Market Bulls: Everything's Coming Up Roses?

When I was sitting there in the little studio I use in San Diego, doing Larry Kudlow’s show on CNBC, all that kept going through my mind was Ethel Merman singing, “Ev-uh-rything’s com-ing up ro-ses…”

The high point, for me, was when Don Luskin, frustrated with my use of the word “maybe,” asked me what I really think will happen in the future, and I told him something like, “Unlike you, Don, I wasn’t blessed with the gift of a crystal ball.”

Don’s a smart, VERY opinionated guy who was chatting up gold years ago when everybody else, including Cramer, thought he was a crackpot. A lot of people think he still is, as they do me. As is the case with all of us who have strong opinions, he eventually will be proven right.

But the bullishness, at this stage, for some, has hit the giddy stage as if everything that just happened, and continues to happen, doesn’t matter.

As one reader with a sense of history wrote:

All you had to say was what would have happened if you’d listened to the market/economy bulls in October 1930. The Dow was 164 having declined 52% from the July 1929 high of 343.

Sounds like a good time to be bullish right?

Problem is it took almost six years for you to get even (July of 1936) and in the interim you would have watched your Dow investment decline by 74% (to 43 in July of 1932).

These blind bulls are crazy. They make it sound like bank earnings are irrelevant. Who do you think put money in the hands of the consumer and businesses to create the business EPS growth? Problem is that the bank implosion wont impact the businesses that quickly as many still have decent liquidity and few are paying of their Auction Rate Securities.

You are right that the consumer is toast and if the bulls think eliminating their access to credit is OK wait till they find out that banks are now taking away unused credit lines. That should shake them up a bit.

I want to know from the bulls who is going to replace the $600 billion in liquidity provided by sub prime loans last year. The answer should be really good.”

Bulls? The floor is yours….

Comments

[robster]

bulls will tell you globalisation i suspect.

[littlebucks]

Really had nothing to say. Another "MAYBE" ON HIS PART.

[Simple Simon]

It's good to consider both the optimists, and the pessimists. I think it's fair to say that energy doubling practiclly overnight had a lot to do with the what may be known later as the wake up call,nay, fire drill that flushed a gargantuan chunk of disposable lucre out the exhaust pipes. Like John, the voice crying in the wilderness, we former leaders of the free world in technology, just might regain that feather in our cap via renewable energy entrepeneurs dotting the landscape =geothermal, wind, internal combustion assist to electric engines, etc. It will take another 5 or 6 years to come on line, but the nice consideration would be the 'jobs now' aspect of this newfound pollyanna optimism. I think we will have another 6 year climb in the Dow, as usual. AFI ( adjusted for inflation-with the dollar now worth about a dime ) puts value in perspective-namely that Ford and U.S. Airways can be bought at 75 cents a share, and DRYS at about $8. I can't conceive of of an infinite vanishing point for the Dollar-"maybe&quo... I like to think we can do this. Call me Ishmael, but I think we can and should start thinking of the internal combustion engine as a lumbering, thirsty dinosaur; a white whale that only the obessesive compulsive would insist on pursuing, given the fact that these new ideas are already in the pipeline. Couple that with countless millions of investors seeking the new 'fast buck' path, and in so doing, jump start these new enterprises. All that is need now is to locate these companies, and hook up our jumper cables.

[msmailbox]

This "giddiness" has been bothering me, too... Last Friday, I went to cash. The P/E's on my primary holdings had crept back to about 80% of their last July levels, but without significant change in their earnings, or expectations thereof. Too many other contrarians had joined me in heralding the recovery from the impending recession. I don't like crowds (like most contrarians)... Too many people doing the "right thing" can only mean that it's the "wrong thing." I had been going full-bore (on margin) and was leaving my trading post to eat and even took a hot shower (during market hours!), one day... I was making too much money, far too easily and the world does not work like that, at least not for very long... So, now I'm flush with cash and I have no idea where to invest it. Is it time to get exotic and play CD's, or should I be burying this stuff in Mason jars? I've been a very mad bull, made lots of money over the last 3 months, but it's time to repent and change my ways... Treasuries, bonds, CD's, cash, gold? I don't know.

