Buy Every Black Swan
At least that?s what Ben Bernanke thinks. He said as much in his press conference yesterday in the wake of the latest Fed statement. He might as well have waved a red Flag at a bull.
The central bank took the opportunity to downgrade its US growth forecasts going forward as a result of sequestration imposed government spending cuts. What is impressive is how minimal the impact will be, each year only pared back 0.1%. Armageddon, not! Here are the new GDP numbers:
2013? +2.55%
2014? +3.15%
2015? +3.30%
These are at the high end of most private sector predictions. Does Uncle Ben know something that he is not telling us? If the Fed is anywhere close to being right on these predictions, it justifies the meteoric rise in share prices we have seen so far this year. It also suggests we have more upside to go.
Let me throw out a theory here. Ben Bernanke is so fearful of repeating the Federal Reserve mistakes of 1938 that he is going to ere on the side of caution on the monetary easing front. That is when the government tightened too soon, triggering the second leg of the Great Depression and another 50% fall in the Dow average. He certainly is getting a free pass on the inflation front. When is the last time you heard of a worker getting a pay increase?
All of this paints an outlook for stocks that is pretty bullish. We could well continue on up for the rest of 2013, save for a 5%-10% correction in the summer. In the meantime, I added more longs to my model-trading portfolio this morning, using the Oracle (ORCL) inspired dip to tack on positions in United Continental Holdings (UAL) and Apple (AAPL).
By the way Ben, how much is a gallon of milk at the supermarket? Watch this space.
