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Morning Commentary

Raging Bears...Too Rich to Stay Down

By Charles Payne, CEO & Principal Analyst
5/13/2013 6:39 AM
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Now that the market has entered into the short squeeze phase, flatfooted bears will speak of its irrationality as further proof it's going to end up battered. In the meantime, we enter this week with the raging bears demurring: "Look Ma, still standing."

Yes, they are standing only because most have tons of money but, outside of media and industry hype, declining credibility.

Still, I worry about all the whining from the naysayers and chorus of folks that say the crash is around the corner, because corrections happen but while millions of investors wait, million have missed an opportunity of a lifetime. The thing is we could be on the cusp of something that lasts a very long time, albeit with occasional shocks and pullbacks. The key will be a new administration and GOP control of the House (maybe even the Senate, too) after midterm elections.

But, of course as the market moves higher there is more risk for a larger pullback. This is why we have to put investing goals into proper perspective. Last week we asked subscribers to raise cash, issuing six exit alerts (five for profits averaging 21% and one loss for 1%) just to be prudent and prepared. This month I've gone into each weekend wondering if the market will finally succumb to the tidal wave of negativity from all the "experts" and each week the market proves the experts aren't so smart. To prove it, last week was all about short squeezes- massive short squeezes.

There is one thing to remember, however, the masters of the universe types always get more money the way Napoleon was always able to raise armies. So, look for them to get back on short trades including certain stocks, US dollar and treasuries ... after all, one of these things has to work sooner or later. Of course the big losers have been those fence-sitters still waiting for the next shoe to drop 8,500 Dow points later. Missed opportunity is often like missed time- one you can never get back and the other is pretty elusive to recapture as well.

But investing is a lifelong endeavor, and if you missed the rally out of an over-abundance of caution, angst, anger, disbelief or frustration look forward not backwards.

Red Flags

Margin interest has soared on the New York Stock Exchange, up 28% in the past year to $379.5 billion, just inches from the all-time record of $381.1 billion established July 2007. Yes, 2007 is an infamous year that saw a red hot stock market hit a brick wall but mostly as collateral damage from the housing implosion. There are a lot of differences between now and then, although the "bubble" word is hurled around every day by so many people- some of whom are not crazy.

The bubble crowd has fingered:

> Bonds
> Art
> Stocks
> Reality TV Shows
> Pessimism

Of course the bond bubble was supposed to burst years ago, and commercial real estate was going to be the second leg down, and the nation was going to sink into oblivion overnight. I continue to say the doomsday crowd is probably the biggest bubble out there as the lure of the limelight of predicting doom is too much to ignore. The sweet thing is you can be wrong for days or thousands of Dow points but when the next crisis begins take a victory lap.

Regular people don't have time for that nonsense. In the real world missing rallies can't be mitigated with big time book deals and speaking engagements.

Regular people need to prepare for retirement in a nation that's moving away from greatness on all levels. While I do believe there's a connection between economic success and social issues the focus should be on the latter which has been toggled between being under relentless attack or completely ignored. The thing is America was an economic Mount Everest, it's not going to become a molehill overnight. At some point, however, greatness can be weathered into submission.

We'll see what higher margin (investors borrowing money to invest in the market) means near term. As a contrarian, I think it's important but still don't see the outrageous rabid demand for stocks that normally marks tops. So, we enter the week with Masters of the Universe regrouping, shorting the market again hoping fresh money could be spooked into an avalanche of selling. They're hoping (former) fence-sitters just getting back into stocks can be knocked out with a few jabs of pressure.

It's really interesting considering the serious battering the big boys have taken. Because they have so much money and always find more they can still exclaim: "Look Ma, I can be a contender."

Taking punches, like taking losses, is part of successful investing. I'm still a raging bull on America and a raging bull on American companies.

Update on Plastic Guns

Last week the threat to release blueprints on how to build a plastic gun using a 3D printer became reality - for a little while. The government moved in to shut down the free downloads but not before 100,000 copies were obtained. Western nations were tops in downloads, which underscores the idea of demand in nations where owning guns is virtually prohibited or heavily threatened.

> Spain
> US
> Brazil
> Germany
> UK

Last week I asked your thoughts on plastic guns and replies were amazingly thoughtful. It's worth watching this development because there is a lot at stake. A government run amok on power is the greatest threat to any economy, particularly one based on freedoms.

Today's Session

I continue to write about the positive impact of this Dropout Nation we live in where it's all about today as there is generally indifference or doubt about the future. Retail sales came in better than expected, and ex-autos and gasoline the highest increase since December 2012.

> Ex-Auto & Ex- Gas +0.6
> Clothing +1.2
> Building Material +1.5
> Auto +1.0
> General +1.0
> Non-Store Retail +1.4

The retail numbers come at the expanse of decreased savings, which can't slip much further. What probably happens is consumers' access credit more than they have over the past five years, but at some point wages must begin to edge higher - more than slightly.

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