January 30, 2013
I am still Long and still Buying the Stock Indices.
Not “when it dips”, Not “when it corrects”.
I say you buy it here, “at the market”,
Call Options or Futures, and put your stops in.
Stocks are making new highs. Yes, there is finally SOME talk that is bullish the market but in general, there is still a mountain of doubt.
Here are a few recent samples taken from well known news websites…
One lesson I learned decades ago: If a market is making new highs, and you can find any noticeable degree of opinion suggesting “Don’t buy it here”, or “This could be the top”, you’d better ignore all the doubt, get on the horse and ride with it….And I would add, especially if it’s a market that everybody is aware of, not some obscure commodity, like Cocoa for example…And the Stock Market is obviously THE market of which every investor is acutely aware.
As I wrote throughout 2012, the whole thing about Europe collapsing was nonsense...that the idea our economy was growing too slowly was nonsense…that the perception job growth was too slow was irrelevant. Ditto that the election mattered, or that China might slow down, or “there were still too many foreclosures”, or whatever…including all the malarkey about the fiscal cliff (which has now morphed into the “debt ceiling”)...All of those reasons not to own stocks were just the usual wrong way chatter that accompanies every bull market in equities…
The bottom line is the world is still in the midst of a three decades old economic expansion inspired by the Technology Revolution and The Death of Communism, an expansion that will now be aided by extremely low interest rates , a perhaps steady decline in energy prices due to advances in fracking, and 3-4 years of pent up demand about to hit the real estate and housing markets…Businesses have wrenched out excesses. Overvalued housing and real estate in general have been revalued and now represent a major asset class that has nothing but upside. Technological products are being absolutely devoured by the WORLD’s masses while also producing jobs faster than there are people to fill them…And to add to all this, two incredibly expensive, decade long wars have ended or are close to being so….As I have written for years, today’s planet is about BUSINESS, not ideology. The death of communism did add about a third of the world ‘s population back to the consumer driven economic cycle (after almost a century without them), and whether it’s here in the USA, or in Africa, South America, Russia or CHINA, Capitalism is King….and after the last 12 years of sideways stock market consolidation and the solving of various crises and the elimination of various excesses, I say the world is on the cusp of, at a minimum, 10-15 years of unmitigated prosperity…To me, where we sit is something like the early 1980’s or early 1990’s. In other words, I think the world economy and the equity markets are going up…a LOT and for a long time.
After what you’ve just read, the following excerpt from my August 17, 2010 newsletter may be a bit redundant, but I’m going to insert it again here as it may provide a clearer picture of the world’s economic climate as I see it…
Yes, the terrorist threat exists (and will), but I believe the world today is more at peace than any time in my 60 year lifetime. When I was a kid, we truly feared war with Russia and the threat of massive nuclear attack. We DID…China was the giant silent mysterious Communist enemy we knew NOTHING about, and with whom we didn’t even have the slightest of diplomatic relations…Half of Europe had been gobbled up, and held prisoner behind an Iron Curtain from which no one, nor any information, escaped, and the western world lived with the ever foreboding question of, “Where will the Soviet tanks show up next?”. The Cold War was real and it was global.
Today, even though the war in Afghanistan continues, and to a much lesser extent in Iraq as well, these are not world encompassing conflicts and definitely not wars between superpowers. And yes, the situation between Israel and its neighbors will continue to be “prickly”, but the international bottom line is the major “wars” now being fought are purely economic…The USA, China and Russia all have variously different political ideals and structures, but all three (and the rest of the world) are now immensely more interested in making money than in making war. In other words, Capitalism has broken out all over the planet as opposed to what was the case just 20-25 years ago…Think about it. In 1985, you still had several billion consumers suppressed by Communism, living under circumstances, for example, where factories produced according to government mandates (or quotas), not market demand, and making a quality product, or a profit, was rarely a primary consideration…But, how that has changed! Now, China has essentially become the world’s second largest economy, and their government, unhindered by the restraints of congressional gridlock and partisan party politics, is doing everything it can to turn their country into the world’s biggest Capitalistic machine…With China having 20% of the world’s population, this 21st century version of Capitalism (State Sponsored) has become a rising global force, and I believe, represents just as much of a dynamic influence for the planet as did the advent of computers back in the mid-80’s…
But again, China is not alone in their “adoption” of Super Capitalism as a means of elevating the living standards of its citizenry. Though each government’s approach and degree of support may differ, when you get down to it, as I’ve said before, the whole world has become about business. Whether it’s just the old guard, well developed, Western style economies…or Southeast Asia, India, Arabia, Eastern Europe, South America and even parts of Africa, nations everywhere, even the old Communist ones, are now geared, MORE THAN EVER, towards expanding commerce, not ideologies…and in all of those “new” capitalist nations, the most important thing they are really producing is the massive growth of their middle classes. They are producing hoards of new wage earners and CONSUMERS, which in the final economic analysis, is what really keeps everything going.
