NEW YORK ( Real Money) -- Bear markets create problems. Bull markets solve them. Bear markets sow seeds of worry. Bull markets harvest the seeds and turn them into something worth chowing down on. Bear markets frighten people out of stocks. Bull markets let the rest -- those with fortitude, those who are implacable -- enjoy the gains after the weak hands have left the table. The bear has objections; the bull rebuts them and trounces them.
Go back four short months ago. What was the prevailing wisdom?
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1. The federal government was going to jump off a cliff. Taxes would rise for 100% of the nation, particularly those in the middle class. Taxes on the rich would skyrocket and dividends would be taxed at the new, very-high ordinary income rates.2. At the exact same time that taxes on popular dividend stocks would at least double, if not more, the Federal Reserve was going to raise rates, maybe dramatically, because it would be worried about the inflation caused by its bond-buying. That meant dividend stocks' after-tax rate of return would plummet and make them not much better than certificate of deposits. 3. Europe, after some months of calm, was back on the red-hot griddle, with Italian and Spanish bonds performing badly again and the usual litany of banks about to have runs. 4. The debt ceiling was going to derail the U.S., even if we solved the fiscal cliff, and the sequester lurked ominously no matter what deal was made. These would, of course, throw us off track and bring higher unemployment. 5. First-quarter earnings were around the corner, and they would be nothing to write home about, or maybe worse, particularly with the worldwide slowdown that Europe seems to have been mandating. That's a full head of bear steam coming into a year that was about to have its best first quarter in years and years. How was that possible? I think it's because the market has changed its coloration. It simply couldn't be scared any longer. For the people who were still in, they'd been hit over the head with these issues for so long that they had developed virtual helmets. Or if you want to get all Ulysses-like, they were strapped to the masts and they had heard all of these sirens before.