The market won't fall off a cliff
When the fiscal issues are resolved, get ready for a bull run reminiscent of the 1990s.
Last week, Jim Cramer wrote an excellent article for TheStreet about the Clinton-era bull market.
Other than reaffirming to "Dow deniers" that the move from 3,200 to 11,000 between 1992 and 2000 did indeed happen, this is my favorite part of the piece:
... the greatest thing about the bull market of the 1990s was how little Washington mattered at all. For all of the griping about the havoc that Democrats wreak on business, it was simply a benign time with a White House that was deeply wired to creating jobs and allowing the private sector to blossom.
Right on. Jim goes on to point out that, "Tax rates just weren't much of a factor in decision making, certainly not as much as the certainty of knowing what they were and what they would be ..."
For a repeat of the Clinton-era bull market, Cramer believes we need an environment where companies are comfortable spending and reinvesting without political overhang.
That's all good. And logical. And let's hope whatever needs to happen in Washington happens so corporate spending accelerates.
As I noted in TheStreet's Why Are So Many Big CEOs Complete Losers, however, fiscal cliff-related uncertainty doesn't keep Jeff Bezos from spending at Amazon.com (AMZN). And, on the other end of the spectrum, it doesn't stop entrepreneurs with families from paying for their own health care while they launch fresh startups.
It comes down to mindset right now. In large swaths of corporate America, you have companies sitting on cash and using gridlock in Washington as the reason. In many cases, I call it an excuse. At the same time, I understand and can respect the notion that you need to know the rules before you aggressively play the game.
There needs to be some context here, though.
I follow almost everything, but I most closely cover tech, Internet and media companies across sub-spaces. Behaviors in these sectors differ considerably from, say, what goes on in the industrials or at particularly blue chip firms.
If you're in tech, Internet, old guard media, new media or social media, there's no excuse for not spending. If you cannot find opportunity, there's something wrong.
Even though I fully admit to missing badly in the near term on Sirius XM (SIRI) (as I wrote on TheStreet), comments about outgoing CEO Mel Karmazin made a few months ago -- at least once to Cramer on Mad Money -- rub me the wrong way.
When asked about what to do with his company's cash, Mel said that because he did not see attractive acquisition candidates, there's no option other than to return capital to shareholders. While SIRI might have more life left in it -- after hitting $3.00 intraday Tuesday -- I still cannot get bullish long-term. I want to see what Liberty Media (LMCA) plans on making of satellite radio.
Will the company treat it as a singular space, doing things like streaming radio for the same lame reason -- everybody else is doing it! -- Meg Whitman gives for eventually building a smartphone at Hewlett Packard (HPQ)? Or will Liberty raise the stakes, making moves that draw the attention of media companies that act more like tech companies? If the latter comes to pass, $3.50 might be a conservative price target for SIRI.
Over the long haul -- I'm talking in Amazon years -- it's that second mindset that wins out, where companies go bold and disrupt large and multiple industries the way Amazon has. CEOs such as Bezos and Marissa Mayer at Yahoo (YHOO) set that tone: We don't care what's happening in Washington. We can't afford to waste a minute. There's too much work to do!.
Forget special dividend payments, stock buybacks and comfort with the status quo. If you do consider them, they should be secondary to growth. They might work in the short-term, but they crush souls and create Best Buys (BBY) in due time.
Once they no longer have the fiscal cliff as an excuse, I expect the best companies in tech, Internet and media to join the ranks of Bezos and Amazon and Mayer and Yahoo! They'll remove the conservative shackles and attack. Those who do not will get bought out if there's value or be left behind.
Don't be fooled: As I predicted weeks ago on TheStreet, a fiscal cliff deal will be made before the end of the year.
That will provide the market with sustained energy. Solid earnings led by Amazon and Apple (AAPL), along with some surprises and strong 2013 outlooks across spaces will propel equities even higher.
Once a deal gets done -- especially if it's a halfway decent one -- there's really no reason for a rally not to happen. No more excuses. There's opportunity out there -- tons of it -- and more than a handful of companies must exist who not only see it, but are prepared to leverage it.
More from TheStreet.com
When are people going to realize that the market survives and prospers even
with wars, impeachment, terror attacks, etc,etc.The DOW was at 777 in 1982.
Look how much crap has been thrown at the market and it`s up like 1600%
since then.If you don`t like the market, stay out.The rest of us are making tons
One thing that occurred with the bull market in 90s was significant trading volume. In the mid to late 90s, there were 400+ million shares of Dow stocks traded every single day. There were even quite a few days where more than a billion shares were traded, and even some days with more than 2 billion. Anyone looked at the volume on the Dow lately? We're lucky to see 175 million shares trading hands now on any given day. Today we saw just 149 million.
So, where did all this volume come from? IMO, much of the bull run in the 90s was built on 2 things - tech IPOs and the newly created retail online stock trading. Much of that bull run involved tech companies that had no tangible value and no profits. You had a ton of companies trading at 20-30-40 even 100 times book value. If you could get in the ground floor of an IPO, any IPO, you were just about guaranteed to make a ton of cash. That didn't work out so well in the long run. Also, the number of people who could and would buy and sell stock over the internet exploded with the advent of online trading platforms like E-trade, Ameritrade, TD Waterhouse, etc... This allowed regular, everyday people with a couple thousand dollars to buy and sell lots of stock from their computer - something that wasn't available in the early 90s. Clearly these platforms still exist, but less people are using them less often. Remember the daytraders in the 90s? Don't see too many of them around anymore.
These were but a couple of the components that all formed at the right time and combined to create the huge run up in the 90s. The chances of another one of these "perfect storms" occurring again in the next couple of generations is pretty remote, especially in the USA. Something similar will probably happen in Brazil or Indonesia before it happens again here.
You cannot be serious... so the market won't fall off a cliff after all?? I’ve been diligently prepping for three years now, what ever will I do with my sizable stockpile?
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