There's never a bull market anywhere.
That about sums up my twitter feed right now, something that's virtually a ritual near the bottom.
In fact, it may be the most reliable indicator I know.
That's the conundrum I face right now. The people who are weighing in, and they are substantial and as well reasoned as you can be with a chart and 200-some-odd words, are almost unanimous in the need to get out now, get out of everything -- every asset, save maybe gold, because the economic grim reaper is coming.
Let's digest this "never a bull market anywhere" rationally and think what it means.
First, the crowd is almost never right, but the crowd that is visiting my feed is almost always totally contemptuous of the long side. Things are always about to topple with this gang, except they only come out after it has toppled.
They typically are late in their reaction. This time the indices are up a lot though, so it is possible that they could be right because the chief indices are down only 5% from the highs.
So, let's give these twitter bears their due. If you are up as much as the average or more, you should take something off the table. I took something off the table yesterday morning for my charitable trust and I recommended to club members of Action Alerts Plus to do the same. So, I am not oblivious, but I hated doing it because the sentiment is so bad out there that I felt I was simply complying with it. I did that at the bottom in 1998. Really bad. But I did it right before the crash in 87, very good and before the crash in 2000, excellent and before the crash in 2008. So call me three for four. I think that batting average gives me the standing I need to stand up to the bear bullies.
But second, they have the silver bullet on their side: Every time rates go down, the stock market goes down. Given that I think rates are going down because of flow of funds, not demand, I am not able to jump into the bull camp. Why should I? We have endlessly heard that the reason why oil can't rally is because of weak demand. But this is said despite the addition of two million barrels a day from the Permian. Why can't this rate move be because of people trying to get out of negative interest rates and into a market where the currency is strong and yields are not yet negative? How can our rates NOT go down in that scenario?
What, though, if negative rates don't produce a bear market? We have heard endlessly that stocks must go down when rates go negative and yet Germany is still up 10% and their economy is awful. So even though my feed is almost unanimous in thinking that negative rates product a bear market, we aren't having one in the original negative-rater, Germany.
Finally, what happens if the scenario changes. What if rates are negative until they are not. One of the saving graces of stocks is that they stop at zero. You can't lose more than you put in. But bonds, it turns out, don't. Yet if there is a sudden surge of demand from a stronger economy like ours, because it gets even stronger with lower rates, or if Fed Chief Powell decides to slash short rates or if the Fed or Treasury sell or issue long bonds -- as they should -- then the theory goes away.
So here's where I come out. I rebel against the certainty. In fact, the phrase there is always a bull market somewhere is a hedge. It's a sense that not everything can go down if the economy turns weak. Yes, in 87, 98, and 08 everything did go down.
But what's forgotten is that for many stocks it actually was a buying opportunity. You had to buy the cyclicals in 87 because there was nothing wrong with the economy, the banks in 98 because the Fed provided instant liquidity, the consumer packaged goods in 2000 because people turned to consistent growth and big tech in 2008 because its prospects weren't damaged.
So where will the bull market be? Right now it's gold. But maybe this time there will be no anointed group? I doubt it. I know my followers think they believe in history, but they aren't historical.
History, not me, says there's always a bull market somewhere, we just have to look for it. If you don't, you are wrong. That much we know and most of the followers don't. And they will be wrong. But because they don't play with an open hand as I do, we will never know it, and they won't care to tell us.