The latest weekly call from Raymond James’ Jeff Saut…
The call for this week: The week before Thanksgiving has been “up” eight of the past nine years . . . that is up until last week. While many pundits cited the failed German Bund auction, China’s slowing PMI Index, another bank “stress test,” a downwardly revised GDP report, Euroquake, etc.; my hunch is the real reason for the recent swoon is our own dysfunctional government. To be sure, the breakdown of the Super Committee has clarified the differences between the two parties. Hence, it is pretty clear that Americans must now decide to accept either serious reductions in their healthcare and pension programs, or substantially higher taxes, and probably both. Whatever the reason, my sense is that the November weakness has burned itself out and consequently I look for a continuation of the traditional year-end rally that began on our “buy ’em” call of October 4th. That belief is based on the fact that trading volume has contracted so sharply it reveals the public is g-o-n-e from the investing scene (read: bullishly), the economy is NOT slipping into recession (our recession indicator has the odds down to 11% from 35% in September), Euroquake will be resolved, earnings will continue to surprise on the upside (like they did in the 3Q10), that last week’s reduction in real GDP was because of inventory adjustments that should actually boost growth in 4Q11, that Domestic Final Sales accelerated to 3.1% in the third quarter (versus 1.4% and 0.4% in the previous two quarters), and the “bull list” goes on despite all of the negative nabobs rants. And this morning Germany and France are rumoured to be exploring “radical” methods to solve Euroquake, which has the preopening futures up more than 30 points.
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