Bull Bear Debate

As a matter of philosophy, I am invested but I’d be hard pressed to take the bull side of the argument with any conviction at all.


  1. Roger – I think it’s harder to take the bear side – we are in the midst of low inflation, steady GDP growth of about 3%, low tax rates (on dividends, that is), good corporate profits, and a weak dollar to spur exports.

    If anything is worth watching, oil futures prices is the big bugaboo here. Also, the rate hikes take time to seep into micro-economic fundamentals, so towards the end of the year, it should be interesting to see where US GDP + corporate profit growth is if oil prices continue to rise…

    If bearish times were around the corner, I would think the year 1974 comes to mind when the US had the worst of all possible macro fundamentals (high inflation, low GNP, punk corporate profits, etc.) I think this is the part of the US economic cycle where this is “the pause that refreshes” the markets later this year.

  2. Sure enough Roger, one must stay invested but making the bull case certainly takes a rose-colored set of glasses these days. Increasingly numbers out of Washington such as ‘core’ CPI, GDP, etc. just plain look ‘cooked’ (e.g., http://bigpicture.typepad.com/comments/2005/06/something_fishy.html); in a word, not reliable.

    Can’t say the numbers out of corporate America and Wall Street look much better: Seems most of that cash sloshing around in corporate coffers is going to stock buybacks to compensate for executive options and/or M&A activity, not to real expansion of business and concomitant expansion of employment. Even the upper middle-class is starting to tap out on real estate equity borrowing.

    The big question for me is, where is the buying power for stocks, consumption, etc. going to come from? Personally I don’t see it anywhere and until I do I will not be persuaded that this is the stuff from which bull markets are made. After all, stocks are not companies and the stock market is not the economy (even if it does have an impact on it).

  3. Roger,


    Best Wishes,
    Editor, ETFinvestor.com

  4. Ditto on the stock buybacks for executive stock options. This is in lieu of pay raises for employees, who are experiencing higher than CPI reported inflation in the form of higher property taxes, health care expenses, etc. Also, the programmer at the next desk or 13 time zones away is Indian – not a neighbor.

  5. The last time the earnings yield on stocks was above the earnings yield on bonds for an extended time was the summer of 1982. The market starting around August 8, 1982 was a doozy. I hope this one turns out to be as good.


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