Good Morning. While it is probably a safe bet that there aren't more than a handful of readers who noticed that I've been M.I.A. the last few mornings, I feel obliged to explain my absence. In short, I had a surgical procedure at the end of last week to repair a herniated disc in my lower back and I greatly underestimated the recovery process. Although it was an outpatient procedure, I should have known better than to think I'd be bright and perky again on Monday morning. Especially given the combination of pain killers, muscle relaxants and nerve drugs I had been prescribed. Thus, it will suffice to say that I haven't been feeling particularly insightful up to this point in the week.
But with the days flying by, I will admit to a fair amount of guilt creeping into my slightly "loopy" (yea, that's a medical term) brain for not spending enough time at my keyboard. So, while this morning's missive will likely be relatively brief and may or may not make much sense, I thought I'd give it a go.
I've had the pleasure of coming into contact with a fair number of medical professionals over the past week, many of whom made the mistake of asking me what I did for a living. First, I'd like to say a public thank you for these people because across the board, I was thoroughly impressed with their level of caring, service, and expertise. As such, when a nurse or an anesthesiologist asked for my input on the stock market, I tried my darndest to provide something of value - all in 90 seconds or less, of course.
If my exposure to the public over the last week is any indication, the main question that appears to be on people's minds these days is if the stock market can keep on keepin' on. Although John Q Public is notorious for coming late to the stock market's parties and has also over the years displayed a propensity to linger too long at the proverbial punch bowl, the folks I was chatting with had more schooling than I did. So, I found it interesting that the primary concern right now seemed to be whether or not another bear market might be lurking around the corner.
Given the brief amount of time allotted for my answer, I pointed out to those truly interested in a response that over my 30 years in the business, there had really only been three nasty bear markets - and that two of them had occurred in the last thirteen years. My first point was that contrary to recent history, the stock market doesn't make a regular habit of smacking people's portfolios around for losses approaching -50%.
I suggested that the Tech Bubble and the Credit Crisis had each been unique events and neither were likely to be repeated any time soon. I also opined that if Europe hadn't kept interrupting our economic recoveries each summer over the past four years, we might be in a much better spot today. And finally, I pointed out that unless we see another crisis develop in the near term, stocks should be able to return to a more normal market cycle.
To the anesthesiologist killing time with me waiting for the surgeon to finish up his first patient of the day, this brought up the question of "what exactly is a more normal market cycle?" I suggested that stocks tend to advance for several years at a time with only modest corrections mixed in - just to keep us honest - and that big, bad, bear markets don't occur when everyone is looking for them. Therefore, I opined that another bubble wasn't likely to creep up on anyone in the near future.
If memory serves, the altogether too young doctor then wanted to know how high stocks could ultimately go. As you might expect, I said that I wasn't in the "crystal ball" business and that my job was to stay in tune with what the market is doing instead of flapping my gums about what I thought it ought to be doing. But, I did decide to go out on a limb and suggest that the market currently appears to be dealing with the idea that the economy may finally be turning the corner. I offered that if this was indeed the case, then stocks could receive a "hall pass" for a while longer as expectations can drive prices higher than they might otherwise deserve.
But just as I was about ready to offer up the usual caveats about the importance of risk management and staying on the correct side of the important trends, it was time to get the surgical show on the road. So, while we may have kept talking, for the life of me, I can't remember about what.
Publishing Note: I may or may not publish a report on Friday morning. But regular reports "should" return on Monday.
Turning to this morning... Fatigue may be the best word to describe what has happened to the rally over the past 24 hours. Although stocks had been climbing steadily higher, the 1700 level on the S&P appears to have suddenly become a resistance zone that the fast money has been selling into. And with the foreign markets all lower overnight, it appears that the sellers will be in charge again today at the open. However, strong tech earnings continue to buoy the NASDAQ.
Positions in stocks mentioned: none
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