“I have no idea what the stock market is going to do in the second half of this year,” Brown wrote on his blog on Monday. “Neither do you. I have no S&P 500 target that means anything other than a guess. If you’re in search of pretended clairvoyance, there are no shortages of people who will give it to you.”
But he says he has something more “valuable than that nonsense.”
“I have a reasoned, mature, rational list of ten reasons I prefer owning stocks to not owning stocks for the second half of this year.”
Here’s his list:
10) Pessimism is now the base-case scenario. “This means that any positive news, from any quarter, should have an outsized effect on asset prices.”
9) The negatives are more well-known than ever. “My dad can quote the debt levels of several sovereign countries and his secretary can tell you the yields on their bonds. Remember that civilians become experts in things at major inflection points—often just before the turn.”
8) The “fetishization” of bond funds is rounding the corner, headed down the home stretch. “In the second quarter just ended, the iShares investment-grade corporate bond fund had the highest of all ETF inflows at $2.5 billion; the runner-up was Vanguard’s total bond index ETF with $2 billion.”
7) $100 in S&P earnings doesn’t feel like a major stretch. “And if we can do it, we’re talking about a 12 or 13 multiple on those numbers, nothing special.”
6) Central banks around the world are no longer debating inflation versus deflation and whether or not to ease up. “The new debate is whether or not to cut to zero or to some negative integer below zero.”
5) What about Europe? [Forget] Europe.
4) No seriously, what about Europe? “I want you to look at Ireland. They are back in the debt market as of last week and proving that there is life after death—they are raising capital at a lower interest rate than Spain … No one is talking about it, but this is of immense symbolic importance.”
3) Wall Street strategists “hate stocks more than at any time in my career …This is a highly contrarian signal. I know these guys and they’re idiot savants. They get the numbers right but always miss the meaning.”
2) What about China? Wake up, it’s already crashed.
1) Apple is coming back in the second half with one of its biggest product cycles ever—the iPhone 5, the iPad Mini and more details about how they’re going to save/revolutionize television.
“So yeah, I know how much everything sucks,” Brown concludes. “I eat, sleep and breathe it on this blog for you guys seven days a week (I’m writing this post at 2 o’clock in the morning, FYI). But I think the negatives have now become accepted and obvious, though I dare not say ‘priced in.’”
Check out Research magazine’s March cover story on Josh Brown, Breaking Ranks: Former Broker Turns Bomb Thrower, at AdvisorOne.