Wednesday's WSJ has a very bullish, front page article on the current Bull market lasting another decade or so. In the past, that has operated as a bit of a warning sign that an intermediate top was nearing.
This doesn't mean the penultimate top is here; it only points to the fact that the WSJ editors have decided to move a Money & Investing column to page A1. Like any other publication, this implies that they are trying to capture some of the current zeitgeist, which is obviously enthusiastic for stocks.
A decade-long bull market is supposed to be a once-in-a-generation rarity: There was one in the 1920s, another in the 1950s and a third in the 1990s. Historically, most bull markets have run their course in three or four years. That means, recent stock-market highs notwithstanding, the current one should be on its last legs.
But just seven years after the great bull market of the 1990s thudded to a halt, a small group of seasoned investors -- including some with no vested interest in selling stock -- believe the U.S. market is in the midst of another long period of gains.
This group of extreme optimists believes that global economic strength will keep shares rising for much longer than has been common in previous eras. Not only China and India, but also Japan, Western Europe, Latin America and other parts of Asia are feeding on one another.
Such sentiments give traditionalist investors the shivers, because they can signal that excess is percolating back into the market. Many cite Yale economist Irving Fisher, who shortly before the 1929 crash famously said, "Stock prices have reached what looks like a permanently high plateau.
Identifying precisely when enthusiasm shifts to froth and froth turns into rampant speculative excess is an imprecise guessing game. So far, with Sentiment measures in the middle of their ranges, it does not look like we are in the last stage major of a blow off. It is not until the sentiment measures move to wild extremes, that we can more confidently smell the end game.
As I noted on CNBC Monday, despite the bull run here, US stocks continue to underperform overseas bourses. The chart in Wednesday's WSJ shows just how much:
Why Market Optimists Say This Bull Has Legs
They See Decade of Gain Fed by Global Growth; Skeptics Cite Big Doubts
WSJ, May 23, 2007; Page A1