Tags: Obama | bull | market | secular

Early Stages of Secular Bull Market in Progress

By    |   Wednesday, 08 May 2013 07:44 AM

Ho hum. New highs in all major indexes. Record number of new highs, solid advance-decline line, big volume. Solid employment growth.

Nothing new to my readers, but sure is a strange brew to permabears who, for the seventh time since this bull market surge started last November, have been burned as the markets roar higher. North Korean missile launch? Cypress? (Oops … Cyprus … whatever.) Who cares?

We are in a bull market. The question is what kind. Is this a cyclical bull market, or the beginning of a new secular one?

Some definitions first.

A cyclical bull market lasts a couple years, brings market averages up 40 to 50 percent or often more and is associated with the business cycle (thus the name) and recovery. If we are in a cyclical bull market, then investors should be concerned as it is somewhat long in the tooth. It began in March 2009, more than four years ago. There is enough political and economic uncertainty worldwide to bring this cyclical bull to an end, but so far it has been onward and upward.

Perhaps then, we are in the early stages of a secular bull market. A secular bull market often lasts 15 years or two decades and is associated with worldwide political, economic and military environments which are conducive to free trade in goods, services and ideas, as well as favorable treatment of capital. In addition, the mood is encouraging to entrepreneurship, innovation and the profits generated by such activity.

Whoa! That doesn't sound like the current climate, does it? Well, actually it does. Let's look at history a moment.

The previous secular bull market began in 1982 and ended in 2000. In those 18 years, there were scattered bear moves, but over this time span the Dow Jones Industrial Average climbed from 800 to 11,000.

While everyone knows it was the Reagan tax cuts, deregulation and the explosion of technology that pushed prices up, the roots of this secular bull move began in the tumultuous Carter years of 1976 to 1980. Much like President Obama today, Carter had contempt for wealth (except his own), blamed oil companies and the profit motive for persistent unemployment and high costs of fuel and basic necessities.

Carter also had a limited vision about America's power and role in the world. People forget that just three Democratic administrations ago, Carter's response to hostage taking and terrorist attacks was … to ring church bells!

Yet better days lay ahead. You could see it in how conservatives in Congress walked over Carter like a welcome mat. So did Federal Reserve Chairman Paul Volcker, a Carter appointee who raised the discount rate to the high teens to push inflation back into the closet and push Jimmy back to Plains, Ga.

Iran provided the final insult to the 20th century's worst Commander in Chief, releasing the hostages days before Carter left office.

Sound familiar? What happened to Obamacare? New gun control laws? Restrictions on fracking? Peak oil? Climate change (global warmingism)? Thanks to the heft and strength of the Republican House of Representatives, these once-sacred shibboleths of "no-Drama-Obama" are all but forgotten. And prospects for a Republican Senate in 2014 — which would block any more Sotomayors and other economic featherweights from the Supreme Court — looks better than any time in years.

Now, fracking promises lower fuel costs for a decade or more. Obamacare is being unwritten and unenforced as we speak. Drones and aerial surveillance bring precision warfare off the screens of teen gamers and onto the screens of Fox News and other outlets.

Other technology — just ask the citizens of Boston — makes identification of terrorists easier than before. In the European Union and Japan, central planning, "stimulus," and fiscal policy are in their death throes. Medical technology and devices are on the doorstep for replacing not just knees and hips, but soon whole organs, valves and damaged nerves.

All this is phenomenally bullish. Don't let the petulance and small mindedness of the Obama clique obscure you from a vision of this bright future. Barack may trot out the suffering Newtown families like figurines on a Black Forest cuckoo clock, but he has lost control of the social, political and economic agenda.

Our economy will move onward, forward and upward. In spite of Obama. Not because of him. Enjoy the secular bull. You ain't seen nothing yet.

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We are in a bull market. The question is what kind. Is this a cyclical bull market, or the beginning of a new secular one?
Wednesday, 08 May 2013 07:44 AM
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