Check out our social media platforms!
JYE Financial
21st century business media
  • Home
  • Politics

The Greatest Bull Market Ever! 

6/9/2014

0 Comments

 
Picture
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.

0 Comments



Leave a Reply.

    Stock blog

    Direct.Pointed.Insight. Financial analysis without the filler.

    Archives

    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014

    Author

    All blogs written by Joshua Enomoto unless otherwise noted

    Categories

    All
    Accounting
    Adam Silver
    Adp
    Advisor
    Alex-jones
    America
    Analysis
    Anecdote
    Annuity
    Art Of War
    Ask
    Assessment
    Assets
    Bank
    Bankers
    Banking
    Basketball
    BBY
    Ben Bernanke
    Bid
    Black Swan
    Bonds
    Books
    Brendan Eich
    Budget
    California Chrome
    Capita
    Capital
    Capitalism
    Cash
    CBO
    Central Bank
    Ceo
    Certificate
    Chairman
    Chairwoman
    Charts
    China
    Clippers
    Cnbc
    Commodities
    Commodity
    Common Stock
    Communism
    Company
    Conglomerate
    Congressional Budget Office
    Conspiracy
    Conspiracy Theories
    Consultant
    Consultation
    Consumer
    Consumer-confidence
    Contrarian
    Contrary
    Corporate
    Corporate-america
    Cost
    Cost Cutting
    Crash
    Currency Evaluation
    Curve
    Defensive
    Defensive Strategies
    Deflation
    Democrat
    Department Of Labor
    Depression
    Derivatives
    Disparity
    Divergence
    Dividend
    Dividends
    DMA
    Donald Sterling
    Dow 30
    Dow Jones
    Earners
    Earnings
    Eastern Bloc
    Economic
    Economics
    Economy
    Effective
    Employ
    Employee
    Employment
    Enomoto
    Equality
    Equities
    ETF
    EU
    European Union
    Executive
    Fat Tail
    Fed
    Federal Reserve
    Fill Or Kill
    Finance
    Firing
    Fiscal
    Football
    Forecast
    Forecasting
    Forward Guidance
    Fund
    Fundamental
    Fundamental Analysis
    Gay Rights
    Gdp
    Gold
    Goldsilver
    Good For The Day
    Gov
    Government
    Government Shutdown
    Govt
    Go With The Money
    Graphs
    Gross Domestic Product
    Growth
    Hard Assets
    Head And Shoulders
    High Frequency Trading
    Holodomor
    Human Resources
    Implied
    Income
    Independence Square
    Index
    Indices
    Inflation
    Insider Trading
    Institution
    Insurance
    Interest
    Investment
    Iron Curtain
    Janet Yellen
    January Effect
    Japan
    Japanese Candlestick
    Jcp
    J.c. Penney
    Jobs
    Jobs Report
    Joshua Enomoto
    Kiev
    Kyiv
    Labor
    Labor Department
    LA Clippers
    Layoffs
    Leadership
    Ledger
    Liabilities
    Los Angeles
    Madden
    Maidan Nezalezhnosti
    Main Street
    Management
    Margin
    Markets
    Media
    Metals
    Metals-complex
    Michael-lewis
    Michael-maloney
    Middle-class
    Minimum Wage
    Monetary Policy
    Money
    Money Story
    Monopoly
    Moving Average
    Mozilla
    Nasdaq
    National Debt
    NBA
    Net
    Net Profitability
    New York Stock Exchange
    NFL
    Nikkei 225
    NYSE
    Obama
    Obligation
    OkCupid
    Options
    Orange Revolution
    Order
    Paul Craig Roberts
    Policy
    Politics
    Portfolio
    Precious-metals
    Probability
    Prop 8
    Proposition 8
    Protests
    Public
    Punt
    Punting
    QE3
    Quantitative Easing
    Rate Change
    Rates
    Recovery
    Register
    Regression
    Republican
    Residual
    Retail
    Retail Market
    Retirement
    Revenue
    Risk
    Risk Management
    Russia
    Russian
    Sales
    Sanctions
    Savings
    Scalp
    Scandal
    Securities
    Share
    Silver
    Simulation
    Soviet
    Soviet Union
    S&p
    S&P 500
    Spread
    Statistics
    Sterling
    Steve Coburn
    Stock Market
    Stock Market Trends
    Stocks
    Stop-loss
    Sun Tzu
    Superbowl
    Taper
    Tapering
    Target
    Tax
    Technical Analysis
    Termination
    Tokyo Stock Exchange
    Trade
    Treasuries
    Trigger
    Ukraine
    Ukrainian
    Unions
    United States
    Uprising
    U.s.
    Usa
    U.S. Labor Department
    Variable
    Violence
    Wage
    Wall Street
    Washington
    Wealth
    Work
    Workers
    Yield
    Yields

    RSS Feed

Powered by Create your own unique website with customizable templates.