THE PRAGMATIC CAPITALIST » » WHY THIS IS NOT THE BEGINNING OF A SECULAR BULL MARKET

WHY THIS IS NOT THE BEGINNING OF A SECULAR BULL MARKET

16 November 2009 by TPC 6 Comments

David Rosenberg, not surprisingly, doesn’t think this is the beginning of a new secular bull. His argument is pretty convincing:

P/E Multiples were 8x, not 26x.

Dividend yields were 6%, not sub-2%.

The stock market was trading at a discount to book, not a 2x premium.

Monetary policy was aimed at reducing money growth and inflation rates, not creating both as is the case now.

Fiscal policy was aimed at reducing nondefense spending, not accelerating it.

Deficits were peaking and coming down, not surging to 10%+ relative to GDP.

Global trade barriers were being torn down; not erected.

Deregulation back then was in; today it is all about re-regulation and government ownership.

Union membership was on the way down; today it is back on the rise.

The dollar was entering a Plaza Accord bull market, not a mercantilist bear market.

Credit, household balance sheets and participation rates were expanding, not contracting.

Tax rates, income, capital gains and dividends, were declining then; rising now.

Source: Gluskin Sheff

Rating: 0.0/10 (0 votes cast)

6 Comments »

svg said:

Let me know when Rosenberg finally becomes bullish. That’ll be the time to go all-in short.

Rating: 0.0/5 (0 votes cast)

James Reply:
November 16th, 2009 at 12:39 PM

Same with Art Cashin. They’ll be sort of right soon, the top is very very near at least for the short term.

Rating: 0.0/5 (0 votes cast)

svg Reply:
November 16th, 2009 at 1:55 PM

1) Nobody knows if the top is near.

2) No matter how many times we see the same thing in the stock market, throughout our entire lifetimes, most human beings are obviously incapable of learning the REALITY. I guess we are simply not wired to do so. Sad comment on the human brain. It is remarkable to read on blog after blog, messageboard after messageboard, the exact same things over and over again. Same goes for life in general. The only reason I read any of it is to kill time. It’s the mental equivalent of bubble gum. Basically worthless, but gives you something to do while waiting for outcomes.

Rating: 0.0/5 (0 votes cast)

James Reply:
November 16th, 2009 at 3:38 PM

I agree nobody KNOWS if it is unless you have control over the markets like Uncle Sam does. A dollar rally and some negativity from Ben, Obama, Geithner or a high profiled congressional member will throw things into disarray for a while. My conviction is a top is very near technically and fundamentally, at least for the SHORT term. I can’t say if this is the top or not.

Rating: 0.0/5 (0 votes cast)

svg Reply:
November 16th, 2009 at 5:56 PM

Well, look at the SPX chart. Look at that series of perfect (read: controlled) waves. I got out of longs around SPX 920. No chance I buy back into this market. Will trade around the edges and hopefully avoid getting run over by the elitist train. But I’ve been hearing/thinking “top” for over 100 points. Momentum is clearly with the bulls. Selling pressure is minimal. Until selling returns, this low-volume, momo following, HFT-greased, liquidity driven “rally” will continue.

Rosenberg seems like a good guy, and he is obviously intelligent and well-informed, but unfortunately there’s very little value (or worse) in listening to any of the fundamental-ists in terms of what the stock market will do. The mistake that these people make is in trying to guess the unknowable future. Something that Buffett, for example, wisely avoids. How many people around the world are making a paycheque by coming out with these silly dart throws? Gee, I wish I was that lucky. And even when they are hugely wrong, they still get paid and listened to. Unreal.

The market does what the market does. Trying to make sense of it is a big mistake. There is no “should”. There just “is”.