by Joshua Enomoto

Yahoo Finance, as they are apt to do, ran an article with a hyperbolic headliner which bluntly opined, "We are about to enter the greatest bull market in 85 years." I'm glad that there is so much optimism in the face of virtually untenable challenges that the mainstream media deliberately glosses over, but at a certain point, conjecture, no matter how articulated it may be, cannot sustain an economy whose large cap equity sector accounts for 50% of global market capitalization, according to sources from CNBC.

This is why it's so refreshing that Ari Wald, head of technical analysis at Oppenheimer & Company, divulged specific details that support the aforementioned sentiment. While Mr. Wald does not discount the possibility of near-term weakness or volatility, he provided five reasons why investors should remain bullish for the long-term :

1. A secular breakout above its 2000 to 2013 price range.
2. An accommodative Federal Reserve policy.
3. Attractive stock valuations compared to bonds.
4. Cyclical sectors have stronger trends than defensive sectors.
5. Continued growth in the U.S. economy.

In reference to his first point, Mr. Wald states "When you consider that we're just getting above levels from 13 years ago, we think this is a much stronger structure that makes the case for higher highs and higher lows over the coming years." The verbiage relates to the discipline of technical analysis, which in this case is a speculative psychological assumption that as new highs are achieved in the markets, this naturally leads to the investment masses gaining confidence and continuing to push the markets higher still.

The problem with this assumption is that it's an assumption : there's no rule that higher highs must be accompanied by further momentum. If that was the case, we would never have a bear market and...let's cut the crap...we patently know that this isn't true! But more importantly, the context is very misleading. Yes, the market has had a "secular" breakout above its 2000 to 2013 range, but over the course of a decade-plus, it has merely regained losses from two market collapses, at least from a nominal perspective. There is also the contention that the recovery is not equitable as it correlates to the real losses incurred by the retail community, but that's a different story for a different day. The key issue is that the mainstream is patting itself for a recuperation : the real story is just beginning.

Points two, three and four, while presently legitimate, are not assured to be floors for the stock market should a negative catalyst wreak unexpected havoc on economic fundamentals. The accommodative Federal Reserve, to put it simply at the risk of sounding obtuse, is not guaranteed to continue their "generosity." Former Fed chair Ben Bernanke outlined an exit for the central bank to peel back its highly experimental quantitative easing program and even if current chair Janet Yellen were forced to unleash the monetary spigot in response to another financial crisis, there's no assurance that an identical policy will react in the same manner and scope in a future, dissimilar paradigm.

Because quantitative easing was directly tied to the bond market, any change in trajectory or even the mere velocity of current Fed policy will likely have unintended, and more to the point, unfavorable consequences for bond market valuations. We've already seen some wild fluctuations whenever serious deliberations occur inside the Fed so point number three is very much contentious. Point four, while true for now, is subject to a radical rotation should volatility enter either economic fundamentals or the bond market. At times of uncertainty, and this situation is very much uncertain, defensive sectors can take the form of a bear trap, springing violently upward at the first sign of real trouble.

Finally, we come to point number five. I think this is the most contentious argument because the growth, even though it is recorded as such by government statisticians, is accompanied by compositional problems within the labor market (swapping good jobs for menial ones) as well as rising standard of living costs, ironically also recorded by the Bureau of Labor Statistics. Ultimately, for the stock market to continue on its journey, a more widespread support basis must be established. Sadly, it is not there and those that take Mr. Wald's advice are setting themselves up for unnecessary risk.

With a 36-year drought now consigned to the inevitability of adding yet another year to one of the longest losing streaks in professional sports, attention has now shifted towards the post-race interview of Steve Coburn, co-owner of racing horse California Chrome, who had just failed in the bid to secure the vaunted Triple Crown. Mr. Coburn, who must have simultaneously felt the pressure of national expectation and the alluring seduction of precontrived destiny, was obviously in a overly heightened state of emotion. That the ever-intrusive media pounces upon such opportunities of human vulnerability will inexorably raise the odds of capturing an anomalous or an otherwise unacceptable behavior.

As much as the mainstream media would like to impugn poor sportsmanship upon Mr. Coburn, he did have an extremely valid point during his salty denunciation of the team associated with Tonalist, the winning horse at the Belmont. Tonalist had the luxury and the clear performance advantage of not having raced the Derby nor the Preakness before being allowed to play the role of spoiler at the penultimate track. There is something wholly dissonant about the previous controversy surrounding California Chrome's much ballyhooed nasal strip, yet very little, if any, commotion about allowing rested horses to compete against tired ones.

