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zugzwang

Dow Joke 15,000; 16,000 By Friday?

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Got to hand it to Benny the Bubble, he's even managed to eclipse Greenie in the irrational exuberance stakes.

http://moneymorning....6000-by-friday/

  • By Shah Gilani, Capital Wave Strategist, Money Morning
  • May 8, 2013

The Dow Jones Industrial Average, the world's most famous stock index benchmark, easily smashed through 15,000 yesterday, reaching a new record high of 15,056.20. Excited stock market bulls think the Dow's march to 16,000 won't take nearly as long.

They've got good reason to think that.

While it took the Dow seven years and five months to go from 11,000 on May 3, 1999 to 12,000 on October 19, 2006; it took only six months to then go from 12,000 to 13,000 on April 25, 2007; and only three months to jump another 1,000 points to over 14,000 on July 17, 2007.

It's taken the Dow four years and just over nine months to decisively rise above 15,000.

What's even more remarkable than the Dow possibly making it to 16,000 before long, is that the Dow had sunk to 6,547.05 on March 9, 2009. It's risen 8,509.15 points in only three years and two months.

What's behind the market reaching this milestone, and will it be easy to add another few thousand points in the months ahead?

A Harbinger of What?

The short answer is: don't bet against it. But, don't bet the house on it, either.

First, here are two absolute simple basics why the average can go a lot higher.

Number one: There are more buyers than sellers.

Waves of capital have been flooding back into stocks. According to the Investment Company Institute, which surveys at least 95% of all U.S. domiciled mutual fund families, year-to-date (ending April 3, 2013) equity fund flow trends are the best in five years.

The domestic stock category alone took in over $21 billion through early April. For the week ending Wednesday, April 24, 2013 estimated inflows to long-term mutual funds were $8.42 billion.

Hybrid funds that invest in stocks and fixed income securities had estimated inflows of $1.36 billion. And surprisingly, amid the rising stock market propelled higher by inflows, bonds rose alongside stocks with bond funds seeing estimated inflows of $5.76 billion over the same one-week period.

Number two: There are fewer companies to buy.

According to Wilshire Associates, keepers of the Wilshire 5000 broad-based stock index, there were 6,639 U.S.-based operating companies listed on U.S. exchanges in the year 2000. There were 4,989 in 2004; 4,539 in 2008; and only 3,687 in 2012.

For perspective, there were 3,069 in February1971 and a high of 7,562 in July 1998.

Leveraged buyouts, mergers and acquisitions, companies being delisted and a dearth of initial public offerings have reduced the number of companies available to invest in.

While big companies have gotten exceedingly bigger and float more shares, fewer companies traded on U.S. exchanges makes diversifying harder. At the same time, bigger and bigger institutional money managers seek out the biggest companies with the most shares outstanding to invest in, so they have enough liquidity getting in as they hope to have when they want to sell shares.

From the so-called 30,000 foot-high vantage point, more money chasing fewer companies is a respectable recipe for a rising stock market.

There's plenty more ammunition out there. The Great Rotation, the dumping of low-yielding bonds and their rush into higher dividend-paying equities with the potential for capital appreciation hasn't even begun yet.

There are trillions of dollars parked in bonds, that if moved into equities could make 16,000 happen in the blink of an eye, and 17,000 and higher all too easy to accomplish.

Edited by zugzwang

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Here's how the stock market works.

There are maybe half-a-dozen major players. They buy shares and bid the market up. Joe Public piles in, desperate not to miss the boat. The major players suddenly sell off 20% of their shares. This spooks the market and everybody else scrambles to sell. The market falls by 50%. The major players start buying again.

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How long can they prop it up with funny money?

Trouble is booming like this is going to attract savings which aren't making anything. It would appear Bernanke is laying the foundations for what happened in the 29 crash.

The Dow I think will go a lot higher yet!

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Here's how the stock market works.

There are maybe half-a-dozen major players. They buy shares and bid the market up. Joe Public piles in, desperate not to miss the boat. The major players suddenly sell off 20% of their shares. This spooks the market and everybody else scrambles to sell. The market falls by 50%. The major players start buying again.

I am no expert but my gut feeling is that 'they' have been trying to lure in Joe Public for about 15 to 18 months but Joe Public was just not buying it.

So I think they went for a crack-up parabolic boom this year and used the postponement of the sequestor in the US to start the parabolic rise - so we had 6 to 8 weeks of rapid rises in January and February, then seemingly a pause until the past couple of weeks... and then the surge appears to be about to continue...

