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Everything Goes Up in December - Money Matters for 12/1/05
On the first day of the last month of 2005, everything went up. Everything. Up, and not just a little. Stock indices were higher by more than 1%, but also higher were gold, silver, oil, along with soybeans, corn, hogs and cattle.
In other words, the world just got more expensive and for no good reason, either.
The concept behind stocks rising in December is simple. Over the past 50 years, December has been the best month to own stocks, so everybody and their brothers, sisters, nieces, nephews, and probably grandma and grandpa got into the act today. Buy stocks! Never mind that the Nasdaq is at 4 1/2 year highs, the Dow is in permanent bull-heaven and the NYSE just keeps setting new record closing prices.
More than 400 stocks hit new 52-week highs today. Many of those hit highs yesterday or the day before or within the past few weeks. It's like betting on favorites. The returns may not be great, but they usually win. Never have there been so many suckers throwing their money down on obviously lousy bets. Unless these plungers of December 1 plan on being out of the market within the next week to 10 days, there's almost certain to be losers on today's trade.
Not to throw a wet blanket on Wall Street's December party, but how many times, when everybody seems to be in the know, is there a party at the end of the game? We saw it in 1999-2000, though many failed to understand that rampant speculation with loose money - exactly what we have today, as then - generally ends in disaster.
Well, it's December. Have another toddy, do a little shopping and enjoy it while it lasts. The December rally is here, albeit off to a very early start.
What may be confusing for some is how all asset classes rise at once. How do stocks go up, while gold and silver and platinum and even copper, usually regarded as safe havens in times of uncertainty, rise along with stocks? Somebody certainly is wrong. We'll likely find out who's on the right track and who's in the wrong within a short period of time. If stocks hold today's gains through the month or for even more than a few days, yours truly will be the most surprised person on the planet.
Happy Holidays.
Dow Jones: +106.70; 10,912.57 close
NYSE Advancers: 2543
Nasdaq Advancers: 2152
NYSE New Highs: 218
Nasdaq New Highs: 204
Gold: +7.60; 506.30 close
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