Monday, July 16, 2007

A Two-Legged Stool

excerpts from this week's report

"Throughout its entire run, the bull market that began in the spring of 2003 is like a stool that has had three legs supporting it – valuation, liquidity, and market metrics. Yet, while both liquidity and the technical aspects of the market remain firmly in place, valuation, perhaps the most important of the three, has now broken down and no longer provides a justification for higher prices. And, in the process, the stock market has now become a two-legged stool.

Undeniably, valuation is a highly subjective measurement tool. What’s one person’s fair value level is another’s over or undervalued level. Regardless of one’s fair value point, however, it is becoming increasingly more difficult to make the valuation argument..."

"With earnings growth slowing and interest rates rising, a stock market that has risen to record highs reduces if not eliminates the margin for error. Hence, the equity bulls are now resorting to the age-old Wall Street axiom of a market climbing a wall of worry..."

"As the data on page three shows quite clearly (see report), individual investors are anything but concerned as their bullish levels have reached multi-month highs. Moreover, numerous surveys of professional investors are equally optimistic..."

also in this week's report

* Current Blue Marble Research Fed Model
* Model Growth Portfolio
* Key Economic Indicators

Note: To learn how to view this week's report, please click on the Blue Marble Research services link to your left.

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