A longtime stock strategist known for calling market bottoms is now calling a market top — an astounding Dow 20,000.
James Finucane, a career analyst at Stifel, Nicolaus in Chicago and now a consultant, told Barron’s weekly that the market is in one of those speculative low points following a crisis that later yields a huge rise in stock prices.
The liquidity being pumped into the financial system now means the natural outcome will be a big bump up in short order. There could be some volatility, but soon enough the Dow will rise to somewhere between 18,000 and 20,000, he says.
"Governments and central banks have a clear incentive to promote growth, so to bet on a prolonged slump is to bet against the government, markets and human nature,” says Finucane.
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Finucane is a student of low points, especially the long and bumpy history of recent market crises, like the Mexico peso crash in 1994 and the collapse of hedge fund Long-Term Capital Management, just four years later.
He has some numbers, of course, not just a "feel” for things: Money-market funds are stuffed with $3.45 trillion in cash. U.S. equity funds have seen nine months of outflows, a new record.
Consumer confidence has hit a 17-year low, and individual investors are by one measure more bearish than since the beginning of the 1990s.
In short, things are not nearly as bad as they were for investors in 2003, as the tech stock crash was finally winding to a close. An investor rally is practically built-in, he figures.
"The setup is perfect," Finucane says.
Print this story out and stick it on your calendar. Twelve months is no time in the markets.
© NewsMax 2008. All rights reserved.
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