I'm sick of being bearish. So... very... sick of it.
Bearishness is an insidious beast of mindset. Too much bearishness gives you a creeping case of cynicism that washes over everything you see. Not the fun cynicism where all things are equal and every pomposity is a chance to laugh. The ugly cynicism where everything is lame, and everyone except you and your friends is an idiot.
Being bearish should be a temporary state. Like bullishness, only less friendly.
Right now the bears are getting smug, and the market is starting to rally on bad news. It's time to consider, if only for a moment, that the world as we know it isn't about to come to a screeching halt just because the politicians we elect are thinking about "shutting down the government" or cutting off the services that our tax dollars pay for.
Forget them. I want to talk to a bull. A credible market bull.
So Breakout turned to Rob Lutts, the president and CIO of Cabot Money Management. Rob has five reasons why we can all relax just a wee little bit. For a change, I'm not going to push back, make snarky jabs or otherwise act the cynical, know-it-all, gas-bag permabear.
Open your mind and drink it in. Here are Lutts' five reasons to be bullish:
--1. "Eleven years, no profits in stocks." That's a long time to go without making any gains in stocks whatsoever. Not stunningly long, but comparable to the equity slumps of the 1930's and 1970's. Rob has gone back even further than that and found the same data. The market is due for a breakout higher if American history is our guide.
--2. "Huge cash pile in retail and institutional coffers." $2.7 trillion as of May, and it seems unlikely folks were pouring into stocks in June. This is roughly $1 trillion more than there was in cash in 2005. A trillion remains a big number, even by Capitol Hill standards.
--3. "The whole country is playing defensive." Money is pouring into bonds yielding nothing and dumping out of stocks that usually have some upside. Combine the lack of enthusiasm with the huge cash, and you've got kindling loaded up with gasoline. If and when we get a spark, the markets are going to heat up in a hurry.
--4. "Housing affordability." This is the highest it's been in almost 40 years. OK, I rent and have no plans to own a house in this lifetime. Still, you have to admit most houses are cheap relative to a few years ago.
--5. "Valuations of equities today are very attractive." You've heard the stats. Stocks are somewhere in the low teens in terms of trailing and forward P/E. You know the reason why is nobody believes earnings will come within a par-5 of estimates. You should also know the second part might, just might, be wrong. If it is, stocks will go higher without the bears.
There it is. Rob's been in business for a long time. Investing is a family business for the Lutts crew. He's not a hack, fool or part of any conspiracy of bullishness in which you may believe, so please spare us the comments and emails along those lines. Argue on the merits and tell us what you think via email at firstname.lastname@example.org or in the comment section below.
- everything you see
- The ugly