The stock market "has an awful good gig going," according to Jim Paulsen, chief investment strategist at Leuthold, who appears capable of looking through the current collapse in 'hard' economic data, predicting a nirvana-like world ahead (sounding ominously like the "permanently high plateau" we've heard of before).
Speaking on CNBC's Squawk Box this morning, Paulsen explained:
"We've got a fully employed economy, rising real wages. We restarted the corporate earnings cycle. We've got strong confidence among business and consumers."
"The kick is we can do all of this without aggravating inflation and interest rates."
"If that's going to continue, I think the bull market could continue to forever."
It seems 'real' macro data and the yield curve disagrees for now... but what do they know...
Paulsen goes on to hedge just a little...
"Ultimately the bull market does continue until we aggravate some inflation, and until we have to raise bond yields and interest rates some more."
"I think that's going to happen eventually, but it doesn't look like it's going to happen anytime soon. So I think the bull probably continues through the end of this year."
As a gentle reminder, we have heard this kind of 'everything is awesome' chatter from Mr. Paulsen before...
Jim Paulsen, chief investment strategist of Wells Fargo's primary investment unit, expects home prices to steady by year end, with the pace of foreclosures slackening shortly.
Most of the subprime debt at the center of the current crisis already has been written down by financial institutions, he notes, while many subprime borrowers who lost their homes are returning to rental units.
"Folks who compare this home-price cycle to the one that occurred in the early '80s obviously have short memories," Paulsen says.
"In the 1980s the economy was in a deep recession, mortgage rates were at 17% or more, and unemployment [was] hitting a post-Great Depression high of nearly 12%."
The bottom line, as we noted earlier, is stock market investors better hope that the bond market investors are wrong.. but then again if bond buyers are wrong and rates rise, as Greenspan warned, "that is very bad for asset prices at current equity market valuations."