Fiend Commentary
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Bears Beware?
Of all the more ridiculous things that I have heard recently, the quote
below from one of Wall Street's loudest Bulls takes the cake:
"Bears beware," said Larry Kudlow, chief economist at American Skandia.
"All that talk about weak earnings, a poor advance-decline ratio, narrow
breadth, rising inflation, higher interest rates and all that other
smoke bears have been blowing our way is, once again, nada."
Bears beware? First of all, there are few Bears left in this runaway stock
market. As you can see from the main page, I have not been able to locate
any suitable bearish articles. This is not from a lack of effort, there
just isn't anything being produced at the moment. If Dow 10,000 stunned a
lot of Bears, Dow 10,500 knocked them cold. I've notice that even the few
vociferous Bears have become somewhat tongue-tied.
I can't even think of one high profile Bear that has made any comments on
how the stock market has gotten out of control. Think about it. When was
the last time you heard or read about a Bear predicting a crash or even a
decline of more than 30%. There has been a subtle but very definite
capitulation on the part of the Bears -- right at the height of one of the
greatest manias in modern history.
The put/call ratios or advisor sentiment data doesn't indicate a lot of
bearishness and on the bullishness side, the Bulls have just gone nuts.
The unbelievable condition of the stock market with never before seen
valuations and speculation is just so much "smoke" according to Kudlow.
The Bulls are really feeling it right now and they are at the height of
hubris. Their confidence is so great at the moment with the Dow surging
through the century marks that there isn't anything that will concern them.
Instead of concern for the Bulls who in my opinion are headed for a fall
that will at least rival the 1973-74 bear market, they are concerned for the
Bears.
Well, I can speak for the other Bears of course, but they should worry about
this one. Certainly Dow 10,000 has hurt my ad revenues. Believe it or not,
I get on average about 15 clicks a day out of 3,500 to 4,000 impressions
which is probably some sort of record low. Luckily, I'm not dependent upon
ad revenue to keep my site going so there is no way for the SuperBear Page
to go bankrupt.
Personally holding cash isn't going to hurt either because with 0 inflation
as the Bulls claim, you are getting a 5% real return. Prior to the New Era
that many believe we are in, the best you would hope for in the stock market
is a 7% real return.
It is hard to believe, but in the Old Era, one of the key reasons given to
invest in stocks was to beat out inflation. Well, there is no inflation so
cash is once again king. I'm willing to take the chance that the real rate
of return in the stock market is not going to be 20% a year for much longer.
It is actually quite an absurd viewpoint of the Bulls that I will get into
in another commentary.
So, if you are holding cash, just keep in mind that you are doing nearly as
well as the long term real rate of stock market returns prior to the NewEra. |
