Why Stocks Are Moving Higher

Why Stocks Are Moving Higher
By Jeff Clark
September 10, 2009

They ought to call it the "Black and Blue Book" instead.

The Fed released its Beige Book for August yesterday. The Beige Book contains anecdotal information on economic conditions derived from interviews with key business contacts, economists, and market experts. The report was less than stellar.

Consumer spending remains weak. Loan demand remains weak. Credit markets are tight. The labor market is weak. Wages are frozen in most industries. And the cost of raw materials is higher.

There was a slight uptick in real estate sales, much of that at the expense of lower housing prices. There was also a modest improvement in factory output, spurred in large part by the Cash for Clunkers program (which looks like it only cost taxpayers $81 billion – yippee).

None of this is news, really. We all know the economy stinks. We all know the only sectors that show any improvement are those where the government dumps billions or trillions of dollars. Yet the stock market continues its moonshot higher.

"Why?" you ask. Well, the best I can tell is stocks are moving higher because stocks are moving higher.

Everyone feels pressure to get in on this rally. It's not because stocks are a good deal right now and represent good values. It's not because growth in the economy or in corporate earnings justifies paying 20 times earnings or more for stocks.

People feel pressured to get in because stocks keep moving up. Everyone else is making money in the market. If you're the only one at the Labor Day barbecue not sharing stories of untold riches from investing in AIG, Fannie Mae, or Freddie Mac, it gets increasingly difficult to nod politely and compliment fellow partygoers on their investing acumen.

"Hold your nose and buy" is the theme of the day.

We've seen this movie before, however, and the ending is always the same. Florida real estate always appreciates... until it stops. Internet stocks always move higher... until they fall.

And the stock market always moves up... until it doesn't.

I don't know exactly when "doesn't" will finally occur. As Growth Stock Wire readers know, I thought it would have happened by now.

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Instead, stocks are approaching their highs for the year. Every attempt to sell off is greeted by willing buyers. And anyone foolish enough to short stocks is quickly forced to cover and take a loss. It all seems a bit backward, especially in the face of lackluster economic statistics.

History has proven many times that paying 20 times earnings to buy a stock is rarely a good idea, and I'm sure history will prove that point once again. For now, though, the Beige Book remains beige... and it's the bears who are black and blue.

Best regards and good trading,

Jeff Clark

Crucial economic number "near collapse with no end in sight"
Giant decline here says things aren't getting better.

Today's entertainment: Obama's original school speech
An excellent satire.

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And why it will make you rapidly lose weight...

•	S&P 500 hits 11-month high after a 53% surge since March... still 34% below October '07 peak.
•	Semiconductor rally continues... giants Broadcom, ASML, Marvell, and others make fresh highs.
•	Brazil ETF (EWZ) climbs 8.5% so far this month, retests 11-month highs.
•	Earnings today... National Semi.

	Last	Change	52-Wk
S&P 500	1030.66	+0.25%	-19.58%
Oil (USO)	37.54	+1.58%	-60.76%
Gold (GLD)	93.21	+0.45%	+14.57%
Silver (SLV)	14.07	-0.15%	+5.39%
U.S. Dollar	77.97	+0.49%	+4.96%
Euro	1.44	+0.90%	-2.30%
VIX	24.62	-1.32%	+24.60%
HUI	359.64	+1.91%	+3.79%
10-Year Yield	3.46%	0.02	-0.28

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Company	Sym	Industry
ON Semi	ONNN	semiconductors
Advantest	ATE	semiconductors
Micron Tech	MU	semiconductors
Shire	SHPGY	pharma
Sterlite Industries	SLT	copper mining
Kohl's	KSS	department stores
Natl Australia Bank	NABZY	bank
Ashland	ASH	chemicals
Watson Pharma	WPI	pharma
Red Hat	RHT	systems software
Priceline	PCLN	online travel
ConAgra Foods	CAG	packaged foods
ASML	ASML	semiconductors
Swisscom	SCMWY	telecom
Telefonica	TEF	telecom
Inverness Medical	IMA	medical devices
Alexion Pharma	ALXN	pharma
Tata Motors	TTM	Indian autos
Seagate	STX	data storage
United Micro	UMC	semiconductors
Starbucks	SBUX	coffee
Infosys	INFY	business software
F5 Networks	FFIV	networks
Virgin Media	VMED	TV programming
Ultrapar Holdings	UGP	gas distribution
SKF	SKFRY	heavy equipment
Annaly	NLY	virtual bank
Newcrest Mining	NCMGF	copper mining
Wipro	WIT	outsourcing
Apple	AAPL	computers
Broadridge	BR	business services
Makita	MKTAY	power tools
Skanska	SKSBF	construction
Discovery Holding	DISCA	TV programming
Marvell Tech	MRVL	semiconductors
Broadcom	BRCM	semiconductors
Telecom Italia	TI	telecom
Concho	CXO	oil & gas drilling
Ivanhoe Mines	IVN	metals mining
Comp Brasileira	CBD	grocery stores
NVIDIA	NVDA	semiconductors
NIDEC	NJ	electrical equip
Tullow Oil	TUWLF	oil & gas drilling
EMC	EMC	data storage
Macrovision	ROVI	graphics software
Advanced Semi	ASX	semiconductors
Amerisource	ABC	pharma
Vivo Part	VIV	wireless telecom
Cognizant	CTSH	outsourcing
Gap	GPS	clothing stores
Novo-Nordisk	NVO	pharma

Company	Sym	Industry
Phlo	PHCP	Wine

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