Bears Miss Another Good Month

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Wow, what a month! Up almost 6 percent although almost every prognosticator said that a repeat of last year's strong January was impossible. Why must it be so astonishing that the market is strong? Well, the bears were right in one respect. It wasn't like last year; it was even better.

But why shouldn't it have been? Take a look at the last few data points in this great economy of ours.

First, the government reports on Friday that GNP grew north of 4 percent but inflation as measured by the deflator declined to less than 2 percent. Wasn't it just a few years ago that we thought that the U.S. couldn't grow more than 3 percent without igniting inflation? Well that's wrong.

Fed Chairman Greenspan even thinks our inflation numbers are overstated. He is implying that the economy could grow at 5 percent without inflation. That would be amazing, indeed antithetical to all conventional thinking just a half dozen years ago. Clearly we are a more productive nation that we thought possible.

Second, with fourth quarter earnings in we have learned that most companies are operating at much higher levels of profitability than we ever thought. Sure Intel and Microsoft are hitting the cover off the ball. But so are Merck and Philip Morris. Same with 3M and Texaco.

In fact, the domination of U.S. companies, once restricted to food, beverages and entertainment, now seems to have reached well beyond tech and aerospace, two industries reclaimed in the late 80s

Now we are seeing dominance in oil and oil services¿you can't drill for oil anywhere in the world without the U.S. taking a piece of the pie. We have seen a return to dominance of our precision instrument industries with companies like Honeywell, Sunstrand and Perkin Elmer reporting magnificent earnings.

In fact, the only place I see the Japanese beating us is with the Nintendo 64 bit games. Heck, they can have that.

Is it really that much of a wonder that the U.S. market keeps hitting all time highs? The quandary would be if the market were going down in the face of these earnings and economic backdrop, not advancing.

Can we have a repeat of last year's great investment horizon? As I said at the beginning of this year, and as I will say on Taking Stock tonight on CNBC, no, I don't expect a repeat. I expect an even better year. Tune me in and you'll see that I am an unrepentant bull.

Pick: Randy "MF Templar" Befumo's most recent work on Novell. Made a quick 30% from his incredibly cogent reasoning. Is he the brawn behind the Motley Fool? His stuff is terrific.

James Cramer is manager of a hedge fund and co-chairman of The Street. He has a position in Novell. While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to Jjcramerco@aol.com.

James Cramer is manager of a hedge fund and co-chairman of The Street. He has a position in Novell. While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to Jjcramerco@aol.com.