Not Great, But Good Enough

US indices registered another positive session on Monday, even though the gains were marginal at best. Still, investors shrugged off weekend terrorism threat news and another big drop in China's markets.

Dow 13,676.32 +8.21; NASDAQ 2,618.29 +4.37; S&P 500 1,539.18 +2.84; NYSE Composite 10,064.45 +21.45

While investors in China's emerging market adjust to the realities of government intervention and an overheated environment, US shareholders are singing the praises of being old, established and considered ultra-safe.

As America slept, the Shanghai Composite divested itself to the tune of an 8.3% drop, the largest one-day decline since

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the 8.8% collapse in late February that triggered market selloffs throughout the global financial community. The Dow lost over 400 points then, but today's reaction was more of a yawn than a shriek.

Please send Alan Greenspan a note that he's no longer relevant.

Even though overall market gains were negligible, internal numbers were solid. Advancing issues outperformed losers by roughly a 5-4 margin. New highs trounced new lows, 545-69, an eye-popping differential.

As long as the A-D and High-Low lines remain so heavily positive, this market has no possibility of turning lower any time soon. Despite high gas prices and an inept, ineffectual federal government (that may be a good thing), stocks continue to be superb short term instruments.

One reason for the unprecedented long bull run may be summed up in three words: supply and demand. The heavy handed private capitalists have been snapping up shares and taking them private. At the same time, a slew of companies have been engaged in huge stock buy-back programs. While each of these activities indicates some degree of underappreciated value in US shares, they both dilute the number of shares available to the investing public.

Money has to go somewhere, and those shares previously invested in companies which have been taken private, gets re-invested elsewhere. Stock buy back programs takes more shares away from the investing public. According to Keynes, insufficient availability always results in higher prices, every time, and stocks are no different than apples or iPods.

With those two trends in place, expect public shares to continue rising for some time to come.

Checking commodities, those things which actually are in somewhat limited supply, oil gained another $1.13 to $66.21. Gold and silver barely budged. Grains and other foodstuffs were equally somnambulant.

Today was not a great day, but by any measure, it was a good one.

Dow, S&P, NYSE Composite Reach New Highs

Dow 13,668.11 Up 40.47 (0.30%) Nasdaq 2,613.92 Up 9.40 (0.36%) S&P 500 1,536.34 Up 5.72; NYSE Composite 10,042.60 +63.96

Advancers led decliners by a 2-1 margin. 641 new highs, 79 new lows.

Oil was up $1.07 to $65.08. Gold levitated $10.20 to $676.90 and silver was higher by 27 cents to $13.74.

The Bull continues to run. Have a nice weekend.

Recess or recession? Are we playing or being played by government numbers?

In April, the Commerce Dept. projected that first quarter GDP - the broadest measure of domestic economic activity - grew by 1.3%. As usual, the government number crunchers were wrong. Not only wrong, but wrong by more than 50% as the latest estimate was announced today at 0.6%. A couple more revisions and we'll officially be in recession. We may be already... probably are... but it doesn't really matter.

Leave it to the federal government to botch statistics in such a monumental manner, though it hardly manners to the average US citizen or investor. At the other end of the economic food chain, however, the big fish may not take the news so readily. Many investment decisions are based on economic data, and, at the very least, news of a recession looming is likely to send some of the weak-kneed types scrambling for the exits, and that's just fine. More profits for the brave.

Dow 13,627.64 -5.44; NASDAQ 2,604.47 +11.88; S&P 500 1,530.62 +0.39; NYSE Composite 9,978.63 +15.02

Based on today's trade, there was some effect from the figures, though it was muted. These macro-economic figures are tough to wrap one's mind around. First, nobody really has a handle on the real, raw data; second, there are rounding errors, adjustments for inflation, the foreign value of the dollar and other considerations in the nebulous world of economics to consider. The margin of error is probably around 1 1/2%, so when we get close to zero, it could be a positive or negative number.

Really, there's no good reason to get agitated over a decline in the GDP unless it's substantial, like 3 1/2% or more. Even then, recessions are natural and necessary cycles in robust Keynesian economies. Recessions are just the normal response to excesses - of which there have been plenty of late - as a way of balancing the books, so to speak.

Also, recessions are barely noticeable on the surface. Life goes on, some businesses do well while others have to tighten their belts a bit, but, unless the recession is long and deep, the economy in question usually emerges stronger for the experience.

We won't know for sure when we're in a recession for at least another 2-3 months, if at all. If the first quarter was actually contracting, so too would the second quarter have to be, as the most widely-accepted definition of a recession is two consecutive quarters of negative growth, or contraction. Fear not, even if we are already there, it's not going to hurt much.

