The market melt up continues. Although the evidence is mounting for the market transition I wrote about yesterday, a transition such as the one I described takes time. Institutional investors by their very nature are conservative, so the evidence has to be quite convincing before they pile into the market.
In fact, the behemoths of the investment world often enter the market in force some time down the road, a while after the car has picked up speed. Slow in and slow out is what keeps the market from moving too fast; the cautious nature of large investors is a tempering influence on the often reactionary market.
Yes, we all know the market can react to hyperbolized fear and then panic, but the current environment suggests neither excessive fear nor potential panic. In short, it is an opportunity to begin a watch, wait, buy, and maybe sell program. The market will go up and up by inches and then it will go down by less than it went up. The dips are the entry. If you trade, the third or fourth inch up is the sell and if you invest, well, you wait for the next dip to build on your position. In my mind, it is that simple …
One of the benefits of writing as “Convincer-In-Chief” is that folks send me analyses, both positive and negative about the economy and the markets. I always read them and consider the argument. Recently, my sister sent me an analysis from MCALINDEN RESEARCH, one of the multitude of market analysts out there. I liked the argument, and you might as well.
- Although the shenanigans in Washington have temporarily been a setback to consumer sentiment, it remains at close to highs for this cyclical recovery and weekly readings are perking up. Moreover, pent-up demand may soon unleash a wave of consumer investment in houses, cars, and other durables.
The above is the lead in and below is the thesis.
- A multi-year consumer investment boom could be on the cusp of breaking out. The discontinuity that may be quietly boosting sentiment is the reversal now evident in net worth.
Here are the key supports for the thesis.
- The biggest drivers for net worth are stock prices and home values. Stocks have gained almost 15% in the past year and have more than doubled since the major bottom in March 2009. Residential home prices have bottomed out and have already gone up 5% since last year.
- The average age of consumer durable goods is the highest in 50 years. Cars are the oldest in 70 years.
- Home sales are at recovery highs while supply is at historic lows. Importantly, homeowners spend far more on household expenditures than renters.
Here is the conclusion.
- Stronger economic growth should mean stronger earnings. That could mean higher stock prices, as long as the central bank sticks to its near-zero interest rate policy, while bonds will suffer as long-term rates begin to creep higher.
Here is what it means to those who play the market to make their money work
- The median projection of Wall Street strategists calls for stocks to advance just over 10% in 2013, ranging from a 15% gain to a 1% decline.
That is quite the range, but, hey, what else in new? The perma-bears are, well, perma, stuck in the cold gloom of negativity. The point is that the argument is plausible and it coincides with myriad other data points that suggest the conclusion is true. I, for one, am playing it that way and that means looking for undervalued stock that will rise and fall with the undulating secular bull market. Here is one technology company to check out, trade, or invest in…
- In 2011, a Corning researcher named Terry Ott faced a problem that nobody else had needed to solve in the company’s 160-year history: how to make sheets of glass that could be rolled onto spools. The challenge arose because Corning had developed a new kind of glass, known as Willow, which is as thin as a sheet of paper and acts a bit like it, too–if you shake it, it will rattle, and it can bend enough to be spooled. It could be the basis for displays in thinner, lighter cell phones and tablets–or for entirely new products, like displays that fit the curve of your wrist.
Trade in the day; Invest in your life …
