The bull market turned eight years old this week, and I know some folks who are having a wicked, blowout birthday party.
My advice, in the words of the late, great Stevie Ray Vaughan, is "if the house is a rockin' don't bother knockin', come on in."
You've got every reason to jump in and crash this party.
That's because this bull market, in spite of its maturity in historical, human terms, is in fact just coming out of "middle childhood" and running headlong into another growth phase.
Listen, if you miss this party, you're going to regret it for the rest of your life.
Think of Markets as a Herd Animal
Of course stock markets don't know they have birthdays; they don't mark time the way humans do.
Rather, they ebb and flow like the tides in the short run and in longer time frames tend to follow economic cycles and capital-based cyclical waves.
(Incidentally, that's exactly why I call my VIP trading service the Capital Wave Forecast. We've done six times better than the markets on our stocks, and 13 times better than the market on our options. A "wave" is definitely the right way to look at it.)
Most analysts and pros will tell you that this particular bull market started once the post-crisis Dow Jones Industrial Average bottomed at 6,443.27 on March 6, 2009, or when the S&P 500 bottomed at 676.53 three days later on March 9.
Only a tiny number of insiders thought that March 2009 was the bottom of the 50%-plus drop in stocks, and an even smaller number knew it would be the beginning of a roaring secular bull market.
I was one of them. That's why you should listen to me now.
After calling the meltdown, once in February 2008 and again in that summer, I called the bottom and the historic rally, here, on March 27, 2009.
How did I know? No mystery...
What the Market Is "Saying" About Its Birthday
Figuring out bear and bull markets is easy - especially relative to analyzing and figuring out which way individual stocks are going. That's because markets are herd animals; you can hear the noise they make and see which way they're running.
Yep, it really is that simple.
The market is saying “Go!” loud and clear. And it’s been saying so for a while.
The noise now - if you listen to the market itself - is the sound of big breaths being taken as the herd (of smart investors) fills their lungs for another marathon run higher.
Forget the naysayers and false prophets who say this bull is long in the tooth and about to break down.
True, the market has been running for eight years on lousy earnings, exponentially exploding public debt, exponentially collapsing commodities and existential threats like China's iffy economy and currency wars.
Optimism is pervasive. Amidst all that human "noise," markets roared higher in the United States, taking lots of global markets along for the ride.
So why would markets turn tail now when earnings are finally, actually picking up?
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We've got a new, unabashedly pro-growth administration in Washington pushing tax cuts and deregulation (at least eventually) and holding out the prospect of a trillion dollars in infrastructure stimulus spending. What's more, money is historically cheap and there are trillions of dollars parked overseas waiting to be repatriated. Global growth looks to be recovering, too.
The market is saying "Go!" loud and clear.
And it's been saying so for a while.
Why the Market Soared Through Rough Times
The question investors have to ask, and to which I have the answer, is, "Why did the markets move steadily higher in the shadow of all that negative noise for eight years?"
Well, as I said back in 2009 with my bull-run prediction, the answer is simple: supply and demand.
You'll hear that out of me all the time, because it is the core, fundamental force driving the stock market higher.
There's more capital being created every day and fewer and fewer shares of stock to buy every day.
Capital is being created out of thin air - to the tune of trillions of dollars - courtesy of central bank money printing, better earnings, from more savings, from dividends and capital appreciation from rising markets, from economic growth... from lots of places.
And that capital is looking for a return, for a place to reside, to turn itself into more capital.
With interest rates so low, the stock market is the only place where investors believe they have a chance of earning a decent return. Given the lack of a meaningful market downturn in the past eight years, the risk associated with equity investing, as opposed to fixed-income investing, has diminished dramatically.
It's now the bond market, facing the music as the 35-year rally it enjoyed fades, that's being viewed as more risky.
About that supply...
In 1998, there were close to 7,500 listed companies on U.S. exchanges. Today there are fewer than 3,700. What's more, since 2003, companies have staged buybacks on more than $7.5 trillion of their own stocks. Those shares are off the market, and I mean forever.
Meanwhile, we're in an IPO drought, of sorts. There have been a few, to be sure, but nowhere near the 3,800 or so we'd need to get share supply back to its late 1990s levels.
Instead, there are more mergers and acquisitions and leveraged buyouts coming our way. All that "investment banking" activity will further reduce the number of shares available to investors.
Yes, it really is that simple an equation: more capital chasing fewer shares equals rising markets.
That's why this bull market's eighth birthday shouldn't really be a factor if you're using it as an excuse to stay on the sidelines, not when you can "buy" the markets with just one or two stocks.
What matters is the market is surging. And it's going to keep on having milestone birthdays.
And if for some reason it looks like things are moving against us, I'll let you know. Because I'll be listening and watching; the herd will announce its intentions to anyone who's listening.
Happy Birthday, Bull Market!
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.