Full disclosure: I’m genetically programmed to be a bear. My father, who traded for three decades on the floor of the American Stock Exchange, passed this gene on to me, along with the ability to put a soccer ball in the back of a net.
My natural inclination to distrust markets has served me well — it’s prevented me from jumping on bull market bandwagons and becoming ensnared in a bear trap. But I’ve also missed some golden opportunities. But that’s the deal–you can’t have it both ways and for over two decades, I’ve found that losing less on the downside is better for me than making it big on the upside.
But I started to sense that the tide was turning during the spring. In fact, right after I wrote about soaring stock prices, I had a sober conversation with inner-bear. The discussion led to this video.
Here are the five reasons that I grudgingly put some of my cash to work at the beginning of the summer:
- The government was re-flating the economy in a BIG way: The trillions of dollars that Uncle Sam was pumping into the economy had to find a place to go. In the past, risk assets were the beneficiaries of surging liquidity.
- Jobless claims were tapering off: The employment picture was still dim, but after reporting on weekly jobless claims for CBS Radio affiliates week after week, it became clear that the 4-week trend had peaked and was showing progress.
- Manufacturing was recovering: US companies were liquidating inventories, with no sign of easing up. At the same time, the Purchasing Managers Index (PMI) was turning positive.
- Credit was loosening up: After a year of extreme conditions, credit conditions were improving.
- Emerging markets were waking up: Led by China, emerging Asia was leading the way out of the crisis.
These trends continue and lead me to believe that stocks can continue higher, at least for the next couple of quarters. Yet with all of this said, my inner bear still requires me to keep a healthy chunk of cash on the sidelines. Instead of choosing the stock market for that money, I’ve set my eyes on real estate.
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Image by Flickr User tch1337, CC 2.0
