Who can blame the bulls? Let's look at what happened with the above five items. First, the tax code didn't change much at all. When it comes to income tax, 98% of the people in this nation of about 313 million don't pay any more now than they did last year. That's a phenomenal number of people who weren't impacted vs. the percent -- just about everyone -- who thought they would be. Spending had been shut down in this country because of the possibility that 98% of the people would pay much more.
More important, many rich people thought stocks would not be good assets with the tax-code changes. Dividend-paying stocks were sold aggressively. Many companies rushed dividends to their shareholders, putting tons of money into the wealthier peoples' pockets. It was a bonanza. That dividend money, already acclimated to stocks, flowed right back in. The whole worry -- every bit of bearishness about how tax rates would wreck dividend-paying stocks -- totally backfired. Then, as we now know, it triggered the most incredible rebound in dividend payers we have ever seen. In fact, the companies that were paying 5% are now yielding 4%, and the 4s are yielding 3s. That's been the trade of the first quarter -- the defining trade of the year so far -- and it is all on the backs of the bears.
Of course, the bears wouldn't stop. I remember saying at the beginning of the year that, now that taxes are unchanged, confidence can resume. Immediately I was hit with a tsunami of stories about the end of the tax holiday. I pointed out that the rate had only been a temporary dip anyway, and that it won't be a big deal. But the bears dug their paws in and made a real federal case out of it. Yet the last part of the rally of the previous quarter basically proved me right; this didn't matter at all. It was just another defeated bearish scenario that caused stocks to rally precisely because it was defeated.
Second, the Fed didn't switch its strategy because its actions are employment-based. Lots of the bears are conflated with the ideologues on this and can't accept what Chairman Ben Bernanke is doing. The bulls know it doesn't matter. Their goal is not to reason why. It's just to make money or die. These silly ideologues are fighting wars that don't matter in this turf. They are cavalry against the bulls' quad 50s and Spandaus. It's downright stupid to ever bring in political feelings about what Bernanke is going to do. Just accept that it will be the case until he retires.