Three reasons to stay bullish in the stock market in 2011-2012 according to Altucher, the bull advocate (believer).
Bernanke Is Just Getting Started (The Fed effort is just getting started) : Amid the heated debate over whether QE2 is monetary madness or simply failing, Altucher notes Fed policy typically works with a lag. “Bernanke just started spending this $600 million and he’s not holding back,” he says. “It typically takes 12-to-18 months for Fed money to trickle down to our pockets and we’ll see [the impact] in 12 months.”
The Recovery Rolls On: One reason economists were so perplexed by Friday’s punk payroll figure is that it contradicted so many other recent signs of economic healing and health. “Under the surface, the economy is booming,” Altucher says, citing the recent ISM surveys as a prime example. “That’s why the market in general has been going up.”
Valuations Ain’t Rich( Valuations are low by historical standard): While the broad market is trading above historic P/E averages, Altucher notes mega-caps such as Microsoft and Exxon are trading around 10 times projected 2011 earnings. Since the S&P 500 (500 largest cap companies) is market-cap weighted, any multiple expansion in these names will have an outsized affect on the index, he says.
Add it up and Altucher predicts the S&P 500 is going to hit 1500-1600 this year, on its way to 2000, or roughly 50% above current levels.
“I’m not saying it’s going to happen overnight,” he says. “But there’s an enormous amount of [Fed] money that’s going to be hitting the economy, then there’s a multiplier effect.”
Check the accompanying video to hear Altucher’s rebuttal to concerns about rising commodity prices and profit margins, as well as an update on his recent demand for an “apology” from bears like Nouriel Roubini, John Hussman and Mike Shedlock who each mocked Altucher’s bullishness in 2010.