A Bull is Born 2009
By
Glen Bradford
Paul Price Tribute:
My friend Paul Price is calling for a Bullish 2009.
For example, here’s an article that upsets me:
All it does is have a bunch of analysts guess about their “favorite” ideas. Looking through them — I question the validity of it all. I mean, if my day job was to be an analyst, I wouldn’t recommend buying the Dow Jones Index unless I believed that no amount of analysis could give market beating insight. But then, why would I want to be an analyst? Well, it goes to show that the people most willing to give you advice recommends that you diversify into their ideas while they take their commissions and fees. I call this sell-side asset management. It’s the largest legal pyramid scheme. One indication of this type of heresy is when the recommendation comes without the disclosure of ownership of their recommendation. So far, I’ve only done this to one company, National Presto (NPK). Needless to say, it outperformed the market and my portfolio by 40% in the last 2 months. Yes, I’m kicking myself. The people you should take advice from are young and retired.
Call it Late:
I try not to call it early, I try to call it late — and that’s where I am. I’m at the cross roads. I hate that the Dow appears to have bottomed so early and so high, but it looks like a good time to get in if you like to go long. I called the Hang Seng bottom earlier — and I like that one a lot more. Back then I’d have assigned a 90% probability to that bottom. I’d assign a 75% probability to the Breaking Bull 2009. But first, why am I more right than the last guy?
Don’t Call it Early:
Searching Google (GOOG) I found some comparable market calls:
Welcome to the Bear
August 12, 2007
False Bottom 1
March 16, 2008
False Bottom 2
July 30, 2008
Why I think we are in a Bull Market:
Reason 1. Based on Vanguard’s definition of a Bear Market, where a 20% decline in major indices indicates bear market territory, it makes sense to me to have a 20% similar appreciation indicate the death of Bear 2008 and the birth of Bull 2009.
So, from the bottoms of November 20th 2008, how far have we come?
S&P 500 Dow30
8-Nov 752.44 7552.29
+20% 902.928 9062.748
Today’s Close 931.8 9034.69
Looks to me like we’re breaking the 20% barrier. Doug Short’s been looking at this against the previous Bear Markets.
Reason 2.
Lots of investors are looking for the return of their money and not the return on their money. There’s been a bubble in US treasuries that is screaming negative expected inflation over the next 10 years. My best guess is that since the Fed has pretty much doubled the supply of dollars… inflation will happen. The cause of the bubble can of course be explained by game theory, as can most of the manic depressiveness of market cycles.
Reason 3.
The market rallied friday and Cramer didn’t say sell into the gains, even though it rallied on insignificant volume. There’s a lot of money sitting on the sidelines. Game theory indicates that sidelines money will come into play ball when they start to think that they’re going to miss the boat.
Sidenote.
There’s been a lot of talk about this thing called the January Effect. Studies show that when an effect is made public, it ceases to exist. The reason we’re seeing this effect this time is not because of the old story of year-end tax purposes. We are seeing an inflation of horror story hedge fund sell-offs, that is all.