Yields on Italian and Irish debt spiked higher Wednesday and global stocks struggled after Moody's downgraded Portugal's debt rating to junk. Fear of a sovereign debt default leading to a financial system crisis continue to haunt many market participants, but not the perennially bullish James Altucher, the blogger, author and managing director of Formula Capital.
"Everything is going in our favor for stocks to go up," says Altucher. "I actually am worried we're entering into a boom phase that is going to be unstoppable in 2012."
Yes, short of the outbreak of war, he is much more worried about another bubble vs. a market rout. While most pundits fret over myriad of issues that could derail the global economy — EU debt crisis, China tightening, U.S. debt ceiling, etc. -- Altucher cites the following reasons for unbridled enthusiasm:
- -- The lag effect of monetary and fiscal stimulus, including QE2 and the massive rebuilding that's just getting underway in Japan. "That is a real 'contagion' that's going to buy infrastructure products from the U.S.," he says.
- -- Banks have "enormous reserves" and are starting to lend, he says, citing 7 consecutive months of increased consumer credit. Meanwhile, consumer bankruptcies are falling and average credit scores are at the highest level in four years.
- -- Record levels of share buybacks, which increase corporate earnings per share, "which means the multiple of the market comes down from current levels."
- -- Cheap valuations for mega-cap stocks such as Conoco-Phillips, Microsoft and Apple. "Who is shorting this market against these massive steamrollers that are going to keep on…generating income?," Altucher wonders.
In sum, Altucher sees many of the same forces in place as back in April when he predicted the Dow will hit 20,000 before the current rally runs its course.