Fat lady singing?; Paris.

With the recent market pull-back of over 10%, it’s a good time to ask if the bull market that began in March 2009 is over.

First off, I don’t know, and neither does anyone else. I, like so many others, am speculating on what may happen, not forecasting what will happen. Forecasting short term market direction is foolish. Or, as Warren Buffett put it, “The fact that people will be full of greed, fear and folly is predictable. The sequence is not predictable.”

Given those caveats, I don’t think this market pull-back is the end of this bull market. I have several reasons for this opinion.

1) The governments of the world are still flooding the system with money at zero percent interest rates. It’s unlikely markets will tank with so much easy money available.

2) The governments of the world are still back-stopping every economic problem. Market crashes rarely happen when everyone has just experienced one, or when governments are working so hard to prevent them. Eventually, governments will run out of ammunition, but they haven’t, yet.

3) Lots of economic numbers look good. Granted, commodities like copper and oil have pulled back, but manufacturing data looks strong and railroad shipments are staging a real recovery. These figures may turn down, but for now they are signaling a real recovery.

4) Retail investors were just starting to join the party. I’ve commented before that the general public tends to be a contrarian indicator–do the opposite of what they are doing. Retail investors were just starting to pull money from bond funds and put them into equity funds. I believe they will end up much more fully invested before things really roll over.

I must admit, I was prepared for the downturn. I had bought volatility for both my clients and myself and have mostly cashed out (I invested in a security that goes up when the market goes down). Now, I’m getting reinvested in the same blue chip companies I’ve been recommending for quite some time.

Markets may continue to head down for a bit, and it’s nice to have some hedges against that, but I don’t think the fat lady is singing (yet). It’s a good time to invest in quality companies at cheaper prices.

In the long run, governments will run out of ammunition. When that happens, markets will probably head down by more than 10%. In my opinion, that’s still a couple of years away, but I could be wrong and it could be starting now. Either way, I’m prepared.

On a separate note, my wife and I just got back from a week in Paris, and we had a blast. The food there was simply unbelievable. In fact, my wife and I had the best meal of our lives at a little restaurant called chez l’ Ami Jean (Rue Cler area). Outstanding!

I also found the people of Paris to be incredibly friendly and helpful. It was almost impossible to look at a map and try to figure out where you were without someone stopping to offer help. We tried our French on them, and they were happy to oblige while still being able to speak English when necessary (their English was always better than our French).

Paris is the world’s leading vacation destination, so my recommendation is hardly unique, but I’d highly recommend it to anyone thinking about world travel.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.