Saturday, September 24, 2005

Never Mind the Pundits: Rally Will Continue

The Wall Street pundits get a kick out of scaring us bulls.

For example, Merrill Lynch's David Rosenberg pointed out in a Friday dispatch that:

"We're witnessing an event that has happened barely more than 15% of the time in the past five decades: a year that sees the Fed tighten (liquidity pinch), oil prices rise (margin and personal-income squeeze) and the equity market head lower (wealth effect, discount mechanism) -- a triple play.

Such a triple play has occurred only eight times in the past 50 years, and on seven such occasions, gross-domestic-product growth either slowed or stopped dead in the water.

The odds of a slowdown in 2006 are 88% -- not a track record worth betting against.

So if past is prescient, we could well be in store for 1%-ish-type growth next year.

Something tells us that equity valuation, credit spreads and the dollar are not presently priced for such an outcome."
The problem with this triple play theory is that it makes perfect sense.

But it won't be validated by the end of year rally we're expecting for stocks.

Rita's damage was overestimated and it seems the market should rally on Monday.

We'll have to wait and see, but you can bet the house on this: there are plenty of beaten up, disqualified and undervalued stocks out there.

Look at stocks like Pfizer and Microsoft, for example.

Is there a more hated stock in the universe than Mr. Softee?

At $25, you should be buying into Microsoft's impressive 2006 product cycle, which includes Vista and the new X Box gaming console.

The upcoming trading week should be interesting, considering that the Fed and Rita are both out of our way.

About Us | In the News | Management | Contact Us | Archive | Premium Membership | Terms of Use | Privacy Policy | Careers | FAQ

All quotes are 15 minutes delayed. Copyright © 2006 by Catablast! Media Group LLC, part of the SeekingAlpha network. Web Design by Synexio Systems. All Rights Reserved.