FYI | Apr 16 2013
By Peter Switzer, Switzer Super Report
[Note: This report was written on Monday, ahead of the fall on Wall Street overnight and the news from Boston.]
When I look at Wall Street having a negative day and see the Dow down .08% despite ordinary economic news and unimpressive company reporting you know there simply aren’t enough committed sellers out there to KO this rally and secular bull market.
I think it has years to run, thanks to what I call the Lone Ranger effect, but I will be monitoring it all daily to make sure if there are creeping weaknesses emerging that could change my optimism that you will be the first to know.
But that said, let’s look at what could destabilize the rally, though I don’t think much can take out a secular bull market apart from a shock X-factor such as a nuclear bomb or a leading financial institution collapsing and rocking the world financial system.
By the way, thanks to those who have congratulated me for some big market calls lately — it is nice to pocket 2.5% gain or more when the S&P/ASX 200 index pops up 2.5% in a week.
Don't be a duster
But in this game you can be a rooster one day and feather duster the next, so, let’s look at the shorter-term threats and ask as well as evaluate how worried we should be?
I put the issues down to the following:
· Silly Europeans
· Silly North Koreans
· Silly US politicians
· Silly Fed officials
· Silly Chinese politicians
· The sell in May and go away types
· Australian voters on September 14
· An X-factor
In Europe there is an outstanding Italian election, though the economy often does better without an elected government. Spain looks a worry but I am told EU officials are less so and the European Central Bank looks miles more credible since mid-2012. Europe is a big risk but I am comfortable with what I see.
The North Koreans are nuts — socially programmed to be that way — but I still can’t believe they will try a nuclear stunt. Low level risk but if I am wrong stocks will slump.
For the US the $85 billion worth of spending cuts has been delayed until October. If the economy is strong this could be OK for both the market and economy. There has been weak data recently but this is keeping the Fed in the QE-game and helping stocks. What US politicians come up with could help or hinder stocks in October — I am betting on “help” but I hate punting on the nincompoops in the US Congress.
On the Fed, they have some big mouths but Ben Bernanke is exceptional and so I am not worried there.
China has a new leadership, so I can’t reliably rate their propensity for silliness but I am not worried about them now. Better economic data would be good for my 5,500 call on the S&P/ASX 200 index for year’s end.
Vacation time
On the “sell in May and go away” crowd, who do this for the summer break when they go holidaying, it does not always happen and I think there is momentum in the market to make May’s sell-off so shallow we might even miss it. On last Friday Goldman Sachs put out a call saying the S&P 500 will be spike up 20% to 2015. I love the length of this call as it reinforces my argument that this bull market has least two years to run. I’d like to say three or four but that could be too bullish.
When it comes to September 14, I think a new government with a clear majority will be good for business, consumer and foreign investor confidence, let alone local players and this will out stock market. The reverse would dent out progress for sure.
Finally, an X-factor could rock this rally but by definition, as I have argued before you can’t predict an X-factor, by definition.
Sure the mountain of debt will catch up with us one day but no time soon thanks to Japan and the USA with their QE programs that will create economic growth and higher stock prices.
Goldman Sachs says the global economy is set to grow at a 3.3 percent pace this year and then 4 percent from 2014 right through 2016. If they are right, it will be great for stocks!
In fact you could say that the USA and Japan are riding to stock players rescue like the Lone Ranger and his trusty sidekick — Shintaro!
Published with permission. Opinions expressed are not by association FNArena's (see our disclaimer).
Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.
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