With the major U.S. stock market averages closing in on their highs for the year, the question of the day is whether now is the time to buy stocks with abandon? Is this the beginning of a new bull market, am I missing out?
Indeed, the frequency with which this question is being asked on cable television and on the Internet is a true testament to the success of the financial services industry's mission to convince investors that buy-and-hold is still the way to go. Never mind that those who pursued such a strategy over the past decade have broke even at best, the pressure to be invested in stocks remains strong.
But while Wall Street has shown impressive gains since bottoming on March 9th, students of market history know that major bull runs don't begin until the excesses of the prior era have been wiped out and investors have thrown in the towel on stocks. So here is my Top 10 list of conditions I'll be looking for before jumping back into stocks with both feet.
#1: Bankers (you know who you are) stop complaining that they "really didn't need the TARP billions" last fall, and instead take responsibility for the bone-headed moves that put the entire financial system at risk in the first place.
#2: Cocktail party conversation about making a killing on beaten up shares of Citigroup and Bank of America is replaced by a sober technical analysis of stocks like Caterpillar and Boeing.
#3 Manhattan-ites stop strategizing about how they can buy Bernie Madoff's $7 million penthouse on the cheap.
#4 Warren Buffett is no longer the hottest name and the biggest babe magnet at the annual Allen & Company mogul-fest.
#5 CNBC replaces Fast Money with comforting re-runs of Wall Street Week with Louis Rukeyser.
#6 Fed Chairman Ben Bernanke stops talking about "green shoots" in the economy and just "shoots up". A re-appointment of the fed chairman, who has risen to the task, would also be a plus for stocks going forward. His term is set to expire in Januaary.
#7 The ratio of chauffeur-driven Escalades to Smart cars on the Upper East side falls to 2:1. OK, maybe 5:1, I don't want to get too radical here.
#8 In a huge vote of confidence in its own stock, Goldman Sachs uses some of the $11 billion that it has set aside for bonuses so far this year to buy back the $5 billion dollars Buffett lent it last fall, freeing the firm from a hefty 10 percent dividend on Buffett's perpetual preferred shares.
#9 Hedge fund wives truly cut back big time, eliminating the personal trainer, for their toddlers.
#10 Crippled by the severity of the recession, private schools in New York City start offering incentives for parents to stay on the island and out of the public school alternatives. Waiting lists open up and parents can pick and choose from among the best schools in the city.
Disclaimer: OK, I may have to buy stocks before this last one ever happens, but you get the idea. There are still a lot of bull market excesses to be unwound.