Beyond that, when you combine these new aggressive attitudes towards capitalism with the still ongoing, still in-its-early-stages Technology Revolution/Computer Age, I firmly believe you have the prescription for a worldwide economic boom…And I’m not just talking about some two or three year thing.
Simply stated, I think the confluence of these two forces, the “introduction” of maybe 1/3 of the world’s population to Capitalism, and the still-just-getting-started Technology Revolution, will result in worldwide growth, maybe on a scale unseen ever before…And as a consequence, this suggests (to me) that the chart above does have nowhere to go but UP, and whether it takes 4 years, or 10, we WILL then see the Dow at 25,000…or, for that matter, even higher.
Back to the present…Here is the chart I referred to in that August, 2010 newsletter…when the Dow was at 10,405…
If this chart does end 2013 anything close to how I have drawn it, it DOES mean the market will be flirting with 20,000.
Am I making a hardcore prediction this will happen? No, but I will say I do think at least 17,000 is a high percentage possibility.
At some point, I think we are going to get an economic report that will blow the lid off the stock market…Maybe an employment report where expectations for 150,000 new jobs comes in at 400,000 or the like…and we’ll see the market run like we haven’t seen it run in years…like I said before, 80’s or 90’s style…and the Dow will put on something like 1500-2000 points in a matter of weeks or in a few short months…Essentially, I think the market is poised here on the highs, with nobody believing it could be “getting away without them”, when suddenly, just the right news item will come along…and next thing you know stocks will be off like a rocket while the talking heads and the masses sit there waiting for a “pullback”…
Is it like that every time? No. But I can’t count the times I have seen it just like that.
The Dow and a few stocks tell the story…
Even though there’s always talk about what the S&P and NASDAQ are doing, I remain convinced the Dow is what it’s about…that what those 30 household names are doing sets the tone for the rest of the equity world…and with this in mind, and this is old school, but I think a look at a few of these companies is worth it…
I have no idea how big these three companies are or exactly what they are involved in all over this planet. All I know is, they are big. They are old. They are everywhere. They are not obsolete industries and they are not going to be. AND, these three companies currently represent 23% of how the Dow moves every day…These are the three most heavily weighted stocks in the daily computation of the Dow Jones Industrials Average.
Check out what these three stocks have been doing…especially since the election
that was supposed to ruin the country and then during all the claptrap about the
fiscal cliff…and also especially while 98% of the market following media was
advising “extreme caution” (see all the headlines I’ve included in the last 2-3
THE WORLD IS OK FOLKS. EVERYTHING IS ONLY GOING TO GET BETTER AND BETTER, AND ONE PLACE IT WILL BE REFLECTED IS IN THE STOCK MARKET.
I continue to recommend buying the Dow Jones Futures, using either futures contracts or call options.
One last note…
At the brokerage houses, it’s still as quiet as a bank lobby. I saw it so many times in my 11 years with Merrill Lynch. Those places are always so prim and serious…Until after the market has run 2000 points…From one day to the next, activity in brokerage offices suddenly explodes and the atmosphere goes from somber quiet to loud as a casino, with phones ringing, and brokers standing while excitedly gesticulating as everybody FINALLY wants to “get back in”. Maybe I’m dead wrong. Maybe this thing is all done on the upside and I am foolish to still be in it…but I don’t think so. And I do firmly believe that brokerage house scenario WILL be played out again…
Give me a call if you’re interested…or just to tell me how wrong you think I am.