A messenger on Vancouver Island’s sun-splashed Long Beach recently came with the news that the ‘undertakers’ on Wall Street had been breathlessly pronouncing the death of a three-year-old bear and the dawning of a new bull market.

Probably a broker. Who else wears a silk tie on a beach and uses a Wall Street Journal as sunblock?

As for the bull and bear, unfortunately we may never know the truth.

Wall Street has yet to arrive at an official definition of a bull market or bear market and there is no universally accepted definition, which leaves the bulls to make up their own definitions.

The bulls have been raging about the Dow’s resurgence, an impressive 26.7-per-cent rally off the lows of last Oct. 9 (a 20-per-cent upswing is generally considered enough reason to send out an alert of a bull market).

The bears shrug it all off as a cyclical bull market within a secular bear market.

So the jury is out on whether the bull can muster enough strength to sustain its charge long term, particularly in light of the comedy of mixed signals reported almost on a daily basis over the state of the economy and outlook for earnings growth.

Bull markets are loosely defined as prolonged periods of generally rising prices.

In the spirit of Wall Street, where making things up is a favourite pastime, we have made up our own definition for a bull market – a period in which the savvy small-cap fund manager ceases to whistle while merrily unearthing bargain stocks, suddenly lapsing into a state of depression and resorting to irrational behaviour such as short-selling BW Technologies.

By this definition, the bear is alive and well, meaning that the game is still on for those sleuths who scour for potential 10-baggers that miss the radar screens of the big firms and celebrity analysts.

The small-cap gang continues to revel in the bear market, shooting out the lights and laughing all the way to the bank.

Wayne Deans of Deans Knight Management, the hottest of the small-cap gurus who has been consistently socking home runs in the Edge’s Pro’s 3 Stars column, was recently heard whistling at 6:30 in the morning in his Vancouver office. This is a man who has yet to notice the presence of the bear.

Calgary small-cap ace Martin Ferguson of Mawer Investment Management has also been on a roll of sorts and has had to be restrained from picking four stars.

Evan Spiropoulos, another Calgary small-cap guru, was recently observed turning cartwheels at Hesperian Capital Management over plastic decking and singing the praises of his top three picks (the portfolio manager’s giddiness may also have something to do with the fact the Norrep Fund was ranked last year by Maclean’s as Canada’s top small-cap fund based on a five-year compound annual return of 23.3 per cent).

The bulls have not made a very big impression with Spiropoulos, who won’t acknowledge a bull market until the major indices vault the all-time highs achieved in March of 2000.

For the Dow Jones, that would mean another 27-per-cent gain to reach the pinnacle of 11,722.

For the Nasdaq, even after its surge of 56 per cent over the past 10 months, it would mean a leap of 191 per cent.

Although Spiropoulos believes the economy is on the road to recovery, he also believes that that scenario is already priced into the market.

“Technically speaking, we’re absolutely in a bear market,” says Spiropoulos matter-of-factly. “You don’t end a bear market until you get to new highs. I think we’ll have years before we’ll see new highs in the major indices.

“I think we’re going to see a very choppy market because evaluations are still reasonably high in the general market, meaning the large caps. The growth, although getting better, is not adequate to justify many of these stocks. In fact, in the Nasdaq, I daresay, it justifies very few stocks. I don’t think you jump on the bandwagon and say, ‘OK, good times are back,’ because I don’t see it . . I think you’re still going to have to search for undiscovered value to make money in the marketplace.”

Companies such as CPI Plastics Group that make plastic decking (see Pro's 3 Stars for Spiropoulos’s top picks this week).

As long as plastic decking maintains its sex appeal, we’re staying in the bear camp.

Back o’ the line, you bulls!

* SAGE WORDS: “It’s often misleading to call something a ‘bull’ or a ‘bear’ market because people think you’ve diagnosed something when in fact all you’ve given it is a name. What they think it means is that it’s going to continue.”

– Robert Shiller, the Yale professor who predicted the bursting of the stock market bubble in his book, Irrational Exuberance.



HOT ALBERTA STOCK: COLLICUTT ENERGY SERVICES
COH-TSX $3.20
Up 70 cents (+28%) on 16,631 shares (for week ending Aug. 1).
Collicutt shares continue to gain ground as the Red Deer energy services outfit recovers from a nasty selloff, which pounded the stock down to $1.80. The shares are now within a quarter of the 52-week high, but remain a far cry from levels of three years ago when they traded at more than $10.



COLD ALBERTA STOCK: INTERNATIONAL UTILITY STRUCTURES
IUS-TSX 33.5 cents.
Down 11.5 cents (-25.5%) on 139,500 shares
(for week ending Aug. 1).
Stock in IUS was hammered from the opening bell after the Calgary-based utility structures company announced it will not be making a scheduled Aug. 1 semi-annual interest payment of $3.75 million US. After hitting the 25-cent mark soon after opening trading on Aug. 1, the stock did show some strength in bouncing back. IUS recently spiked to 65 cents on news of a contract.