A Walk in the Park

(1) FDR’s investment strategy. (2) A depressing headline with an upbeat twist. (3) Volatility:1930s or 1990s? (4) Low VIX, volume, and valuation. (5) 2003-2007 again? (6) Earnings boost buybacks, which boost EPS. (7) Virtuous and vicious spirals. (8) The bright side of revenues & earnings. (9) G20 group hug in Moscow. (10) Easy money is still the only solution to all the problems. Strategy I. As I wrote at the end of January, we seem to have nothing to fear but nothing to fear. In his first inaugural address on March 4, 1933, Franklin Delano Roosevelt famously said, “[T]he only thing we have to fear is fear itself--nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Actually, the bull market in stocks since March 9, 2009 has converted plenty of retreats into a solid four-year advance with the S&P 500 up 126.3% since then, and only 2.2% from its record high. Yesterday, Bloomberg posted an article titled, “Volatility Falls Most Since 1930s as Stock Funds Gain.” It was an attention grabber because it seemed to imply that stocks could crash again as badly as back then. However, the actual article was a very well balanced analysis, which is typical of Bloomberg. The bottom line of the article appeared in the second paragraph: “Average daily price moves for the Standard & Poor’s 500 Index have fallen to 0.43 percent in 2013 from an average 1.08 percent the past five years, the steepest decline for any corresponding period since the 1930s, according to data compiled by Bloomberg. The last time the annual average was this low was 1995, when the S&P 500 surged 34 percent and doubled in the next four years. Stocks gain an average 17 percent during years when the gyrations are so small, the data going back to 1928 show.” Got that? It’s either the secular bear market of the 1930s or the secular bull market of the 1990s. I pick Door #2. Let's have a closer look at some of the latest stock market indicators: (1) Vix. Sure enough, the VIX of both the S&P 500 and NASDAQ 100 are the lowest they have been since the start of the current bull market (Fig. 1 and Fig. 2). The former is the lowest since the spring of 2007, while the latter is the lowest since the summer of 2005. Those were both good times to buy stocks as long as you sold them right at the market top during October 2007. (2) Volume. On the other hand, NYSE volume was much greater back then than it is now (Fig. 3). The bears are warning that this combination of low volatility and volume is bearish. There is too much complacency and not enough trading to confirm the bullish trend of the market. (Add our Put/Call, Volatility, & Volume to MyPage by clicking .) (3) Valuation. Maybe so. However, low volatility, low volume, and relatively low valuations all support