Peter Switzer Daily
No stopping the stock surge?
Another day and the rally rolls on for Wall Street with the Dow onto a new record close of 14,296.24 — that’s up 42.47 points or 0.3 per cent. Meanwhile the S&P 500 index is being lured to its all-time high close with only about 24 points to go before it beats its 2007 best close of 1565.
I don’t know what will stop this surge in stocks but something will come along and I like to recall the experts who were so confident back in 2009 that this market comeback was a fake.
Big call merchants
This one about the stocks rally in October 2009 comes from the guy who has been telling everyone that our house prices were set to tumble for the past few years, Jeremy Grantham: "This is the last hurrah," he observed. "A large rally is far more likely to prove a last hurrah... a codicil on the great bullishness we have had since the early 90s or, even in some respects, since the early 80s. The US market will drop below fair value, which is a 22 per cent decline (from the S&P 500 level of 1098 on October 19).”
Since that time the S&P 500 is up some 40 per cent. That’s a big miss.
Then there was Harry Dent out here last year scaring the pants off everyone with his dire predictions, which included a real estate crash for Australia and the Dow would go to 3000!
As an economist you just know these big call merchants are nothing but publicity-seekers as the difficulty of comprehending where a market can go rests on too many unknowns.
No I’m not going into a Rumsfeldian known knowns, etc — it stresses me out!
Stop, rewind, play
One day the music will stop and it could be when the Federal Reserve stops slipping $85 billion a month into the US economy and interest rates start to rise, but if the global economy is recovering then, well the music could be re-started and we could see stocks go higher until another crash comes along, like it always does.
Some smarties will get out before then and play it safe until the crash, where they will buy in again at low prices, then suffer years of wondering if they got it right. But time will be on their side if they stick to quality companies, and they will be proved right.
This is what happens when you play stocks.
On Wall Street
Helping stocks head higher is an improving US economy with most data pointing to a believable recovery. Overnight the Federal Reserve’s Beige Book confirmed this belief.
Also the latest private sector employment survey in the US showed a 198,000 jump in jobs, which was way over the 170,000 expected. Also, mortgage applications spiked dramatically.
Against that, the pace of the rally over the past few months makes me think a retracement is likely but not compulsory, so it’s a real gambler’s market right now.
When isn’t it? The only difference is the way you feel. Right now I think I’m on a great horse with good form and with a good chance of winning. It’s not like I have my last $100 on a long-shot in the last! That takes me back to January 2009 — they were stressful times, but it’s nice when you end up on a winner!
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Thursday, March 07, 2013blog comments powered by Disqus
Today on Switzer
Psst! Did you hear that interest rates could rise by 4%? The RBA boss thinks it's possible!
The share market has ended the week with a slight gain as investors remained unfazed by Russia’s incursion into Ukraine and drew comfort from local economic data.
The Australian dollar has lost some earlier gains but continues to perform strongly ahead of the release of US jobs data.
With the market reacting positively to Putin's u-turn, Marcel von Pfyffer from Arminius Capital joins Switzer TV for a look at the good news out of Europe and what it could mean for stocks in 2014.
Multinational tech giant Apple shifted an estimated $9 billion in sales to Ireland to avoid paying extra tax here in Australia. The fact it is legal doesn't make it right.
Last week, the music industry itself became the news regarding two deals – one that worked and the other that clearly didn’t.