The new month (August) sets up macro buy signals in the stock market and it clearly points higher, being led higher by the break out in the copper market! Ben Bernanke's testimony on the "unusually unpredictable" future of the American economy is the perfect "Wall of Worry”. It's my belief that the recent decline in U.S. stocks is a correction within a primary uptrend. I have concluded the recent weakness has been part of a correction within a primary uptrend, rather than the start of an extended
bear market.
This means the environment for stock investing over the next few years is highly favorable in comparison to other investment classes. The economic back drop is slow-to-moderate growth globally, with inflation under control. Maybe the best thing that is going on is all the ‘crazy talk’ that somehow things are different this time. Nothing is ever different in markets. Was it different in 1982, 1987, 1990, 1996, 2000, 2002, 2007 and 2009? Each one of these years the world was ending and things would never been the same.
No one knows what is going to happen tomorrow. Math can potentially lead us to the highest probabilities, and that is my only concern. I don't care about the stories. I care about how markets function and the math behind it. Stories are discounted as soon as they hit the tape.
The biggest edge is knowing that all markets function the same way. As we look at the global back drop, yes a slowing has taken place into normal growth. The break neck pace has slowed in China; yet it's not over by a long shot. If China is going to become the biggest economy in the world, it should happen by 2020 if not sooner. The rest of Asia is acting well, and India has had a small slowing but does continue to grow. Europe is not going to fall into the abyss and the issues there are already contained. All in all, when you look around the world, even the biggest economy is growing, the United States. While a pause to refresh has taken place - that isn't an issue. You grow from a deep negative number in GDP to 3.9% that is almost a 10% GDP swing in a year's time. That isn't something that reverses and goes away in booming global growth.
The stock market is in a wonderful position in the Macro time frame. The low of the year is in and the move higher is being led by the copper market. The secular bull market is well intact and a new leg higher has started.
Just curious as to why yourself and many others refuse to draw a comparison to 1929 - the last true period of deleveraging. History may not repeat but it usually rhymes- or shall I say human nature/horse race between greed and fear doesn't change. We are at a time where those that experienced the great depression are no longer active in policy = hence the wall of worry/slope of hope may come tumbling down just as it did back then. May Ben print his little ass off......either way we are fiscally hosed
ReplyDeleteRE: Bullethead
ReplyDeleteSeriously!! The doomsdayers who try to draw comparisons to 1929 always amuse me. We are in a much different place. History will ultimately judge Mr. Bernanke and his actions during a difficult period, my guess, quite favorably..Ken @ SaksTrading