Bubbling the stock market... again?

[DemonD]

So in the 1990's, recessionary forces caused housing and real estate to be flat or negative in many areas for the greater part of the 90's, while stocks at the end of the 90's shot through the roof. As stocks started going down 00-02, the housing bubble was getting started. Already as has been noted many times over there were identifications of a housing bubble in 02. Now, as housing enters another down cycle, are we headed for another bubbling up of the stock markets?

http://www.marketwatch.com/news/stor...E3ACB7F56AF%7D

MARKET SNAPSHOT
Stocks rally on Asian rebound, earnings
Dow at new highs as Caterpillar, Honeywell rally; Google up 2% after earnings
By Nick Godt, MarketWatch
Last Update: 4:48 PM ET Apr 20, 2007

NEW YORK (MarketWatch) -- U.S. stocks rallied Friday, lifting the Dow Jones Industrial Average to another record high while the broader market scored strong weekly gains, following a rebound rally in Asian markets overnight and better-than-expected earnings from the likes of Caterpillar Inc. and Google Inc.
"The market is being helped by earnings coming in better than expected," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. "Everything is pointing to a slowing economy, but companies seem to be handling that quite well, either raising guidance or keeping it the same," he said.

The Dow Jones Industrial Average ($INDU :12,961.98, +153.35, +1.2% ) rallied 153 points to close at 12,961, a new record high. It earlier touched an intraday record high of 12,966. For the week, the Dow powered ahead with a 2.8% advance, marking its third straight week of gains.
Caterpillar (CAT :71.82, +3.20, +4.7% ) helped lift the blue-chip average, jumping 4.7%. The company's first-quarter net income fell below the year-earlier level, but still topped analysts' estimates. Caterpillar also raised its guidance. See full story.
Also in the Dow, Honeywell International Inc. (HON :
51.40, +2.34, +4.8% ) , rose 4.8%, while American Express Co. (AXP : 61.00, +2.05, +3.5% ) gained 3.5%, both after their earnings topped expectations.

...

The S&P 500 ($SPX : 1,484.35, +13.62, +0.9% ) rose 13 points to 1,484, reaching a 6-and-a-half-year high. For the week, the broad index advanced 2.2%.
The Nasdaq Composite (COMP : 2,526.39, +21.04, +0.8% ) jumped 21 points to 2,526, a six-year high. On the week, the technology-heavy index gained 1.4%.

Google (GOOG : 482.48, +10.83, +2.3% ) helped power the tech sector Friday, rising 2.3%. The internet search engine company reported a 69% jump in profit and earnings per share that exceeded Wall Street's expectations. See full story.

Trading volumes showed 1.9 billion shares changing hands on the New York Stock Exchange, and 2.2 billion on the Nasdaq stock market. Advancing issues topped decliners by 25 to 7 on the NYSE and by 20 to 9 on the Nasdaq.
Stocks had been advancing this week in spite of a negative advance/decline line, which suggested that "the market was vulnerable," said Elliot Spar, analyst at Ryan, Beck & Co.
Many investors who had made bets that stocks would fall were "forced to buy stocks to cover their short call positions," he said.

...

The Philadelphia Exchange Housing Sector Index rose 2%. Shares of home builder NVR Inc. (NVR : 797.00, +75.20, +10.4% ) ran up 10% after the company reported first-quarter earnings that fell from year-ago levels but were well above expectations.
"Everybody was concerned about earnings," said Deutsche Bank's Fitzpatrick. "But so far, there's no major impact from a slowing economy on earnings growth."
"But we're not out of the woods by any means," he said. Although investors have put the economy on the backburner during earnings season, "past next week, they'll start to look at economic data again, and it's largely pointing to a slowing economy."

Speaking about the economic outlook, Federal Reserve Board Gov. Frederic Mishkin said in a speech that while uncertainties surrounding the economic outlook have increased recently, he saw no reason to adjust the current interest-rate policy stance.

Once earnings season is over, investors will likely start to fret again about whether or not the Fed will be willing to cut interest rates to prevent a hard economic landing, said Fitzpatrick.
"This will remain a challenging environment until we get confirmation from the Fed that they're going to stimulate growth, because so far they've kept their foot on the brake."

