The Next Bull Run: Coming to a Market Near You Soon

Indications are that the public stampede is away from stocks. However, additional stock buy back records have recently been set. Just in the last few days, corporations have purchased 20 Billion dollars worth of stock!

An interesting situation has developed where the bond market, without any further declines in value, will hit very strong momentum buy signals by July (my thanks to Don Hayes for the info). The table is being set for a major bull market move!

The oil now flowing thru Iraq has gotten very little attention. All the emotion and talk is being directed toward the Iran situation. Iran exports about 4 million barrels per day but they then import about 2.5 million barrels a day of finished products. Iraq pumped 700,000 barrels per day thru Turkey before the Gulf War. The growth in China during the month of May has gotten a lot of attention without the mention that this growth was spurred by the announcement of price increases to take effect in June. China and India (Iran and others) sell fuel to the public at a loss. Thus, the prices follow a plateau pattern. The recent increase in China of 12.5% is enough to destroy demand; if not, prices will rise again because the government is losing a lot of money off of each barrel sold.

The other oil factors making the news is a spill in a canal in Louisiana. This is a temporary problem getting far to much ink.

Corporations are buying billions of dollars of stock, reducing the supply. The law of supply and demand works. There is more oil in storage than ever before and billions of new barrels have been discovered in the past few months. Public wealth in America has never been greater and the shares of stock available to buy are going down. Prices are set to go up!

After several years of fighting deflation by pumping up the money supply, Japan is sucking up money like never before. In the short run, this will damage the price of assets. However, the damage is already painful for those invested in emerging markets, small caps and commodities (with the exception of oil). Exploration stocks are under-performing on a relative strength basis but the real pain will come later.

Comments

[WC Whiner]

Funny, when I read "purchased 20 Billion dollars worth of stock!" I mentally subtract the exclamation point, then divide by total market capitalization. "Just in the last few days, corporations have purchased less than 0.2% of market cap" may not sound as good, but it does seem the slightly more-accurate depiction.

FD: like you (I think), short- and mid-term bearish on the petroleum complex and bullish on yen/dollar. Unlike you, totally unimpressed by buybacks in a 5.25% fed-funds world.