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Why Stocks Are Moving Higher

By Jeff Clark
Thursday, September 10, 2009

They ought to call it the "Black and Blue Book" instead.
 
The Fed released its Beige Book for August yesterday. The Beige Book contains anecdotal information on economic conditions derived from interviews with key business contacts, economists, and market experts. The report was less than stellar.
 
Consumer spending remains weak. Loan demand remains weak. Credit markets are tight. The labor market is weak. Wages are frozen in most industries. And the cost of raw materials is higher.
 
There was a slight uptick in real estate sales, much of that at the expense of lower housing prices. There was also a modest improvement in factory output, spurred in large part by the Cash for Clunkers program (which looks like it only cost taxpayers $81 billion – yippee).
 
None of this is news, really. We all know the economy stinks. We all know the only sectors that show any improvement are those where the government dumps billions or trillions of dollars. Yet the stock market continues its moonshot higher.
 
"Why?" you ask. Well, the best I can tell is stocks are moving higher because stocks are moving higher.
 
Everyone feels pressure to get in on this rally. It's not because stocks are a good deal right now and represent good values. It's not because growth in the economy or in corporate earnings justifies paying 20 times earnings or more for stocks.
 
People feel pressured to get in because stocks keep moving up. Everyone else is making money in the market. If you're the only one at the Labor Day barbecue not sharing stories of untold riches from investing in AIG, Fannie Mae, or Freddie Mac, it gets increasingly difficult to nod politely and compliment fellow partygoers on their investing acumen.
 
"Hold your nose and buy" is the theme of the day.
 
We've seen this movie before, however, and the ending is always the same. Florida real estate always appreciates... until it stops. Internet stocks always move higher... until they fall.
 
And the stock market always moves up... until it doesn't.
 
I don't know exactly when "doesn't" will finally occur. As Growth Stock Wire readers know, I thought it would have happened by now.
 
Instead, stocks are approaching their highs for the year. Every attempt to sell off is greeted by willing buyers. And anyone foolish enough to short stocks is quickly forced to cover and take a loss. It all seems a bit backward, especially in the face of lackluster economic statistics.
 
History has proven many times that paying 20 times earnings to buy a stock is rarely a good idea, and I'm sure history will prove that point once again. For now, though, the Beige Book remains beige... and it's the bears who are black and blue.
 
Best regards and good trading,
 
Jeff Clark




In The Daily Crux
Market Notes
S&P 500 hits 11-month high after a 53% surge since March... still 34% below October '07 peak.
 
Semiconductor rally continues... giants Broadcom, ASML, Marvell, and others make fresh highs.
 
Brazil ETF (EWZ) climbs 8.5% so far this month, retests 11-month highs.
 
Earnings today... National Semi.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%