Asia rallies back
Stock markets ended mixed Thursday after recovering from early losses, as investors looked past concerns about an overheating Chinese economy and focused on earnings from Merrill Lynch (MER : 92.02+1.91+2.12%), Bank of America (BAC : 51.04, +0.13, +0.3% ) and Merck & Co. (MRK : 51.49, +1.34, +2.7% ) , among others.

Overnight there were brisk recoveries on Asian exchanges, with the Shanghai Composite Index rallying 4.6% and the Hang Seng gaining 1.1%. Read more.
"The market was worried yesterday about a China sell-off, but China recovered today," said Peter Boockvar, equity strategist at Miller Tabak. "The market has been trending higher and the path of least resistance is higher," he said.
Speaking to a business group in New York, U.S. Treasury Secretary Henry Paulson said that China's growth and stability is "vital for all nations."
Stocks in motion
H&R Block Inc. (HRB :22.56, +0.73, +3.3% ) advanced more than 3%. The company agreed to sell its Option One Mortgage business, which has some subpime loans, to OOMC Acquisition Corp, a newly formed company affiliated with Cerberus Capital Management. H&R Block also said that it expects to report a loss for fiscal 2007. See full story.
Clear Channel Communications (CCU : 35.75, -0.21, -0.6% ) fell 0.6% after it agreed to sell its television station group to Providence Equity Partners for about $1.2 billion. See full story.
Chart of SLB
Schlumberger Ltd. (SLB : 75.23, +0.91, +1.2% ) also had earnings that exceeded analysts' projections. The stock recovered from early weakness gaining 1.2% Friday, continuing its surge since early March. See full story.
Other markets
The dollar rose slightly against other major currencies, recovering from a more than two-year low vs. the euro of $1.3636 reached overnight. "Sentiment remains favorable and a new all-time high near $1.3665 is awaited," said Marc Chandler of Brown Brothers Harriman. See Currencies.

Of course the adage of watching what one does, not what they say is what matters in terms of the fed "keeping the foot on the brake." (Yeah with loans still near 40 year lows they are really jamming down on the stopper there aren't they.)

But I'm just wondering. All I keep hearing is that M3 continues to grow and the macro analysts are saying china, us, japan, and europe are printing too much money. so if it's not going into housing, where is it going to go... stocks again? Besides gold I mean. Please for anyone responding do not analyze gold, as it is something we can all see as continually rising with real inflation and financial instability. The question here is that is 2007 equal to 1998 in terms of the stock market, and the possible creation of yet another bubble in the financial markets. As I remember correctly that was about the time the fed started printing using y2k as an excuse. In 02 it was the stock crash. Now will it be the housing crash as the impetus for something like a swinging bubble pendulum?)

[jk]

Re: Bubbling the stock market... again?

waiting for the bear, i think of kipling's


If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too:
If you can wait and not be tired by waiting...

unfortunately, i'm very tired by waiting, and fairly consumed by doubting, but waiting nonetheless.

[DemonD]

Re: Bubbling the stock market... again?

jk if i remember correctly there were also calls in 1998 on the tech bubble, and then the nasdaq ran up another what 130% or something?

I also know that stocks tend to go up in spring then "sell in may and go away" type thing. I've sold off a portion of my main stock positions but the part that I didn't sell has obviously continued to zoom higher. We all see all this crazy inflation, i'm just saying is all this money printing actually going to hold up the stock market? earnings have been pretty damn good for many companies even in the face of the housing bubble bursting and without all that cash out refi nonsense. Or maybe it's more of a lag that will show up in 2Q numbers in the summer? That's why it's a question and discussion, it's something that I'm looking at and going "hmmmm."

