An Economic Bear Talks Bull

As longtime readers know I am an economic bear. I believe that the best case outcome will be slow, muddle through growth. Long time readers also know that I often say "the stock market is not the economy". When I think about the economy, I believe that the stock market has limited upside. However, when I see how pessimistic market participants are and how aggressively corporations are repurchasing shares I see a lot of upside potential.

Last month was one of the biggest in recent history for share repurchase announcements. Just since the beginning of this week we have seen numerous headlines on share repurchases. Intel is borrowing $5 billion to repurchase shares. Dell announced a $5 billion repurchase. Staples, Coca Cola Enterprises and Kroger each announced $1 billion repurchases or more.

As long as we get anything short of a severe recession, corporate buying and market participants moving back to more neutral stock weightings could give the market a lot of upside. Even if it is not justified by the economy or valuations.

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