Just the Facts, Ma'am - 12/01/10

	I continue to believe that our economy will surprise on the upside in the months ahead.
	Our improving stead (over here) is in contrast to the growing and recognized abyss in certain regions in Europe.
	I am now net long for the first time in quite a while.

I like to be in America,
OK by me in America!
Everything free in America,
For a small fee in America!

Buying on credit is so nice, One look at us and they charge twice; I'll have my own washing machine, What will you have, though, to keep clean?

Skyscrapers bloom in America, Cadillacs zoom in America, Industry boom in America!

-- Steven Sondheim, West Side Story ("America")

In response to an accusation of inconsistency, the economist John Maynard Keynes is often reported to have said "When the facts change, I change my mind -- what do you do, sir?"

Over the past week I have opined that the U.S. stock market's footing has been reinforced by evidence of a marked improvement in domestic business activity.

While capital spending remains subdued and housing (plagued by mortgage-gate and a large phantom inventory of unsold homes) still resides in the basement, most indicators are improving -- including the regional district growth indices (Chicago's National Activity Index, Richmond Fed Manufacturing Survey and the Kansas City Fed Survey) -- the capacity utilization rate is well off its bottom, the ISM and ECRI's Weekly Indices are moving higher, personal income/spending growth is expanding, jobless claims/labor market trends are improving, inflation is quiescent, and other key barometers of expansion such as an upwardly revised third-quarter 2010 GDP of up 2.5% are better than consensus forecasts.

-- Doug Kass, The Edge

I continue to believe that our economy will surprise on the upside in the months ahead.

The wild cards? They seem recognizable, contained and controllable:

The Korean situation is a clear wild card and presents headline risk, but, in all likelihood, the crisis will be resolved before long and will not impact the markets.
China's growth rate is a short-term wild card for the markets, but, in the near term, I don't expect a surprise much beyond a slight deceleration in the country's growth rate.
Politics, too, looks relatively predictable. Gridlock is the likely outcome, as neither party has expressed a willingness to move to the center and compromise.
Nor does a major surprise appear likely from the Fed. Short-term interest rates are anchored at zero, and the Fed will move uninterruptedly on its stated QE2 journey.

-- Doug Kass, The Edge

While it remains uncertain whether the recovery will be self-sustaining and smooth, I recognize that no market is an island and that our improving stead (over here) is in contrast to the growing and recognized abyss in certain regions in Europe.

Meanwhile, as evidenced by PMI's released in India and China last night, the emerging world continues to emerge.

I am now net long for the first time in quite a while, as the facts (sir), have changed ... to the better.

While it remains unlikely that the S&P 500 index will breach the 1227 level achieved in early November to the upside, it might be challenged in the weeks ahead leading up to year-end.

Away from the fundamentals, the technicals of our market also seem to be improving as the oversold condition builds up, put-buying continues, retail investors continue to flee domestic equity funds and the S&P has held at critical points on three separate occasions recently.

Color me more bullish.

Maybe the Oracle of Omaha was right when he wrote his New York Times op-ed several years ago: "Buy American. I Am."!