By Louis Paquette, Posted Tuesday, June 30, 2009

I was interested in observing the demeanor of everyone attending the World Resource Investment Conference in Vancouver earlier this month, since this was the first conference I attended since the market put in it's double bottom in March. Fortunes have been lost and many people are still understandably traumatized by the devastation to their net worth. Mind you, conditions have improved
dramatically since the second sharp decline in global stock markets took place in March. North American stocks have rallied 40%. The CRB Index, a key sign of economic health has rallied sharply. The
pace of decline, of home prices, of layoffs, and fear levels have all subsided. Nobody is claiming a robust recovery is underway. But if one waits for full recovery before investing, it is already priced into the stock markets. The true bargains are found during periods of uncertainty. The question on everyone's mind, and the topic of discussion by many speakers was whether the recovery is for real, or was there a second shoe to drop.

Of the veteran speakers I heard, both at the conference and outside of it, most were negative and sceptical of the recovery. Most felt that the credit bubble which took decades to form would not be resolved in a matter of a few weeks or months, but years. This isn't some kind of inventory recession that could be solved with a few interest rate cuts, but a far more serious balance sheet recession that consumers would take years, maybe a generation, to recover from.Doug Casey (The International Speculator) compared the demise of America to fall of the Roman Empire, and we all know how long the subsequent Dark Ages lasted (I suspect he exaggerates to make the point that he believes the situation is quite serious and lasting). Other speakers I've heard elsewhere are also sceptical. Market historian Bob Hoye suggests a potential parallel between the current economic and stock market rebound and the dead cat bounce that took place in 1932, still early on in the Great Depression. Another analyst, Martin Weiss, believes we are merely in "the eye of the hurricane" that will rise up again once interest rates go up and sites the $14 Trillion in liabilities as proof trouble lies ahead. If there was a divide of opinion,I found it along the lines of age. More youthful speakers, such as John Lee (Mau Capital) David Skarica (Addicted to Profi ts) and Jim Letourneau (Big Picture Speculator) were more optimistic.

Siting stock market recoveries in Asia of up to 70%, and anecdotal such as full stores and restaurants, either these guys are naive and too optimistic, or the older ones are being too negative. Only time
will tell who is right. The other thing I noticed, what how uncertain everyone has become.My Outlook I would describe what we are experiencing now as a cyclical bull market that within the context of longer term secular bear market that began in 2000. I believe it's a bull market for 1 - 3 years because;
1. The charts are saying it is
2. Because of all the government stimulus, and,
3. Because the demographics are still positive. That is because the number of people aged 45 to 54 is still rising. Until the year 2012 that is.

Then in 2013, the secular bear market should resume as the demographic trend turns negative, and stays that way until 2025. That is, the number of high spenders begins to contract and keeps falling until the year 2025. I realize that is a grim long term outlook. But I am here to tell you the truth based on the facts, not what you or I want to happen. And like Mark Stein says, demographics may not explain everything, just about 90% of everything. I suspect the recovery and cyclical bull market will be muted at best. A 1 to 3 year reprieve before the big bad bear returns for certain in 2013. Nor would I rule out some shorter term sluggishness, given the huge 43% run up that the TSX has had since March, the time of the year, and the fact that gold and now oil, at least temporarily, seems to have reversed their upward trend.