|Dow||-30.89 to 17,067.56|
|S&P 500||-1.09 to 2,002.28|
|Nasdaq||+17.92 to 4,598.19|
|10-YR Yield||+0.08 to 2.42%|
|Gold||-$21.70 to $1,265.70|
|Crude Oil||-$2.80 to $93.16|
Morgan Stanley threw down the gauntlet on the stock market today. Just days after the Standard & Poor’s 500 Index hit 2,000 for the first time ever, the Wall Street firm’s chief equity strategist, Adam Parker, and economist Ellen Zentner said the benchmark index will hit 3,000 next!
A further rise of 50 percent? Really? That’s a pretty bold call considering the S&P 500 has already tripled from its low of 667 in March 2009 (even though they qualify that target by saying we might not see it until 2020).
What’s more, it comes just days after other experts went on CNBC and warned of a whopping plunge of up to 60 percent in stocks. That would send the S&P 500 to the 1,000 level and beyond – as low as 800!
The bulls at Morgan Stanley say we can count on an improving economy and lower levels of household and corporate debt to drive stocks higher. They believe we are only halfway through the current expansion.
The bears CNBC talked to say that’s a bunch of baloney! Tice Capital President David Tice said the loss of confidence in central bankers will lead to a “period of extreme turmoil.” He was joined by Peak Theories Research founder Abigail Doolittle, whose technical indicators are warning of a crash of 50-60 percent.
Frankly, you couldn’t get a more diametrically opposed view of where the next 1,000 points will come from. So what’s my take?
Well, back near the peak of the housing and credit market bubbles in 2005-07, my warning signs were going off all over the place. That prompted me to urge investors to get the heck out of vulnerable stocks, real estate investments and more. That was followed by one of the biggest market collapses in modern day history.
“I’d say the conditions for S&P 1,000 just aren’t out there.”
But the biggest risk these days looks to be the bond market. Bonds are the wildly overvalued asset class – just like tech stocks were in 1999-2000 and real estate was in 2004-05. They’ve been inflated beyond belief thanks to ridiculously easy monetary policy the world over.
On the other hand, select stocks … with strong Weiss Ratings … in industries experiencing their own private bull markets … and with less exposure to weak foreign markets like Europe … look just fine to me. Heck, my favorite energy stocks and MLPs … my favorite health-care stocks… my favorite aerospace stocks … and others are absolutely killing it.
If I absolutely had to choose a side, I’d say the conditions for S&P 1,000 just aren’t out there … yet. But I also think 3,000 is a long way off in the future.
Most importantly, I think investors who get too concerned about these big, broad targets are making a critical mistake. They’re focusing on the big, “macroeconomic” forest, and missing all the trees that could be making them rich!
|There are wide variations on analyst calls on the future direction of U.S. stocks.|
My advice: Don’t make that mistake! Stick with the companies I’m profiling in places like Safe Money Report, some of which are showing double-digit and even triple-digit profits!
Or if you’re not ready to take that step, stay focused on the industries I profile here in Money and Markets. They’ll keep you on the right course.
So what do you think? Will the next 1,000 points come from the upside or the downside? Are you worried more about a crash, or about missing out on a further rally? Does that even matter in an era with many promising individual stocks and strong industries? Let me know at the Money and Markets website here.
|OUR READERS SPEAK|
With the long holiday weekend behind us, it’s time to address your comments and questions as best I can. So let’s get right to it!
First, Reader Robert W. said: “All of the new money from our oil industry has to go somewhere. Our cheap natural gas will help reduce our production costs, and all this will offset some of the negatives.”
I agree Robert. Not every “energy” stock is a typical one. Cheap, reliable, domestically provided oil and nat gas will help many other industries lower input costs and outcompete foreign companies. That includes everything from steel to chemicals firms!
On the economy, Reader Cody weighed in with some interesting thoughts. He said: “I’m from Nebraska and I work in a steel fabrication shop. We fab up the I-Beams and all other parts for large buildings.
“This year we have had more work than we’ve ever had during the 40 years the company has been around. We’ve had to hire extra people even though we technically don’t have work space for them. We’ve had to extend our hours past 14 hours per day, and we even worked on the 4th of July, which we have never done before. From my experience, the amount of work we do is a direct reflection of how the economy is doing. I’m bullish for the long term.”
That’s some great on-the-ground “intel,” Cody, and thank you for providing it. We’re certainly seeing better numbers on the economy here than in many other parts of the world.
Not everyone buys it, though. Reader John G. said: “We are talking about an unemployment rate that is figured just like our inflation rate. If it makes politicians look bad, take that segment out of the figures. It makes the public feel good about the unemployment figures they used to hear. The real unemployment rate is just like the inflation rate: Much higher than it should be.”
John, I have no doubt that number fudging goes on in Washington. But the sum total of all the data I’m seeing tells me things are better than they have been in a while, if not as good as we all wish they were!
Finally, Reader Rich V. said all the cash used to fund stock buybacks from Corporate America should be put to better use elsewhere. His comments: “Ask yourself why these corporations are rolling in so much cash in the first place. It is because they have kept wages flat for the last 30 years while productivity per employee has dramatically risen. Keep costs stable and increase sales = profit.
“This is a consumer driven economy and slowly but surely consumers will not be able to afford an ever-growing list of products and services.
Since corporate CEOs and upper management have some of their pay tied to stock performance, there is the incentive for stock buybacks.
“First, profits should go into R&D to improve the products and services so the corporation will be current with the changing marketplace and not be left behind. Second, workers who created the profits should get their fair share. So if labor is 20% of the expenses of the corporation, then 20% of the profits go to the employees. The remaining profits can be distributed as dividends.”
Rich, I think we would all be better off if labor got a bigger share of the pie. It’s just a question of what can be done about it.
Should Washington try to implement policies to encourage wage growth? Would a higher minimum wage at the federal level help or hurt? Or should Washington just get out of the way and cut regulation to encourage corporations to invest more in their workers and their factories and distribution operations? Add your thoughts at the website here.
|OTHER DEVELOPMENTS OF THE DAY|
Instant messaging is a great tool for fast, brief conversations with your co-workers and friends. But on Wall Street, it’s getting a lot of workers in hot water! Credit Suisse (CS, Weiss Ratings: A-) is just the latest firm to face scrutiny for communications between employees and outside firms, according to the Wall Street Journal. No word yet on any potential fines or firings related to the investigation.
Several celebrities had nude pictures and other private images stolen and posted online by unnamed hackers over the weekend. Blame for the breach reportedly may lie with Apple’s iCloud service, which allows users to store images they take with their iPhones in the cloud.
In an attempt to win the battle for Family Dollar Stores (FDO, Weiss Ratings: B), Dollar General (DG, Weiss Ratings: B+) just raised its bid price to $80 per share from $78.50. That would eclipse the Dollar Tree (DLTR, Weiss Ratings: B+) offer of $74.50 that Family Dollar had previously accepted.
If there’s one message I’ve been hammering home for several months, it’s that the U.S. economy continues to beat the pants off of other economies like Japan’s and Europe’s! The latest evidence: The Institute for Supply Management’s manufacturing index jumped to 59 in August from 57.1 in July.
That easily beat the average forecast of 57, and left the ISM gauge at its highest level since March 2011. The sub-index that tracks new orders jumped to 66.7, the best since April 2004!
Reminder: You can let me know what you think by putting your comments here.
Until next time,
P.S. Martin’s urgent video briefing is online now! Please click here now to watch! He will also be hosting a 2nd online briefing Thursday at noon! Stayed tuned for more information.