MMMPARSLEY1

The Bears' Skepticism Is Getting Old

InvestBaboo,

While it's impossible to argue against the idea that the masses opinion of the safety of equities is a strong negative indicator, I don't believe the seekingalpha community is representative of the average investor. Most people in this community actively follow the newscycle, and have healthy skepticism about whatever they hear on CNBC. Moreover, a significant amount of the posters here have some skill in doing their own research and due diligence.

There are plenty of reasons to be bearish. The most significant one is that bear markets don't end at 22x projected year-end earnings. That's where we stand right now. A double from here would be valuing companies in a time of suspect growth at Internet Bubble PE's of 44x 2009 earnings! If valuations are halved from here because of the continued drag on earnings and the consequent weakness in investor sentiment, the market would be valued at a conservative, yet still fair, 11x 2009 earnings.

I offer that as only one example of legitimate reasons to be prudently bearish. I also want to caution you to believe the seekingalpha community shares the same demographic as the CNBC Jim Cramerites who are much more reliable negative indicators.

Dave




On May 17 12:28 PM InvestBaboo wrote:

> This is very good. Almost all the comments here are bearish and many
> extremely bearish in nature. By definition such overabundance of
> bearish sentiment in the early stages of a bull market is good because
> it helps sustain the rally and take the market to new heights.<br/>
>
> As I have always said everytime I have tried to judge the direction
> of the market based on my own anaysis I have been wrong. I just follow
> the trend. We have had a negative week and yet the charts don't say
> the trend has ended. If the trend does end I will jump ship and let
> my bearish emotions come out in full swing and have a good cry with
> all the bears. Meanwhile, I will finger those crispy currency notes
> I have in my pocket thanks to the recent bull market which I benefited
> from by just following the trend rather than sitting on the sidelines
> like most bears shaking their heads in disbelief. Why people just
> don't follow the market rather than sitting on the sidelines and
> trying to second-guess is beyond me!

The Bear Turns Mildly Bullish

Hammerhead,

I totally agree with you that the US markets that operate and sell their products within this country are going to struggle. However, with inflation running rampant, do you really think the DOW is going to go down when it's pegged to the dollar? I'd rather have my money in producers than in cash.

That being said, I wouldn't put my money in one of those companies. However, as paper money loses its value, what do you think is going to pick up the slack? International stocks are trading at very attractive PE's after today. Those economies are still going to grow despite trouble in the US. In fact, they developing countries may stabilize their economies more than ever in the past as they stop subsidizing our debt and begin consuming their own resources.

Do you really think that with all the American companies which are world-class innovators with current of potential global products are going to go down in dollar value? The way I see, as new money hits the market, all speculative innovations go up in dollar terms.

The one thing I wouldn't want to be in is bonds. 2008 is going to be the year of inflation.

The Bear Turns Mildly Bullish

Wake up. We aren't lemmings, we are investors.

Volume is not higher than in mid-August. What you are seeing is a bubble bursing stemming from heavily margined accounts. Corporate earnings are slowing, but global growth remains strong. Even if it didn't, the cash printing press is flooding the market with new cash, so unless you think none of that cash is going to find it's way into the equity market you should be holding tight through the drop.

International growth is still very strong and most country's PE's are still rather low - especially considering the torrid growth rates. Slowed growth is more than priced into foreign equities right now, so put 2 and 2 together and realize that the heavily margined are paying a severe price for their greed right now. We're putting the flailing out of their misery while rewarding those who put capital aside with very cheap prices on equities.

The Bear Turns Mildly Bullish

Some Russell 2000 stocks can't go much lower. Many are trading well below book value as if these mid-tier companies are bankruptcy candidates - and they most assuredly are not.

The market is way oversold, and we're seeing traders heavily margined forced to capitulate to savvy trader who are scooping up shares at a bargain.

There is no reason for Asia to go down. Many countries are still trading at 10-15 PE's and have very significant positive balance of payments. Asian consumers have only begun their spending spree. Many of these companies are trading at VERY low PEG ratios so there is plenty of room for slowed growth already priced into these foreign equities.

The only market that is still arguably overbought is in Shanghai. US traded Chinese ADR's are valued rather nicely right now, with a few expections such as BIDU, CTRP etc.

Fundamentals are all that matters in the long run - and stocks are fundamentally undervalued even when adjusting for slowed global growth.