I hate to sound too bearish, but I have to go with what I see in the marketplace. Bullishness is approaching levels not seen since April when the market had an ugly correction. I was certainly taken aback at a recent article I read at Bloomberg about esteemed money manager Mark Mobius and his comments on the market. Whenever anybody is this confident in either direction, it is time to take stock and re-evaluate the investing landscape.
What Did He Say?
I will start you off with the quotes that worried me. “I’m pretty optimistic. I don’t see any risks any time soon. These things can last for years and years.†Those are pretty forceful statements and not to acknowledge even a risk now of being long smacks of utter complacency only seen near market tops. Stocks have soared through the roof since early September without even a 2% pullback along the way, and he doesn’t see a risk? He might be right, but odds are that this kind of bullishness after such a rise is cause for concern.
He cites the oceans of money the Fed is pumping into the system by buying bonds and how commodities will soar and bring stocks along for the ride. This is not an incorrect argument, but this has been anticipated for two months now and even a mention of it has brought out the bulls in force. At some point this will be priced in and comments like these suggest that time is growing nearer and nearer.
I do agree that commodities will continue their awesome run. Even if there is a pullback, commodities should be bought on those dips because the dollar will soon be used as toilet paper when the Fed keeps printing money, which means that commodities like gold will sustain their meteoric rise. Oil is a bit trickier since demand from a healthy economy plays a bigger role, but it will likely go up more as well.
I don’t think the Fed’s actions warrant too much more upside for stocks as there is a big risk that the program won’t work, like it didn’t the first time around. Secondly, the inflationary implications of QEII are huge, and inflation is a terrible thing for stocks. I am not saying I disagree with Bernanke about QEII in principle, but I think bullish investors are taking the stock rally to unsustainable levels. However, I think Mr. Mobius would disagree with me.
Mobius, Say It Ain’t So! is an article from: 
