TrimTabs' Biderman Bullish on Stocks Short-Term, Bearish Long-Term

Tuesday, 02 Sep 2014 07:19 AM

By Dan Weil

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Charles Biderman, chairman of TrimTabs Investment Research, has a bifurcated view of the stock market.

Stocks will likely continue rising in the short term, because the market is "rigged by zero interest rates," he told CNBC. But for the long term, the extreme premium of the stock market's capitalization over wages points to trouble, Biderman explained.

The stock market's capitalization now registers $26.5 trillion, or 3.5 times the $7.5 trillion total for wages and salaries, he noted.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

The last two times that premium hovered around 3.5 times was in March of 2000 and October 2007. Those dates represented market peaks before precipitous declines.

But for the near term, "zero interest-rate policy means if you have cash on the balance sheet you're not going to earn anything," Biderman argues. "So companies are taking some of that cash and reducing the amount of shares outstanding" by purchasing them.

"If you track the number of shares, you track the amount of cash — supply and demand right now — shares are shrinking."

Friday, the Standard & Poor’s 500 Index added 0.3 percent to close at a record-high 2,003.35. The index jumped 3.8 percent last month, the best August performance since 2000.

Deutsche economist Torsten Slok sees equities continuing their five-year rally. "I believe the stock market will continue to go up until we get a recession. And we are nowhere near entering a recession," he wrote in a commentary obtained by Business Insider.

"Recessions happen because of a bubble bursting in capital expenditure (as we saw in 2000) or because of a bubble bursting in consumption (as in 2008) or when monetary policy is too tight."

None of that is happening now, Slok said.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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