[adan]

re: "... want to know from the bulls who is going to replace the $600 billion in liquidity provided by sub prime loans last year...."

and, add to that, the liquidity from all the alt-a's being downgraded, and, the auto and credit card losses

[flyoverman]

Here you go, Robster: The world-wide supply money will pick up the slack, at least to some degree. The excess liquidity from bad loans (we call it "sub-prime", but really it is "bad") needs to be wrung out. It was an illusion in the first place.

[MattBlackman]

Excellent point Herb. More recently we have the example set by the Nikkei 225 that between 1990 and 2008 experienced six major bull trap rallies, the latest being the 100%+ rally between 2003 and 2007 that ended October 31 (see tradesystemguru.com/co... ) and each time, the index fell to a new low.

Eighteen years later, the Nikkei is worth roughly 20% of what it was in 1990! As I mentioned in my article, each of the six bull trap rallies in the Nikkei was no doubt driven by bullish speculation by stock pundits talking their books...

[curious cat]

you really know how to start a conversation, herb. the last time i joined in was, oh, let me see, oh yeah, the big whoosh! i'm always happy to see a lot of people on your side, too. keep expecting that big whoosh. keep betting against the market and the dollar.

one of the reasons that things do not repeat themselves exactly is that people are involved and they are all trying to game the system (see above comments). it's like going to the race track and trying to see how this race will end, based on the previous races. just doesn't work that way, even though there are still a given number of horses and jockeys riding a given length of turf. sometimes, the one horse wins and sometimes it doesn't, even though it has the same post position! in fact, you can consider the horse's lifetime earnings, age, sex, driver weight, stable wins, diet, drugs, bathroom habits, the weather, track conditions and lots of other things and still not get it right.

i spent a few years betting on them and i'm probably one of the few people who ever left the track a winner, paid off my student loans that way. you see, just one thing can change and it will affect the race. a horse can come down from canada, where he's been losing but he's become accustomed to the colder weather, so he runs better. a horse can get the inside post but, previously, he's always run from the outside. another stable decides to run their horse as a front runner, instead of as a closer and he burns out the other horses trying to take the lead. a new single shaft sulky can be introduced and it might shave a second off a horse's time. a horse can break in front of your horse.

whatever in the world can happen, probably will and that's in a relatively contained environment. one night, ten of the horses i picked in ten consecutive races broke stride. i still went to the airport and boarded my plane.

the stock market is not self contained. the unlimited factors to consider are themselves changing over time and in relation to one another. the single most important factor is the one you want to watch because it will decide your fate most of the time. the single most important factor is not history. it is usually the fed moving or the iron curtain coming down or a discovery in some field that is a game changer.

but, the most amazing thing about the stock market is this. the bettors change the odds, just like at the race track, but they also decide the winners. that's right, the bettors decide the winners. think about that. if you are at odds with the bettors, you will be losing most of the time. you can try to get in front of them. you should never be way behind them and it is safest in the middle of them. this herd mentality is difficult to swallow if you are raised in america as an individualist, but much easier to accept in foreign countries that celebrate conformity.

so, when the market turns up, and it has, turn with it, don't fight it. don't fight the fed. don't fight all those asians who want the market to be higher, either. when they want it to go down, don't fight them in that direction, either. the borg say that resistance is futile. i wasn't convinced until i saw seven of nine.

[rbblum]

Always considered myself a fair & balanced kind of guy. Not only is the emerging global market playing favorably towards gold, so too are the missteps and mindset of the US Congress.

In the most basic terms, think of it in terms of a continuation of the printing and spending policy that will lead to the introduction and acceptance of the Amero . . . not the American Peso.

Please inform your good buddy/pal, Mr. Kudlow of the proper word that has been and will be 'coined' . . . the Amero.

[galewhitaker]

Herb
Here is another rally killer! Managers seem panicked about the increasing cost of energy. They can simply pass on the costs to the consumer but the consumer is already stressed because of the high prices of food and gasoline he won't be able to pay the higher prices. If the airlines take a huge hit its going to put hundreds of thousands of people out work. Not what the economy needs in these difficult times.

[Chungst]

People need to understand Herb Greenberg's background since he gets "leads" or "tips" from "knowledgeable&qu... people for his articles. And, when it's turn to speak for himself (live for TV), it's "maybe."

So much for going out on a limb, having a conviction, or taking a position. It's so clear to me Herb prefers the safety of accessing his network to appear inciteful (not insightful!).