"There hasn't been a recession yet that hasn't ended."
Abby Joseph Cohen, a partner and chief U.S. investment strategist at Goldman, Sachs & Co. during the Squawk Financial Summit aired on CNBC March 24.
I was delighted to hear a practical observation from an economist because as a personal rule, I usually tune out the economists and their forecasts.
I find their little graphs displaying changes in retail sales, initial jobless claims, CPI, GDP, housing starts and so on to have no relevance to the stock market.
Cohen began her career as an economist in 1973 at the Federal Reserve Board in Washington, D.C., serving until 1977.
She worked as an economist and quantitative research director for T. Rowe Price Associates.
She crossed over to the money management side, obtaining her chartered financial analyst charterholder designation in 1980.
She joined Goldman Sachs Group Inc. in New York City as a vice-president and co-chair of the firm's investment policy committee in 1990 and was named a managing director in 1996.
Cohen developed a reputation as a so-called "perpetual bull" and was ridiculed for her bullish predictions.
Her reputation was further damaged when she failed to foresee the great crash of 2008.
Aside from the bad calls, Cohen's "visionary" style is admirable. When Cohen says there is $4 trillion (U.S.) in sideline cash and this is "the investment opportunity for a generation," I am all ears.
Now before I find myself being drawn into another compelling story spun by a very clever personality on business television I have to understand that my investments are my sole decision and responsibility.
The reality is that followers of any business media program must understand the host, the guest and the network do not guarantee any specific profit or loss outcome of any recommendation.
Viewers should be aware of the real risk of loss in following any advice you hear on any business media show.
Clearly, we must do our homework before acting because we need to know if the great bear of 2007-2008 has run its course. There are two basic tests to be satisfied in order to determine if the time is right to invest.
We know that bear markets are the result of falling stock prices. Falling stock prices are technically in a down trend as set out in a series of lower highs and lower lows. We also know that new bull markets need leadership from the important sectors such as financial, energy and technology
I have never seen a new bull market get underway without leadership from at least two of these important stock groups.
Let us assume the lows of October through November 2008 to be significant because every stock sector (including the gold index) posted new 52-week lows during that period.
Let us also assume lows of March to be significant because many stock sectors such as consumer staples, energy, materials and technology did not violate their October through November lows.
Our chart this week is that of the daily closes of the iShares CDN S&P/TSX Energy Index Fund (TSX-XEG) plotted above the SPDR Technology Select Sector Fund (NYSE-XLK).
Note both of these important leaders have so far not violated their important October—November lows. Both the U.S. and Canadian financial indices are trading above their respective October — November lows.
Most bear markets post a new low about every 12 to 16 weeks – and so far all of the important stock sectors and major indices are trading above their lows of 20-plus weeks ago.
This is clearly a base building process which satisfies the condition required to make a technical call for the end of the bear market in global equities.
Abby you got me, count me in on "the investment opportunity for a generation."
Bill Carrigan is an independent stock-market analyst.