Tags: bull | market | secular | stock

Secular Bull Market: Part II

By    |   Wednesday, 15 May 2013 07:53 AM

Last week, I gave several reasons why I felt the gain in the Standard & Poor's 500 since March of 2009 — stock prices have more than doubled since then — is the first leg of a secular bull market. I want to carry this issue forward in this and my next few articles.

First, the collapse in gold a few weeks ago was a major long-term bullish sign, telling us that capital is finally fleeing "tangible" nervous Nellie assets like precious metals. Instead it is seeking assets that have long-term growth prospects. As I expected, gold rallied only enough to close its mid-April gap and has been weak ever since. New lows in the next few weeks would be a welcome confirmation.

Second, look at the recent strength in technology stocks, especially long-cursed Intel. Almost all the secular bull markets over the past century have been led by technology. The post-World War II boom was focused on consumer electronics, such as televisions, stereos and microwave ovens (as quaint as these look to us today). The Reagan secular market started with personal computers and climaxed with the Internet. In the current secular bull market, the creative destruction wrought by mobile computing has so far camouflaged the massive wealth generated by everything from cell phones to GPS and drone technology. This massive new wealth will not stay hidden from investors for very long.

Third, cyclicals have rejoined the party. However, just because my favorite, the Health Care Select Sector SPDR (XLV) exchange-traded fund (ETF), has hesitated a bit at these levels, don't think its bullish days are over. I am expecting it to break out upside in the near future. Also keep an eye on the iShares Dow Jones US Medical Devices (IHI) ETF, to see if the relentless pace of innovation in robotic surgery and limb replacements continues unabated.

Fourth, we all know how clueless President Obama is on the issues of fracking and the Keystone XL pipeline. Kicking and screaming, the administration is being dragged into the 21st century, just like President Carter was over 40 years ago. The latest example is the ballyhoo over 3D printers used to produce guns. Not only has this technology existed (albeit in a more primitive form) for over a decade, but also we as Americans should rejoice that a constitutional right — to keep and bear arms — is being made easier to fulfill and maintain. Like all increases in our personal freedom, this will make us safer, healthier and wealthier.

A lot of law-abiding gun owners probably wish 3D printers could be used to produce ammunition, given the national shortage.

Fifth, look at the strength in the transportation sector. America's railroads, airlines and truckers are carrying record amounts of people and goods and making record profits doing so. The key is slashing costs using more efficient hybrid engines, natural gas as fuel and improved logistics. While our president wastes taxpayer money on urban mass transit and "high-speed rail," private capital flows by the billions into energy efficient truck fleets, jet engines and hybrid passenger cars. Even pure electric vehicles are starting to make a splash with Tesla and others.

Why are all these factors part of a multi-decade secular bull market, rather than just a short-term cyclical one? Because all of them have a common theme: a decrease in the power of governments — especially foreign governments — to control our lives and intimidate our economy. This is a process that will continue for a long time to come. Didn't Glinda from the Wizard of Oz tell you to tap your heels and ignore Europe, a few weeks ago? I hope you are still tapping!

Next week? I puncture a silly argument: that since we baby boomers are at the age where we sell stocks, the market is doomed.

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Gary-Jakacky
Last week, I gave several reasons why I felt the gain in the Standard & Poor's 500 since March of 2009 — stock prices have more than doubled since then — is the first leg of a secular bull market. I want to carry this issue forward in this and my next few articles.
bull,market,secular,stock
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2013-53-15
Wednesday, 15 May 2013 07:53 AM
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