Dividends Still Don't Lie: The Truth About Investing in Blue Chip Stocks and Winning in the Stock Market

Chapter 11. The Stock Market and the Economy

You will go most safely by the middle way.

—Ovid

As written earlier, nobody has tomorrow's newspaper, therefore, the future is uncertain. As a market observer, commentator, and money manager, however, prognostication, as futile as it may be, is nonetheless expected.

As opposed to staking out any hard and fast territory, what I offer in this chapter is a mixture of observations, some historical context, and an educated guess or two, which have been filtered through the prism of a career of study and experience. My intention is that these musings will provide you some grist for your own contemplation and analysis.

The Stock Market

As of late September 2009, the broad equity indexes have rallied close to or more than 50 percent above the March 2009 lows. This being the case, some believe a new bull market is underway. As this is the first major retracement of declines in the stock market since the high-price watermark was established in October/November 2007, it is of no surprise that this has become a popular position to adopt.

For reasons outlined clearly in earlier chapters, however, I am of the opinion we are merely experiencing a garden-variety bear market rally. Also, from all the research I have conducted, no bear market in history has ended in a V bottom. For readers who are not stock-chart aficionados, a V bottom is a pattern created when a decline at a steep angle halts, pivots, and starts to ascend at an equally steep angle, thus creating ...