That is until Mr. Coburn's so-called post-race diatribe. Casual observers, such as myself, and I suspect, millions of other bandwagon "Chromies," had suddenly found a rational explanation for the collective disappointment. Injustice is one of the few intangibles that immediately catalyzes a primordial response and it has a tendency of taking on magmatic proportions when it comes to sports. Perhaps the now embattled owner incorporated this guttural instinct into his calculus or maybe he was just plain pissed : regardless of the possible motivations, he enlightened a viewership that prior to the fanfare was ignorant of the woeful flaws within the horse-racing system.

The declining prestige and relevance of the equine sport was made no secret during NBC's coverage of the Belmont Stakes. In a crowded industry that features its own triple crown of the NFL, NBA, and the MLB, along with the upcoming FIFA World Cup that is to be broadcast via ABC and its ESPN conglomerate, California Chrome's captivating rags to riches story in a sport notorious for its high-brow antics was a God-send for NBC, unexpectedly driving millions of viewers and advertising dollars on the basis of the rarest sporting event, a moment that can only materialize contingent upon the consecutive performance of one specific contestant. That it was revealed that the field was legally rigged against California Chrome was most certainly not in the anticipated script for NBC's producers, considering the potential damage the revelation incurs upon future revenue.

But this detracts from an even greater truth...(read more here!)

With the recent announcement from the U.S. Department of Labor that 217,000 jobs have been added to the mix for the month of May, we have now passed a critical crossroad, recovering all the jobs lost since the financial crisis of 2008. In response, the stock market rallied, continuing the momentum that was built from the prior day's speculation of positive employment data. At time of writing, the benchmark S&P 500, which tracks the performance of large capitalization companies, is sitting within spitting distance of 1,950 points. The venerable Dow Jones, on the other hand, is playing the records tango with its own set of weighted averages, sitting inside a hundred points of the 17,000 mark. Good times, it seems, is upon us. So what could possibly be the problem?

The basis is a lie.

Let me share a story. Several years ago, I, along with a friend, was taking advantage of a local Walmart's embarkation towards a 24-hour schedule. At the time, the idea seemed ludicrous to me yet that notion was immediately quieted when my friend viscerally introduced me to what would later become a more commonly accepted paradigm : the never-ending consumer retail cycle. During the course of shopping, I picked up a few knick-knacks while my friend simply needed a new toothbrush. In order to make the journey quicker and more convenient, I offered to have him put the toothbrush on my tab. After the transaction was completed, I joked that he owed me half of the total transaction amount, an inside reference to our bill-splitting process when we would visit various eateries around town. He countered, as expected, that just because an item of his was included in a transaction does not mean that he is liable for other items within the same transaction.

While this is a very logical concept amongst economists, accountants, and anyone that has a modicum of basic reasoning abilities, the Department of Labor thinks otherwise. The number of jobs isn't nearly as important as its compositional base. In other words, if a million engineering jobs were lost in the recession, a recovery cannot occur, at least within this industry, until a million engineering jobs are once again restored.

I speak extensively about this deception of rhetoric in my e-book, "The Renaissance Paradox." Essentially, the government is allowed to get away with murder because of their duplicitous usage of statistics and the growing cognitive dissonance  within the general American public that cannot seem to connect dots together unless there is an app for it.

Yes, Mr. President, thank you for creating those 200,000 jobs and recovering in four years what we lost in two. My question though, and the question that every American should be asking is, what kind of jobs have you created? Are these government mandated construction jobs, building roads to nowhere for the simple reason of merely satisfying a bureaucratic code? Or are these jobs of inherent merit, jobs whose end-product could potentially result in a technological or geopolitical advantage in an ever-competitive global business eco-system?

Unfortunately, what we find through a preponderance of evidence is that skilled jobs are replaced with menial or temporary jobs. Since that is the case, this recovery rhetoric is based on a false premise. Just like my friend who protested the additional charge of items that were not his simply on the basis that his item happened to be on the same bill, the government is crediting itself for a recovery that is in name only. If we assume that the 8 million jobs that were lost prior to the 2008 crisis had an average salary of $50,000, then we should have the right to know what the average salary is for the 8 million jobs that have now been restored.

This should be the mainstream media's job : they should press the administration and the government agencies responsible for the various employment statistics to understand the true context. As is usual with the lumbering bureaucracies, no one wants to offer the transparency that has been the promise of so many political campaigns, especially when we are so close to yet another political campaign.

My friend had a veto in his objection. The American people do not. We are beholden to the whims, quarries, and outright lies of the government on the coerced framework that their perspective is the truth. Any attempt to redress this clear misalignment in framework is met with ridicule : why would you dare argue with what is patently obvious? 

I guess we will all just have to wait for the next memo...