Is Strong Wrong ... Or Weak Right?

The bull-bear debate rages on, but no two ways about it: the bull, judging from the market's ongoing Samson-like strength following roughly a 50% sprint from its March lows, has firmly grabbed the Wall Street reins. The bears are still out there hollering fire, but the fact of life is no one is paying any attention to the dire warnings from the more prominent skeptics.

In particular, these include dour economist Nouriel Roubini, who has suddenly began to waver on his bleak economic projections and recently forecast another major stock decline; global money manager George Soros, who predicts the "bankrupt U.S. banking system" will lead to a very slow economic recovery; and Federated Investors' strategist David Tice, a perennial bear who sees the S&P 500, now at about 1065, tumbling in a year to 400 and maybe even to 325.

Given the vigor of the market and increasing signs of economic pep, our trio, for now at least, is rapidly losing any semblance of credibility. One trader sums it up, "The beat of the stock market -- a harbinger of what's ahead for the economy -- has swung from a slow fox trot to fast stepping disco dancing," he says, "and the non-believers like the ones you're talking about look like buffoons."

For some thoughts, I rang up four market pros, both bulls and bears, one of whom ridicules the bullish thesis. That's Charles Biderman, the head of TrimTabs Research, a West Coast liquidity-tracking service partially owned by Goldman Sachs. Steadfastly bearish since April, which Biderman says has been very frustrating, he sees a market decline of about 20% kicking off at any time.

The key reason is his contention that the economy, contrary to general belief, is getting worse, not better. In support of this view, he points to:

--Falling wages and salaries (down 8% year over year).

--Substantial numbers of understated job losses. Responding to government claims that new companies over the past three months have created more jobs (184,000) than have been lost by older companies that have gone out of business in the same period, Biderman says "that's insane and utterly unbelievable."

--Plunging bank lending.

--Millions of new foreclosures in the pipelines, with 6 million or 11% of the country's mortgages not current.

--A dramatic reduction in money-market funds and CDs on the part of consumers who are using the money to pay their bills and reduce debt.

The way Biderman figures it, professional investors have been borrowing like crazy to buy stocks, which is what's been goosing the market. But with margin debt way up and mutual fund cash reserves hovering at record low levels and very little new money going into them, he figures it's only a matter of time before the big guns run out of cash and stocks head south big time.

On another bearish note -- a pretty significant one -- Insider Insights, a newsletter that tracks insider activity (buying and selling by officers and directors in their own companies' shares), reports that insiders are non-believers when it comes to the recent rally. "Insiders are saying beware; they're flashing a bright yellow light," says editor Jonathan Moreland. He notes that monthly insider purchases in each of the past three months represented the lowest amount of monthly insider buying since January of 2000.

The significance: Since insiders are the most informed people around when it comes to knowing precisely what's happening within Corporate America, their refusal to actively participate in a strengthening stock market predicated on a supposedly strengthening economy raises an obvious question. Is Wall Street trying to sell investors the Brooklyn Bridge?

Sam Stovall, the chief investment strategist of Standard & Poor's, doesn't see it that way. Based on his rosy outlook, he thinks the bears should hibernate before they're slaughtered. While many skeptical pros remain leery of the market for all the reasons everybody knows -- ranging from a shoddy jobs picture to rising geopolitical risks -- Stovall is not one of them. His overall market view: It's the wrong time to be a wimp.

"We're in a bull market," he says, pointing out that we've climbed 20% above the March lows and that advance has been in existence for more than six months without a subsequent 20% decline (which is what a bull market is all about).

What's more, Stovall expects the bull to continue its romp, given his strong belief the economy is clearly on the road to recovery. Not growing like crazy, mind you, but growing. In terms of specific numbers, he sees GDP growth of 2.5% in the third quarter, and 1.3% growth in the fourth quarter, followed by a slow uphill climb in 2010, with growth averaging 1.6% for the entire year.

Corporate earnings growth, on the other hand, is seen humming, with Stovall envisioning a hefty 35% jump in 2010, versus an estimated 9% gain this year.

One significant economic plus, as Stovall sees it, is the falling cost energy, with the price of a barrel of oil (now at around $70.10) down substantially from its $105 price tag at the end of the third quarter of last year.

What about the dismal jobs picture? Stovall's outlook is hardly encouraging. He sees the unemployment rate (now at 9.8%), topping 10% this year. And while he expects the rate to peak in next year's second quarter, he looks for 10% plus for all of 2010. While he sees unemployment peaking later next year, it won't be a significant drop, given his expectation of about a 9% jobless rate for all of 2011. "We're in for a jobless recovery, similar to what we had in the Eighties," Stovall says.

Still, our bull sees stock prices continuing to balloon, with the S&P 500 surging 12 months out to 1100 from its current level.

His best stock bets, five all told and among the highest ranked S&P companies, are all rated market outperformers and potential gainers of 21% or better over the next 12 months. They are Family Dollar Stores, Gulfmark Offshore, Arris Group, IBM and Gamestop Corp.

A fella who swings back and forth with bullish and bearish views -- he's now a bull -- is online investment adviser Mark Leibovit, the skipper of of Sedona, Ariz. Leibovit, rated one of the best market timers around, notes the Wall Street crowd had been looking for a crash. Instead, he says, they're getting an enema: that is, the shorts (those pros who bet stock prices will fall) are being squeezed, pushing stock prices higher.

The avoidance of a widely September crash is one of the reasons he's bullish. Another is a clear downtrend in the dollar, which is bullish for both stocks and gold. Technically, he notes the S&P 500 has held support at its 50-day moving average. The game, he believes, has changed. He expects the Dow (now at 9787) to hit 10,000 before year end, followed by maybe a rise next year to 11,000. He does raise the possibility, though, of a near-term pullback for several weeks before the market heads higher. Still investors need not worry, he believes, because, as he sees it, "we're now in a melt-up, versus a melt-down."

It all raises the yet unanswered question. Is strong (the bull) wrong...or weak (the bear) right?

Write to Dan Dorfman at