unemployment. It just seems like we continue to move right along no matter how many are unemployed, underemployed or are just plain not looking.
I agree there is a disconnect owht unemployment – look at how companies who have hired recently, like Google and Amazon, were punished for increasing their operating expenses. As companies hire again, margins will go down and they will be punished – that’s a HUGE disconnect.
That disconnect has been there for a long while, not just with the recent economic downturn. It is virtually impossible to do any long term planning or sacrifice margins for non-financial objectives with having to meat or beat whatever some freak on wall street thinks the next quarterly numbers should be. It is clear wall street has no concern with the health and long-term viability of companies nor the economy, and they are the masters of the universe we are all slaves to. It sucks.
Not intended to be put in the wrong context….I guess I assumed it was common knowledge that DR is a bear. Sorry.
TPC, DR’s point 2 re the GOP’s potential ascendance in November would seem to be a negative if they push hard for near term fiscal austerity. Then again, many Dems would like to sterilize some of the fiscal stimulus via higher tax rates and (supposedly) PAYGO rules.
Neither party is particularly bullish, but at the moment the GOP sounds like the slightly more bearish of the two…
Rosenberg probably had to try and gracefullly change his viewpoint since he probably has only 5 clients left. He has been dead wrong for the last 15 months. Being bearish has been a the wrong call, even if you think the market is a giant pyramid scheme.
I’d give him a little more credit than that. Folks who followed his advice may have incurred significant opportunity costs in 2009, but that’s not nearly as bad as the actual dollar damages caused by blindly bullish strategists over any meaningful period of time in the last 10 years. Over several years or longer, people taking his advice would have done OK!
The one weak spot I see with DR is that he’s steeped in conventional macro thinking. Understanding sectoral balances (maybe a little MMT?) would have helped him better explain his persistent bearishness, and perhaps even predict the 2009 bounce. Better yet, it might help him avoid parroting the Wall Street strategists’ line that a significant GOP showing in Nov would be bullish. It could turn out to be bullish — for example, if the GOP can agree to well designed (is that even politically possible?) spending measures and the Dems can agree to a lower overall tax burden. But I’d put a low probability on that, regardless of how either party does; too much rancor on both sides, and too many complicating issues and constituents.
Point taken. Rosenberg was spot on going into the downturn. He makes good arguements and backs them up with data and analysis which is impressive. CNBC will call him up when we have the next down 250 day on the DOW.
I have a very vivid story of my time as a junior/associate on the sell-side in very late 2007/ very early 2008; I forget the actual time, but it was winter and was snowing.
Either way, and TPC you will love this given your disdain for sell-siders, the senior analyst I worked for wanted to upgrade our entire group (we covered a very deeply consumer discretionary cyclical industry) after the initial market downturn had beaten the living daylights out of the stocks.
The basis for his upgrade was the ECRI, something at the time I had never heard about. In my senior analyst’s words, “The ECRI says we aren’t going to have a recession and they have never been wrong historically”. Before you give my senior any credit, please understand that this was the full extent of justification for his upgrade of our group. Moreover, we didn’t even subscribe to the ECRI service at the time, he had just seen an interview or two on TV with Lakshman, who at the time, still wasn’t convinced the downturn in his own indicator mattered.
The point of this story is that I had no idea what ECRI was back then, the market had come off nicely on a big economic scare and nobody, even ECRI at the time, believed that the facts of their own indicator were telling them the truth.
It seems to me that we may actually be in a similar situation today.
The ECRI has a 100% accuracy rate in calling a recession yet the people that run it can never make a recession cal it would seem.
Use the data and screw what they say about “their own index” because they are obviously full of shit.
I would guess these guys are quick to trumpet a recovery
Shades of the past from the summer of 2008
G.Bush “the US economy is the one of the stongest in the world”
Big Ben “the subprime crisis is well-contained”
numerous analysts predict DJIA up to 16,000 by end of 2008
The domestic and global economies, domestic housing and domestic employment are at least are showing signs of stablizing, albeit at a lower level. We have no-flation. The world isn’t going to end this quarter. Companies are making money. Things aren’t booming but at least they are stable. You can’t make money in the money market and bonds have become risky. I’m cautiously buying high quality equities. No…I don’t think it’s a new bull market….I think it’s a trading range market…S&P 1000 – 1200. And I think the low may be in for the year……unless of course fat finger shows up again.
If this, if that, Forget the market buy value.
Straight up from here, with a little wiggle.
I find it utterly amazing that a little downturn in the market turns everyone into a big bear, bring out almost nothing but gloom and doom stories, and a few days of rise seems to bring out nothing but bullish stories. The timescale of public bullishness and bearishness seems to be about the scale of human short term memory. One hardly sees a bearish story anymore.
Unfortunately, the timescale of the market cycles is much longer, and the timescale of truly epic rises and falls in the stock and bond markets correlate well with the human lifespan. This is only natural in that such things happen when everyone who remembers the last cycle is dead.
I think we are still in the secular bear market that started when the dot com bust hit in Mar 2000, regardless of what it does in the short term.