right here, right now.
Now that I presumably have your attention, or at least the attention of the bears who haven’t already started smacking Laszlo around in the comment section below, let’s walk through the thinking. Birinyi is a student of market history. As such he compares the current environment to that of 1982 and 1990. During each of these periods and others he cites, skepticism if not outright fear reigned. Then, as now, the short case was quite logical and the market was on the cusp of solid, multi-year rallies.
Scraping both of our jaws off the desk, my partner Matt Nesto very logically observes that “the short-term doesn’t feel very good.” This would be a fine example of rational understatement and a view which Birinyi freely acknowledges. “The short-term never does…the negative case for the market is more cogent, more compelling, more rational,” he says. The reason giving into this dread of investment death is that the market is a forward-looking vehicle.
Birinyi puts the market into context via a model which categorizes a bull move into a template of four phases. Think of it as the 5-stages of Grief for optimistic dyslexics:
The Take off / Strong Rally: Nobody believes. March 2009, S&P 666. I don’t think I need to elaborate.
Consolidation and Digestion: The skeptics see a return to darkness. In the situation today, consider this: The market is higher for the year. Turn on your television for as long as it takes you to feel dark about the future. Long enough to hear about Rupert Murdoch’s News Corp (NASDAQ:NWSA) Watergate moment, Cisco’s (NASDAQ:CSCO) lay-offs, or the collapse of Europe should be sufficient. Turn off your television and ponder the news versus stock disconnect.
Acceptance and Capitulation: Investors surrender to the idea that there will never be a meaningful pullback and start getting long accordingly.
All In: Everybody’s long; a life-altering, vicious sell-off begins.
See the full “Breakout” interview below: