7 reasons to be bullish right now.

- Oil prices have dropped in half. People will now be able to pay their subprime
loans back. Banks will have to start writing up the subprime debt that caused
this whole mess.
- Stock prices have dropped to 2002 levels. Big difference between now and 2002:
China, one of our biggest customers, is three times the size.
- People are comparing this time to the Great Depression. This couldn’t be
further from the truth. In the Great Depression the government, in their
infinite wisdom, raised taxes and increased interest rates. In other words, they
continued to deflate the economy during the downturn. They literally took money
out of the economy. Without money, people couldn’t start businesses, banks
failed, people lost jobs, people went hungry, and so on. Why did the government
do this? They were afraid of putting too much stimulus in the system as people
would then get into a speculative frenzy like 1929. This time the government is
doing the exact opposite. Rather than deflating they are reflating and we’ll
all have to worry about any speculative excesses that occur only after the
economy is back on track.
- Right now its estimated that the government is not just putting $700bb into
the system as per the bailout package passed by Congress but they are actually
putting $2.25 trillion into the system when you add in the AIG bailout, Bear
Stearns, the commercial paper facility, etc. Additionally the government has
already cut rates once and will probably do so again. This $2.25 trillion does
not equal $2.25 trillion in benefits to the economy. It equals $10-20 trillion.
Every dollar that goes into the banking system, will then get lent out to
someone, who will then use that dollar to buy goods from someone, who will then
use that dollar to hire people, and so on. Its estimated that there is a 10x
multiplier for every dollar put by the government into the banking system. I’m
discounting that a little to be conservative. $20 trillion is so much stimulus
that is coming into the economy I’m not even sure we can handle it without
breaking into another pattern of hyper-speculation but hopefully we will have
learned from our mistakes. But one thing is for sure, with so much stimulus it
will be pretty much impossible to go into a Depression.
- “Don’t Fight The Fed” is a saying that is used to justify buying the
stock market once the Fed starts stimulating. Well, why is the economic news
still bad and people still selling the market? Any stimulus takes 6-18 months to
have its effect on the economy,., In January, 2001 the Fed started decreasing
rates and we probably didn’t have a full recovery until 2002 and people
didn’t fully see the recovery (as exemplified in good economic reports) until
2003. Whenever a recovery will occur, the market will anticipate it about 3-6
months in advance. The one thing that makes this situation different is the
shear amount of stimulus being put into the system. Every central banker in the
world wants the US stock market to go up. Don’t Fight The World Fed.
- Don’t underestimate the effect hedge fund liquidations are having. The 100
hedge funds in the world – representing several trillion in equity buying when
you take into account their leverage, are in some form of liquidation. These
guys are crushing the stock market, leaving solid companies trading for 1-3
times earnings in some cases. Once banks open up their lending coffers again,
private equity firms will be swooping down and buying these companies, creating
a private equity (and hence, stock market) boom.
- There are $11 trillion in cash sitting in money market funds and T-bills.
Throw in the extra $20 trillion that is going to stimulate the economy. This
money needs to grow and in a zero interest rate environment there is only one
place: the stock market.

If we can get follow throughs on these rallies, then that would lead me to
believe a bottom is forming. Until then I see this market as bi-polar. We need
a trend to start.

I respect Carter's views and find his assessments very credible. I only hope he
is correct that the October 10 lows will hold.

If the 10/10 lows do not hold there will be terrible carnage in the street. If
the averages should decline another 800-1000 points from the 10/10 low; once a
true bottom has been established it will take many months for the averages to
come back. Many investors will be severely impaired in this type of scenario.
Investor APATHY will be rampant.

So far this year, when I have disagreed with Carter Worth on market direction, I
have been wrong. I'm not betting against him anymore. Great T.A. guy, who uses
a healthy dose of fundamental analysis. Plus, he's not just blowing smoke; he
stated last night that their managed accounts are "all in", fully invested. If
he had the slightest doubt that the bottom wasn't in, I do not think Oppenheimer
would have risked going "all in."

I know a bottom is in.

Nobody knows if this is the bottom.

We could have more legs down.