Thursday, March 26, 2009

Unchecked Greed Reigns Free

If you thought the 2 1/2-week-long rally had run out of gas - like yours truly - you were proven wrong on Thursday. The Masters of the Universe were at their level best once again, goosing stock positions throughout the day, but particularly in the final hour (just like yesterday, and many days before), when stocks added mightily to their already solid gains.

The Dow jumped nearly 100 points in the last hour, while the NASDAQ, which outperformed all other indices by a huge margin, added 28 additional points as the session drew to a close. It is apparent to any outside observer that greed has trumped fear over the short term. The Dow Jones Industrials have now climbed 1377 points since March 9, a span of 13 sessions.

The economic news of the day was pretty much in line with expectations. Unemployment roles hit a new record high, with another 652,000 Americans adding their names to the roles of the jobless. Final GDP figures for the 4th quarter of 2008 came in at -6.3%, better than the -6.6% some had expected. A number of companies reported better-than-expected earnings, Best Buy and Texas Instruments among them, though investors were snatching up shares of just abut anything that had a price attached to it, in a mad scramble to jump on the equity bandwagon.

If ever there was a textbook case for an overbought bear market rally, this surely is it, and while there may be no perceptible end in sight, the 8000 level, at which there is substantial resistance, is already within shouting distance. It should be pointed out, however, that this market knows nothing of support and resistance, commonly disregarding any resistance on the way up. The path back down ought to be particularly brutal, now that 90% of the public is convinced the worst is behind us, since there are there have been numerous gap-ups at various opens, and, as any chartist well knows, gaps always get filled.

But that's a lesson for another day. For now, any hint of the financial crisis, liquidity squeeze, deflationary spiral or housing crunch has given way to chants of "go, baby, go."

Dow 7,924.56, +174.75 (2.25%)
NASDAQ 1,587.00, +58.05 (3.80%)
S&P 500 832.86, +18.98 (2.33%)
NYSE Composite 5,230.53, +103.53 (2.02%)

Market internals were as unsurprising as the headline numbers. Advancing issues outnumbered decliners, 5180-1675, though new lows continued ahead of new highs, 117-36, though the numbers are closing ranks. Volume was very high once more, especially on the NASDAQ, which recorded one of the highest volume days of the year.

NYSE Volume 1,792,579,000
NASDAQ Volume 2,594,485,000

Crude oil continued to rise, up $1.57, to $54.34. Gold gained $4.20, to $942.20, while silver tagged along with a gain of 18 cents, to $13.62.

Noting the gains in stocks, as well as most commodities, it seems that throwing trillions of dollars at the markets in all manner of bailout, breakout, cram-down and stimuli, seems to be working. The economy is reflating at an incredible rate, so much so that the Fed should consider raising interest rates off their absurdly low emergency levels. Of course, they won't, until the American landscape is littered with currency.

The precious metals now appear to be even better investments than ever. With all asset classes rising in price, rather than an orderly deflation which would have occurred naturally, we will now have even more mal-valued investments in equities especially, backed by a currency that is losing value faster than a prostitute sheds her chastity.

People's 401k's ought to look much better by the end of the month. The S&P 500 has gained nearly 25% in the past 2 1/2 weeks, though all that extra loot in one's pension is surely going to be eaten up by the ravishes of taxation and inflation. Welcome to the new normal. You earn, you pay, you remain under the thumb. Enjoy it while you can.

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