[jk]

Re: Bubbling the stock market... again?

demond, the interesting thing for me to note is that bad news doesn't matter. or anything bad is "company specific." amd is tanking, that means good things for intel's future? hardly. it means that there's overcapacity, bulging inventories, and odd items appearing on balance sheets in a lot of tech. bad news? means the bad news is out, time to buy. good news? time to buy. how do you know if stocks are rising? the market's open.

sorry for the rant, but i think it's crazy. sure, it could go up another huge percentage. as keynes said, the market can stay irrational etc etc. i'm just trying to stay solvent and not get hit badly when things go sour, and look to make some purchase at what i hope will be bargain levels.

i started another thread that didn't go very far, trying to raise the question of whether people think the market can hold up nominally, indefinitely. maybe it never will go down. nominally.

the "new highs" aren't real, even in terms of the official, highly manipulated, cpi, but it's party time at broad and wall, and who am i but a bystander thinking the party looks like a wild, raucous, fun time, but fraught, i still think, with risk.

[Tet]

Re: Bubbling the stock market... again?

jk if i remember correctly there were also calls in 1998 on the tech bubble, and then the nasdaq ran up another what 130% or something?

There is certainly not enough other people's money sitting in the market for the banksters to want to break that piggy bank open again. I think you break the piggy bank open here and the suckers don't come back and play anymore.

I also know that stocks tend to go up in spring then "sell in may and go away" type thing.

Looks like maybe a late May this year, remember you go back into the market in October and doing this last year you had to re-enter in August to catch the bounce. Looks like they've changed the months a bit.

I've sold off a portion of my main stock positions but the part that I didn't sell has obviously continued to zoom higher. We all see all this crazy inflation, i'm just saying is all this money printing actually going to hold up the stock market? earnings have been pretty damn good for many companies even in the face of the housing bubble bursting and without all that cash out refi nonsense. Or maybe it's more of a lag that will show up in 2Q numbers in the summer? That's why it's a question and discussion, it's something that I'm looking at and going "hmmmm."

I'm long two stocks, Qualcomm and I took a position in Dell about a month ago, not to happy with Dell but it's still up. I'm about 70% equity right now with the rest cash or equiv. What are your favorites right now if you don't mind me asking? Thanks.

[Finster]

Re: Bubbling the stock market... again?

jk if i remember correctly there were also calls in 1998 on the tech bubble, and then the nasdaq ran up another what 130% or something?

I also know that stocks tend to go up in spring then "sell in may and go away" type thing. I've sold off a portion of my main stock positions but the part that I didn't sell has obviously continued to zoom higher. We all see all this crazy inflation, i'm just saying is all this money printing actually going to hold up the stock market? earnings have been pretty damn good for many companies even in the face of the housing bubble bursting and without all that cash out refi nonsense. Or maybe it's more of a lag that will show up in 2Q numbers in the summer? That's why it's a question and discussion, it's something that I'm looking at and going "hmmmm."

The money printing isn't so much "holding up the stock market", as it is making it a flight-to-safety destination. The dollar is actually seen as being so risky people feel safer in stocks.

More significantly, the same money printing also means the stock market itself isn't nearly as high as it might seem at first glance. Sure, the published averages are mostly nearing or exceeding their 2000 bubble peaks, but there's been one heck of a lot of inflating passed under the bridge in the past seven years, too. In real terms, the stock market is far below where it was seven years ago.

The stock market is not in a bubble any more. It only looks that way when you price it in dollars. Try pricing in gold, euros, pounds, whatever, and you get a far different picture.

[DemonD]

Re: Bubbling the stock market... again?

The money printing isn't so much "holding up the stock market", as it is making it a flight-to-safety destination. The dollar is actually seen as being so risky people feel safer in stocks.

Excellent point. To a certain extent I'm taking the philosophy with a couple of my stocks that i will "never sell" because i believe this too.

I'm long two stocks, Qualcomm and I took a position in Dell about a month ago, not to happy with Dell but it's still up. I'm about 70% equity right now with the rest cash or equiv. What are your favorites right now if you don't mind me asking? Thanks.

I would say my favorite high-quality, dividend achieving stock that I have been tracking for some time in Johnson and Johnson (JNJ). I almost pulled the trigger on JNJ about a week ago, but I'm still holding in cash expecting a downturn in the entire market this summer. Anything at or below 60/share for JNJ is what I would consider very compelling value. I've tracked Dell and I just don't find their fundamentals compelling at the moment. Can't speak to qualcomm. The two other areas that I've been tracking heavily have been mining stocks (especially canadian based) and canadian oil companies. I am long Suncor at around 70/share (now above 80). There are a couple of other really good ones Encana (ECA) and Canadian Natural Resources (CNQ).

