Raging Bull: Microsoft is Back

We've Got a Bull Market Here

By

I'm not sure you've noticed. You may have missed it.

It's not like 1999, when every restaurant and pub had CNBC or Bloomberg blasting from their television sets, and supermodels were telling you to buy Yahoo! (NASDAQ: YHOO) at $1,000...

In case you haven't been paying attention, the Dow hit another new high of 15,722 yesterday.

There hasn't been another bull market in history with less fanfare.

Volume is one-third of what it was in 2008, and there remains a great deal of negativity regarding the markets in the current literature.

Yes, it's a corrupt, politically-controlled system doomed for failure. So has it always been.

But that doesn't mean it won't go up.

In fact, just the opposite is true. While no one is paying attention, positive forward-looking data is leaking out.

Redbook Up

This week, the Redbook weekly retail sales report revealed a +3.8% year-over-year increase; and ISM Services climbed to 55.4 from last month's 54.4.

If you dig a little deeper and look at container traffic, you'll find that total intermodal traffic grew in the third quarter of 2013 by 4.7% year over year, attributable to gains across the board. This growth was led by U.S. container volume growth of 9.4%.

All of that stuff has to be going somewhere.

It seems that those folks who held jobs throughout the recession are buying again.

Of the Dow Jones Sector Indexes, the best performing sector in the market over the past six months is the consumer electronics sector, which is up 52%, followed by tires, recreation, and travel.

Buy This

Tires I can understand, as the average age of cars on the road in the United States is now a record-breaking 11.4 years old.

Part of the reason for this is that cars last longer.

More important is the fact that the average new car now costs $31,252. A new $3,000 transmission seems well worth it by comparison.

That said, new cars are selling along with the tires that go on them: Car sales were up 16% for GM, 14% for Ford, and 11% for Chrysler in October, and Toyota just reported a 70% increase in profits.

All of this is bullish, because it means the American consumer is inching his way back.

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Out of Debt

Another bullish sign that hasn't gotten a lot of press is that the household debt-service ratio is near its lowest level in 30 years.

According to the blog Calculated Risk:

The overall Debt Service Ratio decreased in Q2, and is just above the record low set in Q4 2012 thanks to very low interest rates.

The homeowner's financial obligation ratio for consumer debt increased slightly in Q2, and is back to levels last seen in early 1995.

This is how recessions work: You clear out the dead wood, work off the debt, and build up your foundation until you gain confidence... in which case you can buy, spend, and invest once again.

Leaders Lead

Perhaps the best reason to be bullish is that market leaders are leading again.

Our old friend and market stalwart Microsoft (NASDAQ: MSFT) is breaking out. It led the markets in terms of volume on Wednesday — and just hit a 13-year high.

The $317 billion company jumped 4% on news that they have narrowed their quest for a CEO down to five candidates, with Ford Motor CEO Alan Mulally leading the list.

Microsoft has also released a new Surface Pro and will launch Xbox One this month.

The software giant has a forward P/E of 13, $80 billion in cash, and pays a 3.20% dividend.

There are a number of future catalysts for share price appreciation, not the least of which is a breakup into three companies that would unlock value...

On the technical side, ten years of consolidation is one heck of a coiled spring. All of the sellers from 2000 have sold or died.

I expect this company to run — and bring the market with her.

Full disclosure: I own Microsoft.

Good hunting,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Crisis & Opportunity and Managing Director of Wealth Daily. He is also a contributor for Energy & Capital. For more on Christian, see his editor's page.


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