3 Weird Reasons to Be Bullish That Will Shock You

global investingMy Comments: A couple of weeks ago I sent out an email from this writer that suggested there was a bubble out there that no one was talking about. He described this bubble as a real and potential threat to us as investors. He suggested that while many stocks are historically overpriced these days, those in the DOW were really overvalued and looking more and more like a bubble.

I sent it to many friends and clients alike since all of us would like to be ahead of the curve when it comes to investing money. Will that bubble burst? I have no idea, but you have at least been warned.

His comments this week suggest reasons to be optimistic and not pessimistic. The images attached to his post are a little weird but the message is not. At the bottom of my post is a link to his article. In the meantime, here is a sampling of his comments:

Oct 31, 2013 | Jeffrey Dow Jones | Cognitive Concord

Businesses will always evolve and adapt. They’ve been doing this in this country for over two centuries. Betting against this intrinsic quality is sheer folly. Yet we do it. We just did it!

We lose our faith when the path out isn’t clearly illuminated. American business always finds a path, though. I don’t want to wax philosophical about the virtues of a capitalistic economy, but we have the right framework in this country to allow for this sort of thing.

Betting against cycles is also folly. Corporate profits may not crash back to their historical mean, but they will find a new mean in a more competitive, more globalized market.

They’ll oscillate around that level. “Global GDP” is perhaps the single most important concept of the next century. (That’s assuming we don’t have any colonies on the moon by then.)

Another of the things I write about over and over again is that our expectations for the future are based on our experiences in the past. The problem is that nothing behaves linearly, at least not for very long. This is why when we get lost in the economic woods, we get nervous. We can’t see the path ahead and all we do is look behind us at our footsteps.

Our footsteps are the only thing we know. We lack the vision to hack a new path. But when economies slow down, they always recover. Even Greece is recovering! When we’re afraid in the woods we act as though they never will.

Because of the Long Boom, it became ingrained in our heads that the economy should always be expanding. Every year. This psychology flies in the face of hundreds of years of economic data. I’m not saying that we shouldn’t have some sort of counter-cyclical fiscal & monetary policy in this country. We should. I just think our expectations still haven’t been appropriately recalibrated.

Part of me wonders if one of the things our cultural/economic psychology needs is a couple of quarters of modestly negative GDP. Perhaps we need to fall off the horse simply to remember that it’s not so hard to get back on. The next recession won’t be fun. Stocks will go down 20-40%. Unemployment will rise.

It won’t be anywhere near as bad as last time, though. And since that’s the most recent data point in our memories, far too many of us are worried that the next slowdown will be another catastrophe. It won’t be. Markets have a sneaky way of doing exactly what you’d least expect. Who out there expects a market that slowly goes down over a 1 or 2 year span — no crash, no crisis, no inflationary apocalypse — just 4 or 5 quarters of sub 1% or sub 0% GDP and a sad-but-not-suicidal S&P? THAT would shock ME!

The reason why this matters is because these expectations are affecting our behavior in the present. We’re not stocking up for a simple little snowstorm. We’re all hunkered down for a blizzard. Study the cycles of history, and you’ll see that a second blizzard is a bad thing to bet on.

Here’s his full article: Cognitive Concord 10/31/2013 Continue Reading HERE...

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