When we said that the stock market was turning in mid March of this year, cries of "pollyanna" rang out. When we said that second quarter earnings were going to be better than expected --much better--cries of "you've got to be kidding me" landed all around us.

I have no idea how high the stock market can go over the next year.

The answer to yesterday's question about whether better-than-expected earnings would lead to better-than-expected GDP is, "Yes." Thankfully, the deepest recession since the Great Depression may be coming to a close. Government data show that second quarter GDP fell by only 1%, less than the 1.5% consensus estimate.

However, all the news was not good. Two important pieces of bad news came in the form of 1) less than expected consumer spending, and 2) first quarter GDP was revised downward.

We said in an earlier blog that better-than-expected earnings combined with better-than-expected Gross Domestic Product (GDP) could be the catalyst for a new up leg for stocks.

Stocks got another lift this week from second quarter earnings surprises. In our June 29, blog we said that earnings for the second quarter would be better than expected. In that blog, we said that cost controls would be the driving force behind the better-than-expected earnings. It is now clear that cost controls at all levels and in all sizes of companies are winning the day and producing earnings surprise after earnings surprise.

In our June 29, blog we said that earnings for the second quarter would be better than expected. Our reason for taking that position is that three of the four portfolio managers at our firm have managed large businesses. In their roles as presidents or general managers of Health-care, Consumer, or Industrial companies they have seen first hand how powerful new management tools, such as Enterprise Resource Management (ERM), were giving them clearer pictures of revenue and expense trends.

Whatever your political persuasion, the truth is capitalistic principles that have served humanity well, are currently under attack in the halls of Congress. Yesterday's Wall Street Journal sounded the alarm that the highest tax bracket may soon rise 11%, from 35% to 46%, by the time the Democrats in Congress are done.

We said in a recent post that we thought that corporate earnings would lead the next up leg of a new bull market. It may be the height of optimism, and we are sure we will be scolded for it, but we believe that "less bad" earnings growth will be rewarded by Wall Street with an uptick in stock prices. We say less bad because earnings growth for the S&P 500 Index stocks is currently estimated to be down by nearly 30% from the second quarter of 2008.

Many people forward on to me articles on dividend investing. These articles cover the waterfront from writers opposed to dividends completely to those who believe companies should pay a stated amount of their earnings in dividends. I find that I agree with very few of the articles I see. In most cases, I find it is not a theoretical objection but a practical objection: I have tried it their way and found it didn't work for me.

The stock markets and many other markets, as well, appear to be waiting for new news to give them direction. Most investors are now looking for a very gradual uptick in the economy in the third quarter, as well as modestly better housing news, and fewer nerve wrenching headlines from the banking sector.

Yet, even though things are "less bad" now, few strategists are able to find many of the green shoots that Chairman Bernanke speaks of sprouting leaves.