Investment advisors tend to fall into two camps: bulls and bears. Usually there are many more bulls than bears because investors prefer optimism to pessimism. If you had to divide advisors into two camps today, however, you could call them the pessimists and the doomsayers. It is hard to find a thoughtful investment advisor who is optimistic about the economic future. The main reason is massive debt everywhere one looks and growing indications that lenders are starting to say "no" to continued funding for the generous pensions, healthcare, and employment programs of the western democracies. These days the operative motto: Goodbye euro, hello gold.
Warren Buffet is believed to be the most successful stock investor ever. Although he famously and consistently has said he can't time the market, he recently told a Congressional panel that the municipal bond market could become like the real estate market. That would almost certainly touch off a severe recession or worse, so some pray for a federal bailout, as if the fed has the money.
George Soros, another extremely successful investors over the decades, says we avoided a depression by transferring toxic assets from banks to the U.S. Treasury. He thinks we saved the banks but ruined the country. He warns we are starting Phase II of the economic collapse in which national treasuries and currencies collapse. If so the worse is still ahead of us.
Larry Kudlow is an economist who worked for President Reagan. He advocates positive thinking and optimism about America but not last week when he changed his outlook from sunshine to rain. He is worried that the tax hikes scheduled to go into effect next year will sink the economy. He is telling TV viewers to sell their stocks.
Kudlow has a point about taxes. If you are sitting on long term gains and sell this year, you pay 15% of the gain. Next year you will pay 20%. So look for people to take their gains this year.
For more than a year Jim Cramer has been predicting a stock market rally. He told his viewers every night not to listen to all the worry warts trying to scare them into selling stocks. His viewers did very well taking his advice. Now he has changed his view and told his viewers that the stock market is headed down.
Both Pimco and the Barron's Round Table are negative, as is Nouriel Roubini, the New York University Professor known as "Dr. Doom."
The hedge funds held a convention in Las vegas last month. Word is they decided that the European governments owe too much money to pay back their debts. They came out of Vegas preaching "de-risking," which in English means selling stocks. In the last few weeks, the stocks were sold with a vengeance.
I have never seen it this bearish. There are bulls, of course, but it seems that all the top investors are bears. If the negative sentiment is only mostly right, we are in for some tough times.
What is the case for a bull market? Believe it or not, investors are hoping that China will save the day.
