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July 10, 2012 at 10:38 AM
Forget Roubini, forget Gross, forget all the economic headwinds hitting us in the face—stocks are still the place to be, says Josh Brown of Fusion Analytics, better known as The Reformed Broker.
“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.”
