What a month December has been so far for the stock market. The Dow Jones Industrial Average is up 3.5% in the first two days of December—its biggest two-day rally since July.
First and foremost, investors have nowhere else to park their cash. Who wants to buy bonds paying mediocre returns? Investors are staying away from real estate because it’s still considered to have the plague. Hence, stocks and gold are the only game in town for investors.
This morning, news comes that banks in one of my favorite countries in the world to visit, Italy, are seeing borrowing costs jump on concerns about Italy’s finances and debt situation. Problems persist in other euro countries like Greece, Ireland, Portugal and Spain.
All of a sudden, the stocks of major American corporations, some of which generate more sales each year than Greece’s or Ireland’s annual GDP, look attractive.
I’ve been telling my readers to buy stocks for months (actually, 20 months). And I still think it’s not too late.
This morning, the Dow Jones Industrial Average opens only 89 points below its post-crash high of 11,451. Do I think the Dow Jones will march onto a new 52-week high? Yes. And we could see that action sooner than the majority of analysts expect.
Michael’s Personal Notes:
The Goldman Sachs Group, Inc. (NYSE/GS) said yesterday that bank stocks are a “buy,” singling out JPMorgan Chase & Co. (NYSE/JPM), Citigroup, Inc. (NYSE/C), and Bank of America Corporation (NYSE/BAC) as the top picks. The Dow Jones U.S. Bank Index jumped 3.3% on the news.
I disagree with Goldman. New, more stringent rules make investment banking profits harder to come by these days. The Dow Jones U.S. Bank Index is down 63% since the boom days of 2007, a big laggard compared to other sectors like retail that have rebounded nicely from their recession low.
The government still has plenty of stock in Citigroup to sell and the mortgage fiasco continues. Imagine being Bank of America and having a slew of defaulted mortgages you want to…
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