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Investors Already In Holiday Spirits - Money Matters for 11/23/05
Wall Street was alive today with the happy sounds of traders buying up stocks. This is especially good news as we head into the holiday season and last month of trading for the year.
The NYSE hit another new high today, based on the rejiggering of the index back in 2003, while the Nasdaq tacked on another 6 points to the 4 1/2 year highs hit yesterday. The Dow, the mother of all indexes, representing the 30 stocks most representative of the US economy, also added 40 points to close within 111 points of its 52-week high.
What's fueling the rally are a number of separate issues. First, the Board of Governors of the Federal Reserve continues to hint that interest rate increases are nearing an end, signifying that inflation is no longer viewed as a threat. (In reality, it never was. The Fed had to raise rates off the absurdly low 1% emergency rate left over from the dotcom bust and recession of 2002.)
Second, corporate profits have been relatively solid in the face of some turbulent times over the past year. Third, crude oil prices have eased and natural gas and home heating oil supplies are now viewed to be adequate for the upcoming winter.
On this last note, one can conjure up all kinds of conspiracy theories and tales of political intrigue about gas and oil prices and their unprecedented increases back in September. The simple fact is that US consumers are under the control of an oil cartel made up of the five largest suppliers - Royal Dutch Shell, BP America, ExxonMobil, ChevronTexaco and ConocoPhillips. Those five companies not long ago used to be nine, but they've consolidated and merged and they control the price of everything from gasoline to diesel, to natural gas, coal and heating oil.
But this past week, when a number of oil executives were caught red-handed lying to Congress, the word went out: cut back your prices or you're going to face more investigations, fines and maybe even jail time. It's no coincidence that prices have fallen along with President Bush's poll numbers, and the inverse is also true as regards the stock market. The president needs something to hang his hat upon and the economy is his last vestige of hope. He's getting all the help he needs from the oil and gas industries and stocks in general.
Some of you may scoff at the notion that investments are somehow tied to politics, but considering the close ties between big business and the federal government, it should come as no surprise that when a president is unpopular and important elections are on the horizon, big business will come riding in like the cavalry.
It's a lesson to be learned and something to always keep under your investment cap. Never discount the power of politics to shape the economy and investments. Looking ahead, as long as the president "stays the course" in Iraq, and investigations continue, expect investment professionals and stocks to behave as though they know nothing about it. The day the president is finally caught up in his self-created political mess and forced to resign (I make the odds of this happening at 3-1 before July), is the day to sell the majority your holdings. Keep a sharp eye on Washington over the next six to twelve months because since nobody dares speak, it means that politics are in play.
BTW: when I told you a couple of weeks ago to buy silver anywhere close to $7.50 an ounce, I wasn't kidding. Check the prices below and buy on any dip back under $8.00, if it ever does drop back. There's a coming shortage and the price may hit $10.00 by the end of next year.
Have a happy Thanksgiving!
Dow Jones: +44.66; 10,916.09 close
NYSE Advancers: 1958
Nasdaq Advancers: 1600
NYSE New Highs: 237
Nasdaq New Highs: 166
Gold: -0.60; 492.30 close
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