Birchtree's Account Talk

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The ability to think far into the future - years and decades - is not something that comes easy. But it is essential in order to be a successful investor. In 1982 would you have predicted an 18 year rise in stocks. In 1982 stocks were on the verge of exceeding even the wildest bullish expectations. Perception sets asset prices. The secular bull market may run until 2031. The Fed wants a 2% inflation rate which is currently at 1.6%. We have the 40 and 60 year Kress cycles due in 2014-2015 applying pressure on disinflation fighting the Fed. Janet wants to concentrate on unemployment which means rates are not going to increase for several more years. And then when they do the bullish market will continue moving forward until we see a 5% Fed Funds rate - only the Fed can assassinate a bull market and 2031 is a very long way into the distance. I'll be buying all the way into my old age. Snort.
 
If the stock market enjoys a Summer Rally of even average magnitude, therefore the Dow will be trading at 18,150 sometime between now and end of summer. Slow growth is wonderful for an investor. Tomorrow we could easily see uncharted territory again - I'm blushing. Right now when you size up financial assets, stocks win by a mile.
 
Wake the blankety blank up - I thin k I'm going to make more money today. Is the S&P 500 about to stage a multi-month rally? The economy is about to rebound, whether anyone thinks so or not. I've ensured that my portfolio is structured for a resumption of the bull market potential. Remember, big fear spikes soon after major tops are a signature bull market consolidation behavior - do yourself a favor and tune out the fear.
 
Although I'm not impressed, I would be remised if I didn't mention today the S&P 500 has put in yet another 52-week high

Weekly Chart
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If this is in fact a market recovery as opposed to a bull trap, the market should be able to hold most of its recent gains in the face of overbought conditions until the market cools off and the 20 day oscillator returns to a healthier position. And please remember a funny thing happened on the way to higher stock market prices - the small guy missed out - don't let that be you. Get in even if you can't swim - market bouancy will support you.
 
This week was a better week than last week but I didn't regain all my give back, but close enough: +$58K, +$66K, -$32K, +$21K, +$15K for a gain of +$128K. Now if I can do the same next week I'm a happy camper. I've now collected 52 dividend increase anouncements ytd with more dividends to be reinvested next week. With dividends, it's the growth in payouts that fights inflation, fights taxes and helps pull along stock values. With any gains next week in the Dow I should be back in margin territory and I'm fully ready to spend some hefty dollars market permitting. When the market delivers unrealized capital gains I will gladly spend them in this bull market. Secular bulls don't end until they bloom into a popular speculative mania that pulls in normal everyday non-investors heading into the climax - we are years away from the end. I expect the VIX to drop down close to 12 next week.
 
From Jason Zweig of the WSJ. "As the bull market soars ever higher, investors face big competition for buying the shares of companies - and it comes from the companies themselves. Last year, the corporations in the Russell 3000, a broad U.S. stock index, repurchased $567.6 billion worth of their own shares - a 21% increase over 2012. And last year's total was well below the all-time high of $728.9 billion in 2007. So the surge in buybacks is worth watching closely. If companies end up chasing their own shares as high as they did in 2007, a fall to earth might not be far behind." I'm open to more stock splits - that would open the clouds for mom and pop to get lower pricing.
 
Betula papyrifera has returned - I can absolutely, without a doubt feel the rumble and hear the thunderous clang of thousands of bull hooves sending the Dow to 18,150 real damn soon. Third waves are the point of recognition for the masses after five years, and tend to be strong trending waves that rarely let up for very long. What happens if next week is parabolic - you'll hear heads popping off all over the darn place. How can we be sure that once the secular bear ends (October 2011) and the next secular bull market begins the Dow will soar to 50,000 and above? Because in each of the secular bull markets of the last 110 years, the Dow has gained 500% to 1000% - we are now up 177% or so. Ferdinand is going to make me stinky wealthy.
 
Birchtree said:
"Success breeds complacency. Complacency breeds failures. Only the paranoid survive."

The Greatest Danger For Stock Investors Today [SPDR Gold Trust (ETF), SPDR S&P 500 ETF Trust, iShares MSCI Japan Index (ETF)] - Seeking Alpha
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Thanks for posting this one. Really good stuff, though a bit out of character from a raging bull;).

I thought the responses were great as well. For the most part, respectful and informative, and the author took the time to respond and was quite gracious with many of the responses.

I have mixed feelings because when the S&P was around 1200 I thought the fair value was around 900, and I waited for a pull back that never came. I got toasted. He stated that using historical metrics the value would be around the mid 1200s without the Fed's asset inflation boosters in place. And that is the $4,000 question. Wait for a pull back (again) that may never happen, or slip on a pair of those sticky pants.....
 
I'm now in a multi-year race against time with the Federal Reserve. Solid economic growth and low inflation are nirvana for stocks. The current inflation rate is around 1.6% and the Fed would like to see 3% and have it stay there - they won't raise rates enough to hurt the economy or stocks. A 5% fed funds rate will make me sweat. Until then the market can go on as long as inflation stays somewhat around 3% and that could last a number of years. I believe the economy is years away from overheating before the Fed steps in to slow things down which means I'll continue to play on the rails in front of the Grand Trunk. My objective continues to be to accumulate assets to build a strong dividend stream. I won't worry so much about my unrealized capital gains and just let'em ride until I'm ready to harvest in the garden.
 
We're in a long term secular bull market and in secular bull markets all surprises tend to come on the upside. We are currently experiencing some consolidation which is fine with me because I still have oodles of dividends due this week for reinvestment. If the perception is for interest rate increases we are going to see a great rotation out of bonds and this creates a generational buy. Many market elements have come together to suggest we are in a time zone and a price zone to be looking for more positive gains. No negative divergence on the advance-decline line, yet.
 
Gosh could a 6% 10 year treasury rate be the line in the sand - that would give me five more years to ride this bull. That's plenty of time to fill up the truck.
 
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