Besides, annual GDP for the US is in the range of $13,000,000,000,000. That's 13 TRILLION Dollars. a 2% decline would be $26 billion. Believe me, nobody, especially you and I, is going to notice.

In any case, advancing issues were ahead of decliners by nearly a 3-2 margin. There were a preponderance of new highs: 568, to a mere 65 new lows.

The price of oil crept up another 52 cents to $64.01. Gold shot up $7.40 to $666.70. Silver was higher by 25 cents to $13.47, though both of the precious metals have been stuck in a narrow range for the past 14 months. That's why numismatists are called "collectors" and not "investors."

Stocks Soar; Dow, S&P Set New Records

It was business as usual for US equities, but today may prove to be especially important as the S&P 500 - regarded as the broadest measure of US corporate strength - made a new all-time high, eclipsing the previous record of 1,527.46, reached on March 24, 2000, just before the dotcom boom went bust.

Just in case anybody was still wondering about the effects of a China meltdown, a la Alan Greenspan's warning of last week, the AP reported earlier in the day:

The main Shanghai Composite Index tumbled 6.5 percent at 4,071.27 after hitting a record high on Tuesday. The Shenzhen Composite Index for China's smaller second market fell even more, closing down 7.2 percent at 1,199.45.

So, we can put that "all markets are related" canard to rest, along with the eminently detestable Mr. Greenspan and his worthless pronouncements.

Dow 13,633.08 +111.74; NASDAQ 2,592.59 +20.53; S&P 500 1,530.23 +12.12; NYSE Composite 9,863.61 +71.12

The Dow Industrials also set another closing high, though that's become old hat by now. With the S&P finally in record territory, the markets could actually break out from here, and that looks very likely in the near term.

The rationale continues to be healthy corporate profits, manageable macro-economics, low interest rates, an accommodative regulatory environment and lots of cash looking for places to invest. The beat goes on.

Not even the oil business could disrupt Wall Street's enthusiasm. As it was, oil was only 34 cents higher, closing at $63.49. Nobody noticed, especially on Wall St., where traders either take trains, limos or are making so much money they don't care.

Wall Street's gain was precious metals' loss. Gold sunk $4.10 to $659.30. Silver was unchanged at $13.22 the ounce.

Advancing issues were ahead of decliners by a 13-8 margin. There were 341 new highs, 95 new lows.

Another Nice NASDAQ Notion

Tech stocks are all the rage again, at least for today. The biggest gains were once again in the tech-heavy NASDAQ index, which was up better than a half percent on a day that the other indices barely budged.

Dow 13,521.34 +14.06; NASDAQ 2,572.06 +14.87; S&P 500 1,518.11 +2.38; NYSE Composite 9,892.49 +16.38

As mentioned here in previous posts, there are good reasons to like tech, especially internet or chip-related issues. Many businesses begun in the red-hot heyday of the 90's are now mature or maturing, solidifying their market positions and bringing down exceptional profits.

Tech fell somewhat out of favor after the dotcom bust of 2000 and it's yet to fully recover. The NASDAQ index is still only half way back from its all-time high, so there are undervalued companies with plenty of upside. Besides that, the blue chips are somewhat overbought and fund managers are looking to mid- and small-caps for more gains in the 2nd half of 2007.

The M&A hawks are also on the lookout for takeover or take private companies in tech. Many of the best have market caps of less than $30 billion. Tech takeovers could be de rigeur in the waning years of the 2000s decade.

Overall, advancing issues surpassed decliners by a nearly 2-1 margin on light volume. New highs checked in at 305, while there was nary a new low to be found - only 73 of them on the day.

The lack of volume was indicative of two matters: Summer and complacency. The nice weather is usually a harbinger of a prevailing slowdown in trading activity. There also was a paucity of economic and/or corporate news to digest, though the consumer confidence numbers released by the Conference Board were surprisingly upbeat and that set the tone for Tuesday.

And, shockingly, with the holiday driving done for now, the price of oil magically fell on the NY-MERC, as light, sweet crude dropped $1.90 to close at $63.30. Drivers should expect some - though not much - relief at the pump over the next three to four weeks. Of course, prices will go higher as the 4th of July holiday approaches due to (wink, wink) supply and demand, of course.

Gold and silver made modest gains but remain rangebound, depressed and somewhat overpriced.

It's a short work week, so expect the most volatility - if there is any at all - to occur on Wednesday and/or Thursday.