The troubling part of an upside scenario is who is going to carry the water. While the DJIA has had a rebound from an approximate 50% drop in value, assembling the usual suspects for buying is more problematic. But there are optimist. According to Barron's last weekend, it is time to position oneself for the second half upside run.
Surely there must be some new insight into the coming rally?
Not really.
The impetus for this rally according to the Barron's author, Andrew Bary, will be because "the S&P 500 is trading at about 15 times estimated '10 profits of $75, based on Wall Street strategists' forecasts. That's not expensive, given today's low bond yields. Besides, the profit picture could brighten as the year unfolds, as strategists often underestimate earnings. A year ago they were projecting 2010 profits of only $66." He continues, " ..Even after the past year's rally, the S&P 500 is no higher than it stood in 1998, and profits then were running at just $45. The index still is 27% below its 2007 high of 1565."
Dangling the same old bait as a rationale for investing is really coming out of the same guide book that got pension funds and other cheerleaders in deep red. Unfortunately for promoters of such logic, the earnings formulas may not have the magic they used to, and may be as lame as reasons for buying gold, you know, because it is going to double. Further, pension funds, up till now, the great buyers driven by these historical extrapolations, seem to be dumping stock in favor of long term bonds. Its not that the great crowd does not want to be bullish, they just don't trust the story.
