Super Bulls Claim the Bears Got It Wrong

Tired of hearing all the reasons why the stock market shouldn’t be at these levels? Looking for an excuse to jump into the rally?

Then listen up to the Super Bulls--the minority of investment advisers who positively believe this market is going a lot higher.

Who are these folks? Generally, they’re independent financial newsletter writers whose clout on Wall Street is minimal. Few of them manage money of any consequence. Most are technicians, meaning they predict the market by watching how it acts, instead of focusing on fundamentals such as stock price-to-earnings ratios.

Point is, not many investors pay attention to the Super Bulls--yet so far this year, they’ve been right and the large crowd of bears has been dead wrong. Knowing that the market often does what’s least expected of it, the Super Bulls are content to toil in relative obscurity.


Here, three Super Bulls make their cases:

* Bernard Schaeffer, Beacon Equity Advisors, Cincinnati: Schaeffer publishes a newsletter that tracks trading in put and call options on stocks, which average investors use to make bets on the market’s near-term direction. What he sees now are hordes of traders buying put options, which represent a bet that the market is about to plunge.

In contrast, Schaeffer says, few investors are buying call options, which will be profitable if the market continues rising. Comparing option prices on individual stocks, “calls now are a fraction of the price of puts,” he says.

The upshot: Most investors are terrified of a market crash. And that all but guarantees we can’t have one, Schaeffer figures. Meanwhile, “The market continues to make new highs, corporate earnings are better than expected, and we’ve got a favorable interest rate environment that gets more favorable each day,” he says.


His advice is to stop fighting the bull, because it wants to go up, he says. The Dow industrials, at 3,648.18 on Thursday, could hit 4,000 by year’s end, Schaeffer says.

* Suresh Bhirud, Bhirud Associates, Stamford, Conn.: You can just about bank on a fast run to a 4,000 Dow from here, says Bhirud, whose career has included investment strategist stints at a number of major Wall Street brokerages.

He says the market’s potent fuel mix hasn’t changed, which means there’s no reason to believe the bears can get the upper hand with stocks anytime soon. “The fundamental trends of low inflation, moderate economic growth and a preference for financial assets are still continuing,” Bhirud says.

What’s more, the longer the bull runs, sudden, desperate buying on the part of cautious investors becomes more probable, he says. He notes that “short interest"--the amount of borrowed stock sold by bearish investors, betting on a market plunge--is at record highs on the New York Stock Exchange and on NASDAQ.

If the shorts throw in the towel and rush to cover their wrong-headed positions, “a buying stampede is a distinct possibility in the near future,” Bhirud says.

* Don Wolanchuk, the Wolanchuk Report, Roseville, Mich.: An ex-broker who now runs a Western boot store outside Detroit, Wolanchuk also is well-known in investment newsletter circles for his wildly bullish long-term outlook.

He derives his forecasts by studying the market’s history on charts that take up entire walls in his offices. “I don’t even have a computer,” he says proudly.

Wolanchuk’s view of this bull run: “The market is discounting an economic boom that will make these stock prices look cheap two to three years down the road.” Communism’s demise is extraordinarily positive long-term for the global economy, he says, and that’s why stocks are zooming. “You’re talking about unshackling human potential,” he says emphatically.


A vault by the Dow through about 3,860 could quickly lead to an exponential rise that could carry the index to 12,000, he contends. Sound too far-fetched? “It’s not buying that causes rising stock prices. It’s rising stock prices that cause buying,” Wolanchuk says. “Nobody ever won a horse race without letting the horse run.”

How to REALLY Know When It’s All Over

With tongue firmly in cheek, Henry Mercer of the Mercer Forecast newsletter suggests that these events in financial markets would truly signal a bull market top:

10. Billionaire oilman Marvin Davis buys the Vanguard Group of mutual funds.

9. Michael Milken joins the faculty at the Wharton School of Finance.

8. MTV displays stock ticker tape during market hours.

7. Lehman Bros. super-bull Elaine Garzarelli walks on water.

6. Speaker of the House Tom Foley begins to speculate in new stock issues.


5. Alan Greenspan becomes a TV spokesman for brokerage Charles Schwab.

4. International speculator George Soros gets his picture on the first $1-million bill.

3. Andrea Electronics (annual sales: $5 million) is added to the blue-chip S&P; 500 stock index.

2. Dan Dorfman wins the Pulitzer Prize.

1. IBM decides to enter the casino business.

Source: The Mercer Forecast, Red Bank, N.J.