Thursday, December 6, 2007

Straight Up, Non-Stop Stock Buying

Since the ephemeral bottom of the market on November 26, the Dow has, like an old, single uncle gorging on multiple holiday repasts, put back on 876 points. In just eight short sessions, US blue chips have availed themselves an average of nearly 110 points per day.

What changed? Attitude, and little else.

While there were some remarkable productivity numbers thrown out on Wednesday (pretty much more fudged government numbers) and an early indication that November job growth was going to register as nothing short of spectacular, the market blithely overlooked November retail figures which showed a spotty and rather lackluster performance by some of the major participants.

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Instead, investors tripped over each other rushing to buy stocks, especially on Thursday, when the Bush administration announced its plan to help homeowners avoid foreclosure. The plan is fairly laughable, extending the payment period on the interest-only portion of option-ARM loans to five years, from the customary two. The plan merely delays the inevitable, allowing more time for people who shouldn't be living in overbuilt, expensive homes to remain in them.

But what the government plan really does is bail out the banks. They simply do not want all those toxic loans exploding all over the place. Bankers are obviously in a position in which they are willing to accept a little than lose a lot, and that's troubling. The weight of the sub-prime mess threatens the very lifeblood of the global financial system and the bankers have been scared to the point of renegotiation with what are basically nothing but deadbeat borrowers.

So, it's a little bit funny how investors react. It's almost like a self-fulfilling prophecy. If stocks are going up, everything must be A-OK, and they'll continue to go up. For the better part of the past two weeks, they have, and tomorrow's gently-massaged non-farms payroll report for November will indeed supply icing for the top of the cake. Or, if you so please, froth on the head of the elixir they're all drinking down at Wall St. and Broad.

Dow 13,619.89 +174.93; NASDAQ 2,709.03 +42.67; S&P 500 1,507.34 +22.33; NYSE Composite 10,030.15 +142.55

For the second straight session, advancing issue pummeled decliners, 4804-1513. New highs haven't yet gotten past new lows - an edge held by the lows since October 31 - but they're close. New lows carried the day, 260-214. With everything set up nicely for tomorrow's employment numbers, this indicator should turn over, vacillate for about a week, and then head back to dominance by the new lows.

As Christmas rallies go, this one is a little early, but don't be surprised if the Dow and other indices reach new highs within the month. January, however will be another story. The current uptrend is unsustainable, especially in light of the 4th quarter warnings already circulating from the Fed, individual companies and elsewhere.

While stocks were soaring again, the oil merchants figured to get in on the action, hoisting the price for a barrel of crude $2.74 to $90.23. Apparently, the oil futures traders figure that with all the extra money floating around this time of year, consumers might as well pay more for gas, home heating fuel, etc.

Gold gained $3.40 to $807.10. Silver added 17 cents to $14.63. Everything was up today. Doesn't that make you feel good? No need to feel any pain. It's the holiday season, after all. Deck the halls with ticker tape.

NYSE Volume 3,575,942,250
NASDAQ Volume 2,031,019,625

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