Hi Mohan -- now here is a new role for me:
As a defender of Iqbal's bullish stance--albeit a rationally exuberant one:)
I think that the bears have something of an obsession with the major averages and the need for a Kahuna of some dimension--and I think that this clouds their perspective. IMO, the bears have already won the day in many respects in that we have had/are in bear markets in several sectors: look at what has happened to the SOX, the disk-drive sector, semis/semi-equipment makers, net-workers(with the exception of CSCO), HMOs, gold and possibly others that don't come to mind right away. The averages have managed to mask these declines and their magnitude but for anyone who owns these stocks the fact that the SPX is close to its all time high, is small consolation. Try and tell those who bought stocks in these sectors during the summer that we are in a bull-market and see how convinced they are. It is on this issue that I part company with Iqbal--he perceives large gains in the indices as vindication of his bullish stance and a defeat for the bulls. I see it as a very narrow advance with relatively few participants.
Where I tend to side with Iqbal is in the outlook for the US economy and the stock-market. The general and presumably informed consensus is that the problems in Asia, as long it stays largely confined to SE Asia, is unlikely to impact the US excessively -- other than for certain sectors/companies. The real challenge is trying to figure out whether the problems are likely to spread further and then snow-ball to the US. If I had confidence that this were NOT going to happen to any degree, I would go long the market lock, stock and barrel--unfortunately, I have not heard a convincing argument being made that this is a problem that can be contained. This tempers my bullish bias and causes me to be cautious.
Now there are several strong arguments that can be made for the bullish case: favorable interest rates, almost non-existent inflation, sentiment that is turning decidedly negative and therefore bullish for the market, stocks that have been beaten down to a point where they represent longer-term value, continued inflow of funds--a secular trend for now, continued profit growth except in sectors that have not been adversely been impacted by the problems in Asia, the quality of earnings, etc . The one major unknown is whether the problems in Asia are likely to remain contained.
So just as I feel that Iqbal's exuberance about the averages recovering nicely from the decline, is misplaced--I also feel that the obsession of the bears that we need to see a significant decline in the averages shows a certain mind-set that clouds their judgement.
Regards |
