BILL REAPED WHAT THE GIPPER SOWED, WILL HILL GATHER W'S HARVEST?:

Feasting On Fear (Will McClatchy, 8/22/06, ETFZone)

Bearish sentiment is rampant on Wall Street, but not for lack of profits. U.S. corporations are generating cash flow as never before. To the classic buy-and-hold investor, this apparent contradiction signals a strong buy opportunity.
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Seemingly forgotten in the fear of war and inflation are operating profits. They have been ample in recent years, and analysts expect them to climb further still. Oblivious to rising earnings, bears are keeping a lid on stock prices and causing a slide in price/earnings multiples.

Stocks are cheap, but how cheap in historical terms? Not since 1990 have we seen price/operating earnings so low, according to Standard & Poor's. Investing in such low P/Es has nearly always reaped excellent long-term term gains. [...]

Can bears be completely wrong, or do they have a case for staying out of the markets? In fact they identify real threats: terrorist plots, costly oil and rising interest rates among others. The problem is that their solution, staying out of the market, is too draconian.

Threats to market valuations are real, but they are not new, and they will not go away soon. Oil was already at $55 a barrel a year ago, and terrorists struck Manhattan five years ago. The Fed has raised interest rates 17 times in the past two years, and avian flu has been circling the globe for years.

As in 1992, the primary reason it's so important to defeat Clinton is so that Democrats don't get undeserved credit for a terrific economy, fueled by globalization, undervalued stocks, deflation and a peace dividend.

Posted by Orrin Judd at August 23, 2006 9:14 AM