What to do now? I hear more and more people talking about buying stocks so, if you believe this is a conspiracy, then it appears to have finally begun to work.

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I am no expert but my gut feeling is that 'they' have been trying to lure in Joe Public for about 15 to 18 months but Joe Public was just not buying it.

So I think they went for a crack-up parabolic boom this year and used the postponement of the sequestor in the US to start the parabolic rise - so we had 6 to 8 weeks of rapid rises in January and February, then seemingly a pause until the past couple of weeks... and then the surge appears to be about to continue...

What to do now? I hear more and more people talking about buying stocks so, if you believe this is a conspiracy, then it appears to have finally begun to work.

And yet I read today on a reputable bb on stocks that none of this has tempted in the 'retail investor'.

FTSE 800 points higher in a years time. :ph34r:

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I am no expert but my gut feeling is that 'they' have been trying to lure in Joe Public for about 15 to 18 months but Joe Public was just not buying it.

This Joe Public's been in it since 2007 and has done pretty well in terms of paper uncrystallised gains.

Is a crash coming? Who knows. I like to think that the divis will keep flowing even if the capital appreciation evaporates along with QE. Not that I sense much eagerness for tighter monetary policy from any central bank on the planet.

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Do you have a link?

Well, total ISA investments fell again in the 2012/13 tax year, making that an unbroken five year trend of decline.

That's pretty strong evidence that, at least as far as the UK is concerned, Joe Public isn't really that involved in the current stock market boom.

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Well, total ISA investments fell again in the 2012/13 tax year, making that an unbroken five year trend of decline.

That's pretty strong evidence that, at least as far as the UK is concerned, Joe Public isn't really that involved in the current stock market boom.

Which is what I am reading about both on this side of the Atlantic and the other side - very much a banker generated crack up boom for the banksters.

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Which is what I am reading about both on this side of the Atlantic and the other side - very much a banker generated crack up boom for the banksters.

Just the other day Buffett feigned a mote of sympathy for those left behind, while heaping fulsome praise on Bernanke, Dimon etc. He also took time out to encourage everyone to buy stocks while they're still cheap... which suggests to me that the Big Boys are in the distribution phase and looking to offload their shit into the retail channels prior to getting short.

Six months then before we top and drop?

.

Edited by zugzwang

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Very different equity markets here and in US, don't forget that.

I was doing some surfing overnight and came across a Bernanke Fed comment from around 21st of March - he was asked about how high the DOW was and responded that he did not think it was high when you took into account inflation.

He went on to say something about the stock market not being his concern as he was focused on the US economy.

http://www.theglobeandmail.com/globe-investor/inside-the-market/bull-fodder-bernanke-not-impressed-by-dows-record-highs/article10011407/

It is an interesting question, because the Fed’s stimulus policies of ultra-low interest rates and open-ended asset purchases are widely seen as major contributors to the four-year-old bull market. The end of Fed stimulus is widely feared.

But Mr. Bernanke gives a surprisingly bullish response (via The Wall Street Journal’s live blog on the press conference): “We’re not targeting asset prices. We’re not measuring success in terms of the stock market.”

Wow. Previous reports have suggested that Fed officials have indeed seen the rising stock market as a sign of a successful reaction to its monetary policies.

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I was doing some surfing overnight and came across a Bernanke Fed comment from around 21st of March - he was asked about how high the DOW was and responded that he did not think it was high when you took into account inflation.

He went on to say something about the stock market not being his concern as he was focused on the US economy.

http://www.theglobeandmail.com/globe-investor/inside-the-market/bull-fodder-bernanke-not-impressed-by-dows-record-highs/article10011407/

While on property, gold and other things (EU break-up possible) I am as bearish as the next man, I think some on HPC (not you TMT) make a false extrapolation from other classes to stocks. Stocks represent real wealth creation.

the market is discounting, and will further discount, the stronger growth that is expected in 2014+ so it isn not illogical to think the DOW could go a lot higher.

Now, unless you believe that a depression with no growth at all is going to be sustained beyond 2015 (unlikely - we'd have serious unrest everywhere by then), then it makes some sense to drip in to equities.

Obviously it's much more complicated than that, but you can understand the logic of equity bulls. (none of this is my exact view - just what I glean from the various things I read).

One bit caveat - I follow UK markets, not the US, so my thinking is much more focussed here. Again, fundamentals are much better for UK stocks anyway for numerous reasons.

Final thought - bull markets usually begin when no one thinks we are in a bull market.

