Why A New Bull Market Has Begun

[Junior]

Just to inject some positivity into the forums I've grabbed this article from FNarena.

Why A New Bull Market Has Begun
FN Arena News - April 07 2008

By Rudi Filapek-Vandyck


He's usually not known for mincing his words, nor for fear of raising his head above the cornfield others know as the global financial sector, but when Dennis Gartman called for a decisive change in the outlook for global equities last week his call will have caught the attention of many.


Is this the same Dennis Gartman who produced one bearish note after another bearish comment since mid last year -at times in strong and defiant opposition to raging market bulls who believed that temporarily rising share prices was a vindication of their own views? It surely is the same one. And to spice it all up a bit more, he was happily pointing out the call came with strong conviction.


Many more market analysts and commentators have -mostly cautiously- expressed a view that the worst could now be over for global equity markets. Few, however, have dared to go as far as Dennis Gartman (at FNArena, we don't know anyone ourselves and we certainly haven't seen anyone anywhere thus far).


The man himself has tried to explain it in the last two editions of his daily newsletter, the Gartman Letter:


"We are asked, "If you are so bearish still of the economy, how can you be bullish of equities?" The answer is very simple: It is called a capital market for a reason. Capital, created by the central banks, floods into the system as the economy wanes, but not being needed as inventories are worn down, as employees are laid off, and as business conditions deteriorate, that capital finds its way into equities.


"Therefore, equities rise even in the midst of recession. It is for this reason that the stock market is one of the "leading economic indicators." Conversely, as business conditions heat up; as inventories are accumulated and as employees are added to payrolls, capital is demanded by the economy itself, and that capital flows from the equity market at the margin.


"Therefore, equities begin to weaken long before the economy makes its top and turns to recession. If one keeps this simple, but elegant, notion in mind, it makes the game of investing in the midst of recession a great deal easier."


Gartman happily concedes more difficult economic times lay ahead. The bottom line remains, however, that stocks are heading higher.


In addition to a switch in view on equities, he is currently "aggressively bullish" of the grains, of the precious metals, of the base metals and of natural gas "with a longer term perspective". With regards to gold he advises people to wait for the Euro to break through US$1.5850 before jumping in.

 

[The Mint Man]

Interesting, thanks for that Junior. However I don't think it takes a rocket scientist to work this one out;

The bottom line remains, however, that stocks are heading higher.

Cheers

 

[MRC & Co]

Oh god, just the name of the thread and that quote by MintMan are a worry.

Its interesting to note that bulls have broken over 50% in the most recent sentiment polls, whilst the bears were above 50% <mid-march, before this rally.

A contrarian viewpoint to ponder.

 

[explod]

Just to inject some positivity into the forums I've grabbed this article from FNarena.

There is huge optimism in the forums for oil, natural gas, some food companies, gold and silver.

But the markets generally; well all the optimism in the world cannot change the dreadful fundamentals of the moment.

When debt has been counted as an asset towards price earnings ratios and given triple A ratings then weeks later have gone bust. Questions being asked in the US about the ethics of former greats in auditing like KPMG. And if one opens the eyes these are not isolated cases, even on Bloomberg at the weekend they reported businesses going to the wall in all directions.

Anyway, take my hat off to you for being optimistic but it is going to be a very long thread till the time many years hence when it goes back into a bull market IMHO

 

[Whiskers]

Just to inject some positivity into the forums I've grabbed this article from FNarena.

And positivty it is!

I like the way this Gartman thinks.

A good example of interpreting statistics for stockmarket v economy.

 

[josjes]

Can I join the party
This guy refers to European market but with all global market inextricably linked, one is the same as the other.

Welcome back to Draaisma-land

While everyone else is worried about calling the bottom, Morgan Stanley’s Teun Draaisma is worried about calling the top - of the bear market rally.

The good news is it’s not over yet. But adds the strategist, known for his well-timed calls in last year’s market oscillations, we may be more than halfway there. The team sees another 2 per cent to 10 per cent upside in European equities.

The trigger for a bear market rally is invariably dramatic action by authorities. The ‘financial end of the world’ has been avoided, we believe, but that still leaves us with a big earnings recession. At some point, the earnings recession takes over again as the driving force in this market, but possibly not in the upcoming reporting season yet, as this one will not reveal the full extent of the earnings recession.

