Yesterday, U.S. GDP numbers came in better than expected at 3.5% – causing analysts to “unofficially officially” call the end of the U.S. recession (Canada, Australia and a few other countries had already come out of the recession). The National Bureau of Economic Research is expected to date the end of the recession to a few months back, possibly to June or July 2009.
With the end of the recession and real recovery now “officially” in sight, it is perhaps not surprising to start hearing some more cautiously bullish views on the market.
But extremely bullish views? – we haven’t heard much of those, yet. Until yesterday.
Webb Asset Management Calls Beginning of an Extreme Bull Market
Derek Webb, CIO of Webb Asset Management is an extreme bull right now. In an interview yesterday on BNN, Webb says we’re just seven months into the beginning of a multi-year bull market.
“This is a mega bull market. A mega bull market. I mean, bottom line is we’re seven months in to a bull market, bull markets are usually two to five years; this is as good as it gets; the strength of the market, the breadth of the market, the volume of the market… this is a bull market… most people are scared to get in, a lot of people sitting on the sidelines… and if you look at the technicals of the market they don’t get much stronger than that. Since we bottomed in March, every decline has been a buying opportunity.”
According to Webb’s research, which is based upon momentum investing and technical indicators, we’re currently in the first stage of the bull market, in which we see earnings declines alongside serious cost-cutting. Webb argues that the cost-cutting is a good sign because it means businesses will be more operationally leveraged towards the upside when more economic factors improve.
Other factors pointing the way to a continued climb in the markets are the massive stimulus given by governments around the world, but particularly the U.S., strong technicals; and strong current economic indicators such as improving consumer sentiment and a slower pace of job losses.
Where To Invest Your Money Now
To position himself and his clients’ capital for the ride, Webb has 100% of his funds long equities and doesn’t recommend shorting anything at this time. He also strongly recommends that you don’t leave your money in overly conservative investments right now, since according to him most things are still going up.
Stay away from U.S. residential real estate and related U.S. consumer financials. According to Webb, the U.S. real estate market is the last problem which caused the credit crisis which still exists and doesn’t look like it will be solved anytime too soon. He recommends staying away from U.S. consumer financial stocks like Wells Fargo (NYSE: WFC) and other savings and loan companies.
Webb is extremely bullish on oil, gold and base metals. Commodities in general are going up, and they’re priced in US dollars, which are going down. This causes the price of commodities to go up even more in and of itself. As for oil, Webb thinks it’s possible that oil will take out its old highs at $147, regardless of whether that matches oil’s fundamentals or not. Webb is less a fan of natural gas, however, as an investment, due to its volatility and current supply situation.
Webb is also much more bullish on stocks rather than bonds right now. Interest rates have a higher chance of rising than dropping, which is bullish for equities, and if equities go up, bonds go down. Webb likes the life insurances companies for anyone who has a long time horizon (he says you can’t go wrong with Manulife (TSX: MFC), for example, which has little competition); and in the U.S., he likes Goldman Sachs (NYSE: GS) – since it is an investment bank (safe from the consumer credit problems still troubling the U.S. real estate market) and has knocked out 60% of its competition. Webb also says General Electric (NYSE: GE) “is a screaming buy” right now.
Apple (NYSE: AAPL) or RIM (TSX: RIM)? Although Webb is a Blackberry user and finds RIM to be an excellently managed company, he sees Apple’s iPhone as eating into the Blackberry’s market for the foreseeable future. With Apple’s open app system, higher-than-expected earnings, and pent-up iPhone demand, and RIM’s lower-than-expected earnings results last quarter, Webb thinks Apple is the smarter investment right now. Investors will have to “wait and see” with RIM to see where the momentum on the stock goes. Webb also sees an even stronger future in Apple’s computer business, which will help buoy the stock and its market share long-term.
Outlook For U.S. Economy and Currency
Webb pulls no punches with his analysis of the U.S. If it were a business, it would be bankrupt. If it were a third world country, its currency would be down 90%. The only reason the currency is still floating where it is is because it also acts as the world reserve currency.
“The U.S. is in a world of pain,” he says. Webb expects massive domestic financial restructuring and likely reforms of the world reserve currency system.
Zhou Xiaochuan’s Proposal For World Reserve Currency is Accepted by UN (March 29, 2009)
U.S. Dollar Up For Debate At G8 Meeting (July 5, 2009)
Supracurrency Coin Proposed As New World Reserve Currency (July 12, 2009)
World Bank: Don’t Take USD Reserve Status for Granted (Sept. 27, 2009)
Sucre, New Latin American Currency To Replace USD for Trade (Oct. 19, 2009)
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