Monday, October 19, 2009

To Heck With Fundamentals: Next Stop- DOW 11,000

As those of you who have read my finance articles already know, I was the first writer to call the current bull swing- way back in late January 2009, when the financial markets were in great peril, and it seemed that 50% of the so-called "professional" analysts were even calling for the DOW and S&P 500 to continue their slides into market oblivion. And 100% of them were certain the markets were destined to continue tanking. Newer lows. Re-test this. Re-test that. Then U-shaped recovery. Or maybe a W-shaped. Bump along the bottom. Blah. Blah. Blah.

Boy were they all wrong! And still are...

Rather than continue to blow my own horn however, or explain exactly how it is I knew the markets would rebound at that time - then play out exactly as they have done- heading straight up over the last 7 months (and will continue to do so), this article, instead, is geared toward the here and now (although I will say this: if people knew what really happened, there would, indeed, be quite a hubub, to say the least).

Many of us want to live in the moment (with an eye on the future). To this end, therefore, the markets will continue to rebound. The DOW will hit 11,000 on its next stop. The S&P 500 will hit 1250 as well.


Because it's not about the fundamentals (not yet). Again- I'm not going to get into the juicy details and sordid analysis of what tanked the markets in the first place. However, as the markets shouldn't have been down where they were in the first place, it stands to reason that they will simply head back to where they should have been in the second place.

Yes- it's easy to play the status quo game of fundamental and technical analysis. And, if I were to do so, well, of course, the markets should not be where they are now. But it's not about that at this place in time.

It's actually about one basic fact.

Traders crave "direction" in the markets. Other than the minority of die-hard short-selling fanatics out there, most investors actually yearn for a bull market in times of economic uncertainty and dire household financial realities. It's an emotional response to being American- fix what's wrong so we can all make money, take care of our families and defend our capitalistic flag, all at the same time.

In other words- bull markets feel good when economic panic has taken hold of our hearts and wallets. And bull markets feel extremely good when severe economic panic has taken hold of our hearts and bank accounts.

So, the next time you hear some financial analyst or economic egghead waffle on about the markets "re-testing the lows" or "pulling back to allow those who were late to the party get in" - forget these idiots. The markets heading up feels good. The markets will continue to head up until the the emotional panic or uncertainty finally dissipates. When we get to DOW 11k and S&P 1250- a lot the panic and uncertainty will begin to be ceremoniously replaced by greed and arrogance. Then we'll all be back to where we're used to being at. And I'll weigh back in at that time to put it all in perspective.

For now, my fellow Americans- enjoy the ride up. Get some sleep. Tell your families that everything is going to be alright.

GT McDuffy said so...

GT McDuffy

(Disclosure: author holds no positions in any of the stocks mentioned in the article above)

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