Monday, May 18, 2009

Who's Buying Bank Stocks?

Apparently, the very same banks that were bailed out by the TAXPAYERS over the last six months are now the hottest properties on the stock market. For those of you out there buying these broken-down businesses stuffed with toxic debt and run by managers who are part of a criminal syndicate, all the best.

To the rest of the investing crowd, there aren't a lot of good investments out there right now, since stocks have already made a 30% move off the lows experienced in March. So, how much higher can these pricey investments go? Remember, price-earnings ratios of 15-20 are for high-fliers, not run-of-the-mill companies, many of which are actually showing signs of slowing, rather than improving.

Today's big move was based on less than nothing. There were no revelations of fresh health for the US economy, which continues to sink further into a black hole of debt and job destruction. When a market watcher as astute as Bob Brinker, host of radio show "Money Talk," says that the US economy is a "fiscal train wreck" one can only assume that more trouble is dead ahead. The light at the end of the tunnel is not a sign of hope, but the oncoming engine of destruction known as quantitative easing and inflation.

Dow 8,504.08, +235.44 (2.85%)
NASDAQ 1,732.36, +52.22 (3.11%)
S&P 500 909.71, +26.83 (3.04%)
NYSE Composite 5,865.87. +202.98 (3.58%)

Advancing issues buried decliners, 5465-1096, a better than 5-1 ratio. Today was abnormal for many reasons, but surely one has to the the extreme disparity in the A-D line. Stocks were already near a recent peak, but this activity is just more piling on to a rally that should have run out of steam long ago. The market is being played higher by big money presently. As soon as enough small investors jump in, the money flow will reverse. New highs nearly surpassed new lows today, marking the closest margin between the two in many, many months. New lows continued to hold their advantage, as they have for 19 months, 68-57. Today's volume was rather squeamish, putting a somewhat questionable tone on the big advance. Were there an actual reason for stocks to be bid higher, volume would have been more pronounced.

NYSE Volume 1,423,339,000
NASDAQ Volume 2,002,612,000

Oil gained $2.69, to $59.03. Gold was lower by $3.20, to $918.50. Silver finished down 7 cents, to $13.76.

There's still a crowd talking about the economy "bottoming out" which has provided much of the fuel of recent sentiment. Actual evidence that the economy is improving is still rather difficult to find. There haven't been this many bulls roaming Wall Street since the area was a pasture. Beware you don't get trampled as they rush out at the next reality check.

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