The Case for a Bull or Bear Market in Two Charts

[Crewleader]

July 28,2014

The Case for a Bull or Bear Market in Two Charts

by Charles Hugh Smith

Which appears more likely--a straight-line extension of the past two years' rise in stocks, or another "impossible" decline to complete the megaphone pattern?


There are dozens of charts and data points supporting the case for a continuation of the Bull market in stocks or a reversal into a Bear market. For the sake of brevity I've distilled the two arguments into two charts, one for the Bull case and one for the Bear case.

The Bull case is easy: the economy has reached self-sustaining expansion, a.k.a. escape velocity; hotel occupancy rates are high, home valuations are rising, stocks are fairly valued based on forward earnings, debt has been paid down/written off, and the Fed has tapered its quantitative easing (QE) bond and mortgage buying with no ill effect.

Looking ahead, there is no fundamental or technical reason for stocks to drop significantly; stocks always go up in years ending in 5, and there is nothing magical about 2016 in terms of a decline, either. The market could advance for years.

Bottom line: the advance since early 2012 is founded on solid fundamentals and there's no reason the advance can't continue along with strengthening fundamentals such as corporate profits, rising tax revenues, etc.

The Bear case is based on sentiment, but this reliance on extremes of bullish sentiment is misplaced; the fact that everyone is talking about a bubble in stocks and expecting a correction just goes to show there is no bubble and a correction will simply offer another opportunity to buy the dip, a strategy that has been richly rewarded.

The Fed (and other central banks) have our back: any decline in risk assets will be washed away with another tsunami of near-zero-interest money, liquidity and credit.



http://www.oftwominds.com/blogjuly14/bull-bear7-14.html


Five Decades of Middle Class Wages

by Doug Short http://www.advisorperspectives.com/dshort/updates/Employment-Wages-and-Hours-since-1964.php

[mahatmakanejeeves]

1. Dow 36,000

Dow 36,000

Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market is a book by James K. Glassman and Kevin A. Hassett largely discredited for misstating the risk characteristics of equity securities as equivalent to fixed income securities, but commonly believed discredited for predicting a grossly inflated stock market. It was published in 1999, shortly before the dot-com bubble burst, and predicted that the Dow Jones Industrial Average would rise to 36,000 within a few years. Parts of the book were also published in The Atlantic Monthly. The number 36,000 is arbitrary as it is an artifact of rebalancing the "divisor" in the Dow Jones Industrial Average each time a stock splits.