I also own Altria (MO), and am looking for a dip into the mid-60's to add to my position in my Roth IRA.

Oh, and recently I've looked into investing in water. A good one I've identified is Mueller Water Products, Inc (MWA). The only problem in investing in water is that most water industrial type things are locked up within bigger companies (like GE).

Incidentally I firmly believe that oil, cigarettes, water, and healthcare are great hedges against inflation or hyperinflation as all are necessities and to a lesser extent can be bartered on their own or even used as "currency", plus you get compound growth when you identify good companies.

[Tet]

Re: Bubbling the stock market... again?

Thanks, I'll add Johnson and Johnson, Altria & Mueller to my watchlist. That looked like quite the plunge Altria took the end of last month, what was that about? JNJ looks like it's launching off, looks a bit too late for me right now, but as you say at $60 it looks like a buy I'll keep an eye on it. The Toronto stuff I don't touch, they rig their market a little differently than we do and the US market is hard enough to keep up with.

[DemonD]

Re: Bubbling the stock market... again?

Tet, what happened with altria was on 4/2 MO spun off their majority stake in Kraft Foods. Every 1 share of MO ended up with .7 shares of KFT. As far as I can tell the actual cash dividend they distribute for MO has not changed, although the ex-dividend date was for the current quarter before KFT was spun off. In any case the loss in market cap was due to the spinning off of Kraft Foods. I'm actually looking to add to my position in my Roth, keeping fingers crossed it gets to about 66/share (at which point i can pick up 15 shares for the 1k I've got free in my Roth). There is a good chance that Phillip Morris and Phillip Morris International will be spun off from the main MO stock later this year.

Incidentally I could talk about stocks all day. I'm no Jim Cramer but for whatever reason I just love stocks. I'll even roll the dice on a small biotech. But oh the stories and ways to invest. I remember reading about how cigarettes are used as currency in many, many places, in some places more acceptable than gold or dollars. JNJ has an orthopedics division that would be the second largest orthopedics device maker in the world if it was it's own standalone company. Suncor is on both the toronto and new york stock exchanges, and their numbers indicate that they will be growing their oil reserves every year for the next 10 years. The fundamentals for Suncor and other canadian resource companies are extremely compelling (namely: growing energy reserves, oil from a STABLE country with little to no risk of terrorism or weather related events disrupting the oil, built in demand by the US with growing customer base in china, canadian currency rising against the dollar... oh the list goes on) Not many oil companies can realistically make that claim. To me it just piques my own interest to learn and discuss about all these things and make some money while doing so.

Meanwhile all this M&A and LBO stuff that's going on right now is making my stomach churn. I feel much better about MO divesting itself of KFT than of many of the big financial institutions and other companies acquiring and buying out all these other companies. I mean there have been rumblings of LBO's of Alcoa and Home Depot? Where does it end? Why not just LBO an entire country?

[Tet]

Re: Bubbling the stock market... again?

How about sending me a PM the next time you think you're going to pull the trigger on JNJ? Qualcomm is off the the races today and I think I'm going to have myself a glass of punch. After I have a glass of punch I always end up buying something else.

[spunky]

Re: Bubbling the stock market... again?

The money printing isn't so much "holding up the stock market", as it is making it a flight-to-safety destination. The dollar is actually seen as being so risky people feel safer in stocks.

More significantly, the same money printing also means the stock market itself isn't nearly as high as it might seem at first glance. Sure, the published averages are mostly nearing or exceeding their 2000 bubble peaks, but there's been one heck of a lot of inflating passed under the bridge in the past seven years, too. In real terms, the stock market is far below where it was seven years ago.

The stock market is not in a bubble any more. It only looks that way when you price it in dollars. Try pricing in gold, euros, pounds, whatever, and you get a far different picture.

Exactly.

The long slow decline of the bonar is good for the Dow.

