Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Taikun who wrote (51470)	7/8/2004 9:04:39 PM
From: AC Flyer	Read Replies (1) \| Respond to of 74559

>>AC, why do you think so?<< The more interesting question to me is why would you NOT think so. The only scenario that I can see that would prevent US equities from trading much higher in 2005 would require an Al Qaeda attack that did significant damage to the US economy. Call me an optimist but I think we are more likely to see OBL's corpse than we are to see a nuke in New York. To answer your question, the following facts are obvious, at least to me. 1. The 2000 tech wreck was not the beginning of a multi-year secular bear market but was the beginning of a serious mid-cycle correction - the cycle in question being the 20 year introduction and rollout (1990-2010) of a slew of related wireless and broadband technologies. 2. The experience of the last three years has been a normal cyclical recovery from a mild recession, but with the twin overlays of the China factor and high productivity reducing economic growth and restraining job creation. The pessimists have focused on job losses and have ignored good GDP and personal income growth. 3. While the media are full of stories of Uncle Joe's Investment Casting Emporium being driven out of business by Chinese competition, they have totally ignored the corollary story that many US businesses are benefiting from reduced material and component costs. Globalization is good. 4. The capital spending cycle is turning, with capital spending now increasing from its post-2000 lows. 5. Job creation is accelerating. More people working means higher consumer demand. 6. Interest rates are low and will remain low. The discount rate remained at post-WWII lows for more than three years. The Fed will move the discount rate up slowly and cautiously. 7. S&P500 earnings are at all-time highs and corporate earnings continue to grow strongly. 8. US companies are sitting on an unprecedented pile of cash, accumulated from record high operating cash flows and from restrained capital spending. 9. At current interest rates, stocks are significantly undervalued, as many people remain skeptical regarding the future prospects for equities. This is a matter of historical fact but nevertheless I am confident that many on BB&R will refuse to contemplate this possibility. 10. The boomers are desperate for one more score before they retire. As soon as they realize it's safe to go back in the water, there will be countless billions moving from money market funds to stocks. To summarize, the combination of a good and improving performance in the real economy, increasing job creation, accelerating corporate earnings, huge corporate cash hoards, deferred capital spending, low interest rates and undervalued equities can lead only to one conclusion - higher stock prices.