I think we're going to get a bounce in October. Not a little bounce, a big one. I don't see us sliding day after day, like we did last week, all through October.
Reasons:
1. At some point, Americans are going to realize that 99.999999% of office buildings did not have a plane crash into them, and odds are good they won't.
2. At some point, investors realize that 95% of us are employed, and odds are excellent that at least 94% or 93% of us will still be employed next year.
3. If inflation is a problem, it's not a problem for this year, or next. Maybe 2003, which is too far away to worry about (unless you're buying LT Treasuries).
4. The Fed and the Federal Government are throwing money at problems with abandon. After a brief (8 year) interlude of Democratic FiscalResponsibility, we are back to Republican BorrowAndSpend. This is not a good LT strategy, but it'll be great for the economy in 2002. At some point, investors focus on this, rather than focussing on why the Fed and government are doing it.
5. Sentiment is at a level that is not sustainable for long. This extreme pessimism, massive mutual fund outflows, it can't go on for years and years. Weeks, maybe a few months at most, no more. This isn't 1990 Japan, and it isn't 1930 American either. It's a garden-variety recession, compounded by an "exogenous shock".
6. In recessions, stocks bottom well before the fundamentals of companies do. By late 2002, the Fed rate cuts (from 6.5% to 3% in 9 months, and could go even lower), and the stimulus of government spending, will cause a turn in the fundamentals. That means the market should be anticipating that by sometime in early 2002, which is just around the corner.
7. tax loss selling won't happen, as no one has any cap gains that need offsetting.
8. I'm fully long the market now, so I'm doing wishful thinking and speaking my position. |