[DemonD]

Re: Bubbling the stock market... again?

I will repeat the question:

Is the current rise in equities another stock bubble? Homebuilder index was up 3% today... with some of the most horrendous housing news in decades. And gold is down. Is this a new bubble (through the Fed pumping money into the stock market), market manipulation, or is it more a result of M3 continuing to grow with money no where else to invest, or is it simply Mr. Market being too optimistic? Earnings from a lot of companies have been continuing their upward charge - Apple, Google, Microsoft, even the banks.

Are we seeing the beginning of a repeat of 1998, where there was a stock bubble that kept going up for 1-2 more years?

IS THIS ANOTHER STOCK MARKET BUBBLE?

sorry for the caps i just really want to know everyone's opinion.

[Tet]

Re: Bubbling the stock market... again?

Not yet, I don't see the extreme P/E ratios. My bet would be it's not M3 growth but foreign d0llar holder repatriation. I see Softie's profits jumped 65%, now I'd have to think that's going to lift a few boats.

[metalman]

Re: Bubbling the stock market... again?

I will repeat the question:

Is the current rise in equities another stock bubble? Homebuilder index was up 3% today... with some of the most horrendous housing news in decades. And gold is down. Is this a new bubble (through the Fed pumping money into the stock market), market manipulation, or is it more a result of M3 continuing to grow with money no where else to invest, or is it simply Mr. Market being too optimistic? Earnings from a lot of companies have been continuing their upward charge - Apple, Google, Microsoft, even the banks.

Are we seeing the beginning of a repeat of 1998, where there was a stock bubble that kept going up for 1-2 more years?

IS THIS ANOTHER STOCK MARKET BUBBLE?

sorry for the caps i just really want to know everyone's opinion.

damn! wanted to be poster #1 today. anyway... yeh, a bubble within a bubble within a bubble, like a chinese doll. good luck finding the little nugget in the middle!

[Jim Nickerson]

Re: Bubbling the stock market... again?

My opinion is that I do not know what the markets are going to do or when?

One newsletter--The Chartist-- http://www.thechartist.com --to which I subscribe in todays edition 4/26/07 wrote

Yesterday’s price action was most impressive with the S&P midcaps, Russell 2000, Value Line Geometric, and Wilshire 5000 along with the Dow Industrials, Transports, and Utilities finishing in record high territory. The S&P 500 and NASDAQ composite recorded bull market highs. On the surface, it might seem like a runaway bull market with a great deal of speculative froth.
..

Thus far, the bulk of the gains have been fueled by institutional money. The public is not all that enthused. U.S. Stock Mutual Funds have had net redemptions for five consecutive weeks. The latest from AMG Data Services shows that the public pulled $3.3 billion out of domestic stock funds and pumped $4.8 billion into bond funds between April 4-18. Again it is not a runaway bull market and the high relative strength stocks that we prefer to invest in are lagging.

..

Compared to the final stages of the previous bull market, which took place during the first quarter of 2000, this bull market is actually quite subdued, which is a good indication

that it could stretch out for several more months despite the fact that from a time standpoint it is mature. The public has yet to embrace this bull market, and in essence, there is ample cash on the sidelines. The amount of cash from recent buyouts alone comes to a staggering $185 billion. On top of this, the recent buyout frenzy has reduced the supply of stock for sale.

4/25/07 Alan Newman http://www.decisionpoint.com/TAC/NEWMAN.html
at the bottom of his article his chart shows that total margin debt now is higher than it was at the top in 2000, and the mutual fund cash is lower. Based on the acceleration of margin debt for the last six months ending Feb. compared to the last six months preceding the top in 2000, he points out margin debt rose 58% then, but only 29% through end of Feb.

That suggests too me that a lot more froth could yet occur.

I'm not that good at remembering the finer points of history, but this market seems to me like 1987. It seems then that the media remained in disbelief til fall that the market just kept going up and up, then it stopped.
Actually it seems that only the bears are in disbelief, but perhaps the public, whoever that actually is, is yet to capitualate and join in the fun of all these new highs, except for the Nasdaq, SOX and maybe some others.