Although foiled, the terrorist plot to blow up planes headed to America from Britain proved to be yet another unsettling moment for the market, even though it rose on the day

One of the country’s leading liquidity trackers, Charles Biderman, considers it practically a nonevent for Wall Street. “Terrorist events come and go; they simply don’t have a lasting effect and represent excellent buying opportunities,” he says.

More relevant right now, he tells me, is that the latest liquidity trends have a screaming message for investors: This is the time to buy stocks.

“We are wildly bullish,” Mr. Biderman says. His 16-year-old institutional advisory firm, Trim Tabs Investment Research of Santa Rosa, Calif., numbers among its clients 50 of the country’s largest hedge funds.

The bears argue that the economy is falling apart in tandem with a rise in inflation (in essence, a period of stagflation), but they’re dead wrong, he says. Taking sharp issue with the economic worry-warts, Mr. Biderman, a former Barron’s reporter, insists the government is losing sight of 2 million people — those who are self-employed, earn a good living working online, and don’t show up in payroll data or in figures from the Bureau of Economic Analysis on income or GDP.

“The economy is doing just fine globally, and America is leading it,” he says. “I wouldn’t be in a hurry to bury the economy, because as of now it’s a very lively corpse.”

In arguing his economic case, our liquidity tracker observes that income tax collections indicate take-home pay is currently growing 7% year over year. The economy, as we all know, is slowing from its first-half pace, but Mr. Biderman notes that it’s still growing faster than last year on a year-over-year basis.

Turning to the latest tidings on the liquidity front, he points out that corporate America is gobbling up stocks at an even more frantic pace than it did following the market’s 2002-03 crash spurred by the Internet debacle. Over the past three weeks, for example, corporate America, via announced share buybacks and cash acquisitions of public companies, acquired an estimated $147 billion worth of stock. This is the largest such stock purchase in a three-week period since late November of last year, when corporate America snapped up a record $99 billion of equities in three weeks.

Mr. Biderman views the substantial buying by corporate America — which has topped $10 billion a week in 15 of the past 17 weeks, sparked by hefty and burgeoning cash flow — as especially relevant, noting that if it saw a serious economic slowdown, it would be conserving cash, not spending it.

He also points to a huge amount of liquidity in public hands, an estimated $6.3 trillion held by individuals in short-term instruments (bank savings, money-market funds, and CDs). In comparison, he notes, individuals’ shortterm debt, notably credit card and installment debt, stands at only $2.2 trillion and is growing very slowly.

Yet another liquidity plus: the most positive readings in the relationship between insider buying and selling since March 2003.

As Mr. Biderman sees it, cash on the sidelines is enormous and growing rapidly. At some point, he says, “it will go into stocks and the market will roar.” As such, he sees the Dow, which closed yesterday at 11,124.37, climbing about 15% to 20% from current levels by yearend.

What about the Middle East conflict? Barring some dramatic change (such as the involvement of additional countries or the use of nuclear or chemical weapons), the war, he believes, will not bother the market.

I asked whether he had any final thoughts. His speedy response: “This is the wrong time to be a wimp.”

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WHERE’S THE RALLY? In Monday’s column, money manager Tom Postin, in a forecast he surely would like to forget, predicted a jump in the Dow of more than 100 points if the Fed were to pause in its credit-tightening at the following day’s meeting of the Federal Open Market Committee. Mr. Postin, a principal of Los Angeles-based P&W Partners, theorized that investors would view any such pause as an end to the current round of tightening. Well, the Fed did indeed pause at the meeting after a string of 17 consecutive hikes in the Fed funds rate, but the Dow not only didn’t go up, it actually fell nearly 46 points.

“Inflation is heating up more than I thought,” Mr. Postin says, in explaining the market’s shoddy response to the Fed’s action.He says that, in turn, is raising fears the Fed may not be done, which he says is pressuring the market and prevented a buoyant reaction to the pause. Likewise, any additional tightening, he says, could well prompt concern about an economic hard landing and possibly a recession. Still, given higher than expected inflation numbers, Mr. Postin sees the likelihood of one more rate hike of 25 basis points before yearend despite a slowing economy.

dandordan@aol.com