3/15/2012 - Why the Bears Were Wrong: It’s Not the End of America

Why the Bears Were Wrong: It’s Not the End of America

by Mark Skousen, Investment U Research
Thursday, March 15, 2012: Issue #1730

“Bears make headlines, bulls make money.” Old Wall Street saying

Over the weekend, I spent some time one-on-one with conservative talk show host Glenn Beck at a private meeting at Mar de Lago – Donald Trump’s Florida retreat. My friend Dan Mangru invited a group of friends to meet Beck and talk about his new non-profit organization Mercury One.
Glenn is still doing well with his nationwide radio program and his new for-pay television show. He wears glasses all the time now, due to his suffering from macular dystrophy, but his wife told me that his condition has stabilized for now.
What’s Glenn’s outlook for the economy? For all the years I’ve known him (appearing on his show twice), he’s what we call a “permabear.” He remains quite pessimistic about the direction this country and the world is headed. His greatest fear is big government…
“I’d be fearful of any government that can give out tickets to kids who start a lemonade stand,” he said. He believes that the current debt crisis is leading us to a new kind of French revolution – resulting in a monstrous government where everything is either prohibited, mandated, or regulated. “We are close to losing our freedom of speech in America,” he told us.
Glenn Beck is in good company, too. Other permabears include Agora Publisher Bill Bonner and Editor Porter Stanberry, who have been predicting the end of western civilization and the dollar for some time. Porter’s little book The End of America, which predicted the collapse of the dollar by now, caught the attention of millions of investors who signed up in droves for his newsletters.

“Bears Make Headlines, Bulls Make Money”

Yet the market continues to recover. After struggling in 2011, the Dow has leaped ahead 7% to 13,120 points this year, closing in on its previous high of 14,000 in 2007, before the financial crisis.
It reminds me of the old saw on the street: “Bears make headlines, bulls make money.” (See my book, The Maxims of Wall Street.)
For a number of reasons, I remain cautiously optimistic:

1. The economy continues to recover; real GDP is growing at 2% to 3% a year.
2. Interest rates remain extremely low, including long-term rates (30-year mortgages are under 4%).
3. Home prices and sales appear to be bottoming.
4. Corporate profits are near all-time highs.
5. Stocks and the economy tend to do well in an election year.
6. Interest rates have fallen in Europe following the Greek bailout. See below.

Source: The Economist

That’s why I’ve been recommending a variety of growth and dividend-paying stocks. In my last Investment U column, I recommended Pulte Group (NYSE: PHM), which has since risen 40%.
Even bank stocks are coming alive. In that sector, I like Barclays (NYSE: BCS).
But I’m not the only one cautiously optimistic. A slew of my brightest friends and colleagues will be sharing some of their favorite plays for the second half of 2012 at an incredible event in July!

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