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I was doing some surfing overnight and came across a Bernanke Fed comment from around 21st of March - he was asked about how high the DOW was and responded that he did not think it was high when you took into account inflation.

He went on to say something about the stock market not being his concern as he was focused on the US economy.

http://www.theglobea...rticle10011407/

Hmmm...he must have a very poor memory then - "Bernanke Admits Targeting Stock Prices": http://globaleconomi...ock-prices.html

Edited by mikthe20

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It's the new gold!

DOW up 30% since August 11 (15,000/11,500 approx.), gold down 24% (1460/1920). Even without dividends a potential 71% differential of wealth for the clued up that switched (130/76).

Edited by crashmonitor

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While on property, gold and other things (EU break-up possible) I am as bearish as the next man, I think some on HPC (not you TMT) make a false extrapolation from other classes to stocks. Stocks represent real wealth creation.

the market is discounting, and will further discount, the stronger growth that is expected in 2014+ so it isn not illogical to think the DOW could go a lot higher.

Now, unless you believe that a depression with no growth at all is going to be sustained beyond 2015 (unlikely - we'd have serious unrest everywhere by then), then it makes some sense to drip in to equities.

Obviously it's much more complicated than that, but you can understand the logic of equity bulls. (none of this is my exact view - just what I glean from the various things I read).

One bit caveat - I follow UK markets, not the US, so my thinking is much more focussed here. Again, fundamentals are much better for UK stocks anyway for numerous reasons.

Final thought - bull markets usually begin when no one thinks we are in a bull market.

I think what people find disconcerting now is the rapid and sudden rise in shares since January 1st - with very little down days. I think this week was a record in the US for how many days the DOW has risen without staying flat or going down.

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That long?

The indicators I use are all pointing higher. Bernanke may have achieved the stock market bubble he's been trying to engineer since 2010 but the underlying economy is still a basket case. The wealth effect he hoped would come from rising equities looks as unlikely as it ever did - too few Americans have skin in that game. The only thing that is guaranteed to increase consumption is another housing bubble. Ergo, he'll keep printing until he gets one. Another few months should do it.

“…higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

November, 2010.

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Just the other day Buffett feigned a mote of sympathy for those left behind, while heaping fulsome praise on Bernanke, Dimon etc. He also took time out to encourage everyone to buy stocks while they're still cheap... which suggests to me that the Big Boys are in the distribution phase and looking to offload their shit into the retail channels prior to getting short.

Six months then before we top and drop?

.

And if there are no chumps to buy this highly valued stocked what then?

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“…higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

November, 2010.

At this point I want to post the Groucho Marx I'm sure he said something of along the lines of I've made several thousands dollars today and I've done nothing.

"Some of the people I know lost millions. I was luckier. All I lost was two hundred and forty thousand dollars.... I would have lost more but that was all the money I had."

Although I have found this one from him.

http://www.awesomestories.com/assets/stock-market-crash-of-1929-part-3

Paul Warburg - in March of 1929 - worried that a collapse of the market could lead to a serious national problem. He even used the word "depression" which could sweep across the whole country. Most people thought he was off-the-mark. Some folks even "shouted him down." No one wanted to hear bad news when everything was going so well.

When people - like Groucho Marx - questioned how prices could just keep going higher, they were told that America was now part of "a global market."

Some speculators - like Joseph Kennedy (the future President's father) - thought it was probably time to get out "when the local shoe-shine boy knows as much about the stock market" as he did.

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http://badassdigest.com/2010/12/27/the-badass-hall-of-fame-groucho-marx/

But 1929 would also be a tough year. When Animal Crackers finished on Broadway the Brothers prepared to take it on the road; just before they left Minnie suffered a stroke and died. A week after her funeral they were in Boston, playing the show. And then the stock market crash wiped Groucho out. “I was a wealthy man on the eighteenth hole of a golf course,” he later said. “By the time I got to the club house I was destitute.” It was especially bitter for Groucho that he, who had been so frugal, lost everything, leaving him in the same state as Chico, who had frittered away every dime he had ever made. At least the gambling, whoring brother had enjoyed his money.

The crash almost finished Groucho completely. The show was still touring, and he was adding all sorts of current events jabs into his dialog, but he was endlessly depressed. One night he refused to go on at all; Harry Ruby, who had co-written the show, threatened to play Captain Spaulding himself. That spurred Groucho into action. “You win,” he said. “No audience deserves to look at you for a whole evening.”

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  • 277 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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