By Duff McDonald
March 10, 2011

If you go by the strict definition of the word, yesterday marked the second anniversary of a bull market. You could have fooled me.

If you want to find a pessimist’s pessimist, look no further than the Tea Party. According to a recent poll, only 3% of Tea Partiers think a recovery has taken hold in the U.S. The rest, of course, think we’re all going to economic hell in a socialist hand basket.

On the one hand, I’m inclined to keep most of that 97% consigned to the place in my mind I reserve for the political fringe. On the other hand, the news that yesterday marked the second anniversary of a bull market got me thinking. If this is what a bull market feels like, maybe the entire system is broken. With a widening wealth gap, persistently high unemployment, and the prospect of another oil-led recession on hand, it seems, well, inappropriate to put on party hats and break out sparklers for the event. Maybe the answer really is Sarah Palin. (Just kidding.)

We can argue all day long (and we do) about the qualitative issues, but some things are inarguable. Such as:

–The stock market is up 95.6% from its March 9, 2009 low.

–We have seen six quarters of economic growth in this country.

–Job growth, while tepid, is also improving. Last month the US netted 192,000 new jobs.

–Corporate America reported record profits of $1.66 trillion in 2010.

By those measures, things are on the up-and-up. But consider a few more facts:

–The economy has been supported by unprecedented amounts of economic stimulus and an easy money policy — so-called QE2 — from the Fed. A weakened dollar hasn’t hurt either. While I’m not sure my mind has grasped all the relevant issues, I’m generally in support of stimulus at crucial junctures. But an optimal bull market is one that is not supported by a tidal wave of government cash.

–That 95.6% gain is off a low brought about by sheer investor terror. A gain is a gain, of course, and this is no dead cat bounce, but it seems germane to any discussion of the health of the stock market to remember that we’d all but left it for dead two years ago. Sure, it’s alive and out of the wheelchair, but it’s hardly back in marathon shape.

–A Bloomberg National poll released yesterday showed than only 1 in 7 Americans has faith that a lasting economic recovery has taken hold. A plurality says they’re worse off than they were two years ago.

–Oil prices are currently sitting at over $100 a barrel due all the chaos in the Middle East. Some commentators have argued that we’re getting too excited about the possible negative economic effects of the price spike. So discuss it calmly if you’d like. It’s still much worse for our economic prospects than would be $40 per barrel prices.

–Wal-Mart (WMT) announced this week that it would begin an aggressive rollout of smaller stores next week. If that’s not a sign of the economic apocalypse, I don’t know what is.

Don’t get me wrong. I believe both Warren Buffett and Jamie Dimon when they talk about the crucial assets we have in this country — our dynamism and entrepreneurialism. But that doesn’t mean our overleveraged way of living is just something we can consign to history without paying a far higher price than we have to date.

I spent the years between 1979 and 1984 living in Riyadh, Saudi Arabia. My father was an obstetrician, and he worked at the King Faisal Specialist Hospital, delivering the children of princesses. (Literally.) Like all doctors, he wasn’t much of an investor, and he got sucked into buying gold when it was around $800 an ounce. He got crushed, but luckily for us, he was making tax-free income, we were living in free housing, and the price of gas was so low that it almost felt like they were paying you to fill up your car. When he passed away a few years back, he had righted his retirement accounts enough by that time that my mother is pretty well off.

To tell you the truth, though, I always felt he’d been played for a sucker when he invested in gold. Gold? Come on, Dad. Well, here we are in 2011, and I own more gold in my retirement accounts than I ever thought I would. Call it a bull market if you want. I’m still pretty much on the sidelines.* If only Dad had hung on, he’d have made a killing.

*I was criticized at length for suggesting in a recent column that hedge funds had run out of good ideas and were all just piling into Apple (AAPL). If I was so smart, I was asked, why was I not retiring with a portfolio full of Apple shares? Touché, commenters. I have no criticism of a hedge fund manager who bought Apple stock and rode it all the way up to its current levels. I just wish we didn’t have to pay them 2-and-20 for the idea. But that’s just one man’s opinion.

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