Bears' View: Bulls' Time Is Dwindling --- As Stocks Ride High, They Say Speculation Is Driving the Market
The stock market cooled a bit late last week from its record-breaking pace, but more and more investors seem to be piling onto the bull's bandwagon.</br></br>Euphoria aside, Wall Street clearly is banking on a U.S. economic recovery to justify current stock prices. The bulls argue that the Federal Reserve has pushed interest rates low enough to spin the economy out of its recession rut. Buying stocks now, the bulls calculate, will produce big rewards later when rebounding economic activity sends corporate profits soaring.</br></br>That optimistic outlook is so pervasive, says Ned Davis, a market researcher, that signs of rampaging bullishness abound: Cash levels at "aggressive growth" mutual funds have fallen sharply as portfolio managers scoop up stocks. A poll by the American Association of Individual Investors shows a 3-to-1 ratio of bullish to bearish sentiment, the highest level of public optimism since 1987. And odd-lot trading, the old-fashioned gauge of "little guys" interest in stocks, is at "the highest relative level of buying for something like the last 12 years," Mr. Davis says.</br></br>This is a hostile environment for bears, and one wonders if any can survive at altitudes above Dow 3000? We and Ned Davis will soon find out. He is one of them.</br></br>"There's definitely a speculative tone to the market now with the public getting involved," he says. "The big question is how long can it last? It may last awhile, but I think it's the last hurrah of the old bull market that dates back to 1982 or 1974."