Where's the Market Going?

06/27/2003 12:00 am EST

Focus:

I can rarely recall a time when there were so many well-founded arguments on both the bullish and bearish sides on the market debate. There are logical arguments to support the case for deflation; there is equally strong support for inflation. How geopolitical events will impact the financial markets remains largely up in the air, and economic statistics continue to come in much better--or much worse--than expected. To help show the wide breadth of current opinions, we offer some extremely bullish--and some equally bearish--opinions.

Below, we take you on a see-saw ride between bull and bears. This is not meant to confuse; it is designed to show the extreme differences that often arise among advisory opinions. All the following advisors are assessing the same financial market and the same economies, yet their analyses result in often diametrically opposed views. It is only by understanding both sides of the market debate that we, as investors, put ourselves in the best position to make our own long-term judgments. (For more information on any of the advisors cited below, simply click on their photos.)

Leibovit, Mark "We could get a bounce here and there, but I don't believe money managers are going to take risks after a 2000 point run in the Dow Industrials since March," says Mark Leibovit, technical trader and editor of the online trading service, VRTrader.com. "As such, they are more than likely to be defensive going forward. I'm still on a sell signal and believe the worst is yet to come. We've only begun the decline; for starters, I'm looking for a 1000 points to the downside in the Dow industrial average."

Smith, Tobin"We have bottomed in the economic cycle and it is time to reallocate capital from income investments into more aggressive growth areas of the economy," says Tobin Smith, editor of ChangeWave Investing. "This is a great opportunity to buy a handful of stocks that will provide significant returns over the next three to five years. We have hit the special moment that investors cherish and use to build a lifetime of wealth--the beginning of the next expansion phase of the Great American Economy. Get on the train, baby,--'cuz it is pulling away fast."

Weiss, Martin "The powerful forces that drive the entire world economy--and ultimately, every stock market on the planet--are following the scenario I've been warning about: Federal and state deficits out of control, a morass of debts that are drowning consumers, and now, deflation," says Martin Weiss, editor of Safe Money Report. "Don't be fooled by rallies. They do not change the fundamentals that are driving the entire world economy into a long-term decline. No matter how strong the market may seem, don't fall for it. It's a trap."

Stack, James" We are a month into the 'summer doldrums' which historically lasts from June through August--a period when market action often proves disappointing to the bulls and bears alike," says Jim Stack, editor of InvesTech Market Analyst. "The most positive action for us would perhaps be for the market to move sideways and digest recent strong gains without any major correction. In the meantime, we'll maintain our current allocation (now at 85%) in value stocks, and watch for more opportunities to open up."

Prechter, Robert"The bulls who permeate the media have continued to pound out the assertion that the bear market is over and at every rally peak the majority once again falls for it," notes Robert Prechter, editor of The Elliott Wave Theorist, who believes that over the next 24 months, the Dow could drop to the 4000 level. He notes, "Optimism is at an extreme, matching the top in 1973.  Given eight months without a new low, the majority has again bought into the bullish vision. Traders should stay short, while investors should just stay out of the market."

Navellier, Louis"We'll likely see a short-term sell-off over the next several weeks, as the market has moved up a lot in a very short amount of time," notes Louis Navellier, editor of the Blue Chip Growth Letter. "I expect any downturn to be short-lived, before the market shoots much higher by the end of the year. With a bias towards the possibility of continued weak economic growth and deflation, the Fed is ready to cut rates more at any time deemed necessary. They're also flooding our economy with enormous liquidity right now. That's extremely bullish for stocks."

Ironically, I would note that despite the enormous differences in the outlooks held by the advisors featured here, the fluctuating market has given all of them--even the most extreme of bulls and bears--the opportunities for profits. Although Mark Leibovit maintains a bearish primary outlook he has profited significantly from trading both up and down in stocks and gold. As a result, he has been among the top-performing timers through the bear market years. Martin Weiss may sound overly pessimistic, but he has benefited significantly from the downtrend in stocks since 2000. Robert Prechter has been locking in short-selling profits since the top. Meanwhile, Louis Navellier remains at the top of the performance charts by focusing solely on companies reporting strong earnings momentum, resulting in stock gains even during down market periods. Jim Stack has consistently reported gains by focusing on safety, value, and diversification. He is currently invested in value stocks, natural resources, short-term bonds funds, REITs, and select international funds. And Tobin Smith, by focusing on developing long-term changes in trends, has been uncanny in his ability to isolate successful stock plays. 

It may appear surprising that that both these bulls and bears have had the chance to be successful in recent years. But keep in mind, we've had a major downtrend, interspersed with significant upside rallies. Indeed, it appears that this see-saw market is giving both bulls and bears alike a chance to generate gains. While it goes against my conservative long-term approach to investing, it appears the winners in recent years have not been the buy-and-hold investors, but rather those who were nimble enough to buy and sell at appropriate times, as well as those willing to shift their funds between various markets--stocks, bonds, gold, etc. Whether this shift from very long-term investing to a shorter term trading mentality is a good or bad thing, is a matter for a future column.

In the meantime, I urge readers to consider joining us at the upcoming Atlantic City Money Show, August 7-9, at the Atlantic City Convention Center, New Jersey. As seen in this column, the variety of opinions may leave you slightly befuddled, but it will also leave you enlightened. Indeed, the one thing I can guarantee is that you will leave as a better investor. It will also be a great chance to meet directly with many of the advisors featured in The Money Show Digest . It's only five weeks away, so make your plans now!

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