Draaisma thinks the market has hit the low associated with this earnings recession, on March 17 when the FTSE closed at 5,414.42.

So according to this favourite Draaisma chart, the current period of buoyancy for the London market should come to an end on or around July 17. You have been warned.

 

[AnDy62]

I'm not sure if that is joining the party per se J But hey it looks like smooth sailing after that final trough . Good post though, I wouldn't be surprised if we saw another pullback in the coming months. Personally, I don't think the market will go any lower than 4800 but that's just my opinion.

 

[Kauri]

In addition to a switch in view on equities, he is currently "aggressively bullish" of the grains, of the precious metals, of the base metals and of natural gas "with a longer term perspective".

Longer term.. weeks.. months... years..?? Can't lose with that one.

The S+P has an important area to get through before any real conclusions can be drawn.. for mine... however after a tentative DB it has advanced the best part of 9%... calling the bottom would have more weight with me had he done it 9% back... but hey, these calls are what Guru reps are made on..
XCheers
.........Kauri

 

[wayneL]

Can I join the party
...but that still leaves us with a big earnings recession. At some point, the earnings recession takes over again as the driving force in this market, but possibly not in the upcoming reporting season yet, as this one will not reveal the full extent of the earnings recession.

This what the bulls are ignoring with calls for another rampant bull. Stocks ain't cheap and still have very optimistic earnings growth priced in.

Where's the risk premium?

FWIW the above dovetails neatly with my own view... so it must be right, right?

As this reporting season gets underway, Alcoa fires a shot across the bull's bow with earnings taking it where the sun don't shine, but it is next earnings season that will be telling... and pivotal aone way or the other.

 

[Kimosabi]

I think we'll see lots of these during our new bull market in credit contraction...

 

[Uncle Festivus]

I think the main reason why stock prices are going up is because the Fed is paying for it - both indirectly and via the extended repo's etc. The extra liquidity doesn't look like it is making it to the real world (as in lower mortgages), just getting churned back in on itself with equity money shuffling again.

Denial phase - see who coughs up some fur balls after the bounce in this weeks trading with reporting season just starting.

Please post some data to show why a new bull market has begun.

 

[tech/a]

Positive expectancy at its best----excellent!

 

[sassa]

Bear market structure …
"If you want to see a real bear market structure …

Today we had a perfect example in the US market:

Ahead of the open … NEWS … at first sight positive, but a non-event … today we had the Citibank “news” and the Mortgage applications.

WHY? To start selling from a higher level …

After that … SELLING ALL DAY LONG …

Then … a rebound towards the close … WHY?

Creating hope for a turn around tomorrow and … A BETTER LEVEL TO KEEP SELLING!!!

This is another sign, that the market has NOT seen the bottom …"
http://www.ridingthedax.com/2008/04/09/bear-market-structure/

 

[Timmy]

Bear market structure …
"If you want to see a real bear market structure …

Today we had a perfect example in the US market:

Ahead of the open … NEWS … at first sight positive, but a non-event … today we had the Citibank “news” and the Mortgage applications.

WHY? To start selling from a higher level …

After that … SELLING ALL DAY LONG …

Then … a rebound towards the close … WHY?

Creating hope for a turn around tomorrow and … A BETTER LEVEL TO KEEP SELLING!!!

This is another sign, that the market has NOT seen the bottom …"
http://www.ridingthedax.com/2008/04/09/bear-market-structure/

Sassa, this strikes me as a very cynical post.
I like it a lot.

 

[rhen]

Don't shoot the messenger...
http://www.businessweek.com/magazine/content/08_16/b4080067330758.htm?chan=search

rhen

 

[Mofra]

There is huge optimism in the forums for oil, natural gas, some food companies, gold and silver.

But the markets generally; well all the optimism in the world cannot change the dreadful fundamentals of the moment.

When debt has been counted as an asset towards price earnings ratios and given triple A ratings then weeks later have gone bust. Questions being asked in the US about the ethics of former greats in auditing like KPMG. And if one opens the eyes these are not isolated cases, even on Bloomberg at the weekend they reported businesses going to the wall in all directions.

One could pessimistically look at the initial comments and ocnclude that the only way a new bull market will form is if the Fed has shown to do enough to ward off the spectre of further liquidity squeezes, given we are at the peak month for ARM resets (prior to any Bush-gov tinkling).

In other words, new bull market = a new era of moral hazard amongst the financial engineers.