I'm bullish because:
1. the Nas bottomed at 1387 in 9/01 (making an elegant double bottom with the 10/98 low), and macro conditions today are much better than in 9/01.
2. There is a large group of TrueBlue LTB&H tech bulls, who are now sounding discouraged and hesitant, for the first time in this Bear Market. When they give up (as they seem to be, finally), the bottom is in.
3. I've been watching and worrying for the signs that this recession was going to be as bad as 1973, or even 1929. It hasn't happened, and it would have happened by now, if it was going to. The evidence indicates, this is going to be a short shallow recession, like 1990. This was the best possible outcome out of several possible futures, and I've only come to believe it in the last few months.
4. Productivity up (if you think the government can measure this accurately).
5. inflation nil. Record low inflation justifies record high valuations,using the formula: market E/P (inverse of PE) is at fair value, when it equals the inflation rate. This formula has held true, for the last 40 years, with inflation ranging from almost 10% around 1980, to below 2% now.
6. More importantly, Greenspan has clearly said he believes there is no inflation risk, so it will be late 2002, or more likely 2003, before the Fed begins a gradual tightening. If I saw signs of inflation, and I thought the Fed was going to be raising rates, over and over, quickly taking back everything they gave us in 2001, then I'd be at 70% cash, till the Fed had quit raising.
7. I've listened to a lot of conference calls, the last 2 quarters, and I'm hearing almost everyone say they see the bottom, now, and things get better from here on out.
8. A lot of charts, measuring a wide variety of different economic indicators, look like we are just past the trough. Things like new orders for semiconductor equipment, which collapsed in 2000, then flatlined for 11 months, and have just now turned up.
9. commodity prices are a good leading indicator, and they have turned up.
10. I don't worry about the unemployment rate, it's a lagging indicator.
11. the government is back to Republican BorrowAndSpend (an improvement over Pre-Clinton Democratic TaxAndSpend?). The farm subsidy and military spending bills, show that the 1990s spending restraint is totally gone. Longterm, this is an immoral transfer of consumption from future generations to us. But, short term, it is an economic stimulus, and will help prop up consumption in this recovery.
12. Everyone is finally paying attention to the systematic Creative Accounting, and the conflicts of interest, rife throughout the securities industry. GAAP is coming back into favor, and "pro forma" is a term of derision, as it always should have been. A necessary cleansing purge of the excesses of the Bubble.
13. I'd like to go back to LTB&H, and quit range-trading. I'm tired of this Bear Market. It's been 2 full years and then some, and that's long enough. |
