And now for the BULLISH case:
(for the bearish case see)
Message 11864105
from tonight's Worden report:
TIP: Descartes and Hume Are Long Dead
Do we personally agree with the User who sent us
the list of "the evidence that would indicate that we
are, with a high degree of probability, in the beginning
of a major bear market?" More important than whether we
agree is the fact that he is thinking for himself, going
about it in an orderly way, and his opinion is as good
as anybody's. There will always be well formulated
arguments on both sides of the bull-bear question, which
is why you must develop the courage to make your own
practical decisions. But it is useful to have someone
sum up the questions - as our Cartesian academician did.
We found it curious that he chose only to list
bearish arguments. Richard Nixon used to draw a line
down the middle of a yellow pad and then list all the
pros on one side and all the cons on the other. You
could say, well, look what happened to him, so maybe we
should have chosen somebody with more intellectual
clout, like Descartes or Hume. But we think Nixon was
right in this case. It's a good idea to look at both
sides of an argument.
Our academician neglected the potent bullish
arguments that may justify this bull of unprecedented
power and durability. 1. The demographics of the baby
boom are still an underlying bullish force and will
remain so for at least another decade. 2. The fall of
the Soviet Union and the resultant globalization of
commerce are good for, we would guess, a half century of
economic expansion on a scale that has never been seen
or even dreamed of. 3. The technological revolution
(computers and communications) has led to ongoing gains
in productivity (efficiency) that haven't been seen
since the Industrial Revolution, which lasted 50 years
with prices falling all the way.
That's point number one -- look at both sides of
the argument. Point number two is don't make the mistake
of assuming the side of the page with the longest list
is the strongest side. The three bullish arguments
above, which we have listed here several times before,
are compelling beyond approach. It would take World War
III or a massive scourge capable of wiping out a third
of the world to offset the weight of the demographics,
globalization and productivity fueling this secular
bull. These catastrophes may come to pass, but we have
no evidence that they will and they do not belong on our
list.
Next we have to consider the quality of our
academician's bearish list. Of the 11 points, we dismiss
eight summarily. Without going into all of them, suffice
to say we are not aware of a Dow Theory bear signal, and
if there had been such a signal, we would not accept the
contention that the Dow Theory has a 90 percent track
record. We do not accept the contention that the
advance-decline ratio has a 100 percent record for the
last 70 years. It is a statistical monstrosity. We
regard the Elliot Wave Theory, and anything else that
can't be classified by computer because it is too vague
to define, as witchcraft. Stochastics is a zero-sum game
timing aid (if you know the main direction). We do not
accept the contention that Greenspan expressed
bearishness about the market as it stands. We are aware
of no evidence that would quantify the threat to the
market posed by accounting manipulation. We regard
Gann's ideas as silly number games. We have never known
a time in the market where both bulls and bears couldn't
find anecdotes to bolster the validity of their
"contrariness."
We do believe that the three points concerning
money supply, credit tightening and high valuations have
some validity and belong on the list. However, even
these bearish arguments seem to imply a growing
vulnerability, not a dire prophecy. Further, these
bearish dislocations are correctable by a cyclical bear
market, which we of course expect to encounter sooner or
later. As for a grand bear market, of the type that
began in 1929 and in the early 1970s, we find no
evidence to suggest anything of the sort is just around
the corner.
That's our opinion. Persuasion is not our
objective. We lay out an opinion. You accept it or
reject it. If we stimulated you into doing a little
thinking, that's good enough. So go back and read the
professor's list in yesterday's Worden Report. Then
decide for yourself. (If you wish to email the
professor, send it to support@worden.com and we'll
forward it to him.)
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