The rally won't wait
Stocks are climbing higher during Wednesday trading on a new government reports that February brought increases in demand for big-ticket manufactured goods and higher sales of new homes.
At 1:44 pm ET, the Russell 2000 (NYSE:IWM) is up 3.89, or 0.93%, at 420.67, while the Dow is up 0.40% at 7,690.63 and the S&P 500 is up 0.12% at 807.20.
Orders at U.S. factories for cars, airplanes, household appliances, furniture and other large goods rose 3.4% last month, much better than analysts' predictions of a drop of 2%.
New home sales rose 4.7% in February to a seasonally adjusted annual rate of 337,000. The month was still the worst on records dating to 1963, but economists were expecting February sales to fall to a pace of 300,000 units.
Small caps on the move today include ARYx Therapeutics (Nasdaq:ARYX), up over 20% ahead of fourth-quarter and year-end 2008 results scheduled to be released on Thursday at 8 am ET.
******Yesterday, I suggested that this rally was unlikely to retrace much ground and give buyers an attractive entry point. I went on to recommend a position in homebuilder Hovnanian Enterprises (NYSE:HOV).
Well, today stocks are pushing higher and Hovnanian is up 20% from yesterday’s closing price of $1.52.
Graham Corp. (AMEX:GHM) is pushing higher, too. It’s up 7% today and 13% since last Thursday’s recommendation.
If you bought either stock, I’d love to hear from you. Drop me a line at editor@smallcapinvestor.com.
*****Durable goods came in better than expected this morning. It seems as though we have entered a positive news cycle that will keep stocks in rally mode. The S&P 500 could be headed to 900, adding another 80 points in short order.
*****The TradeMaster Daily Stock Alerts video conference airs tonight at 6 pm ET. There’s still time for you to register for this event. Click HERE for details.
*****Finally, it’s Newsletter Advisor Wednesday. This week, we’ve got an interview with Coby Lamson of Coby Lansom Capial Management. Enjoy:
Today’s installment of Investment Expert Insights comes courtesy of Ron Coby, CIO of Coby Lamson Capital Management and author of “The Upside of Down,” a Wiley-published book. Coby is a registered investment advisor (RIA) and a commodities trading advisor (CTA).
Last year was devastating for most sectors, if not most companies. Were you able to find any pockets of strength?
Gold and gold stocks as well as bonds were the only places to hide in the global bear market. Stocks, U.S. and foreign, and commodities were slaughtered.
Once some sense of normalcy resumes in the financial world, what sector(s) do you think will lead us out of the bear and why?
Nasdaq made a giant double-bottom and did not confirm the new lows in the S&P 500 or the DJIA. So, I would look to Nasdaq to lead us out. I like oil and gold as well.
I would buy the QQQQ, the Nasdaq 100 ETF, as a diversified way to play Nasdaq.
Name three stocks you would buy today and why?
I would also say oil stocks will be a place to find excellent values. I would buy the Oil Service Holders, OIH, on the NYSE. This ETF is a great diversified way to play for a recovery in the oil sector.
I would buy the QQQQ, the Nasdaq 100 ETF, as a diversified way to play Nasdaq and the leadership in Nasdaq stocks.
I would buy the Gold ETF, GLD, as a protection from both deflation and inflation. Gold’s secular bull market is only half way done.
If you were face-to-face with President Obama, what unique perspective could you give him regarding the markets and challenges facing investors?
I would explain to him that this volcanic market eruption resulted in a lava flow of deflation, like lava flow destroys everything in its path. Throwing money at failed companies like GM, AIG and Citigroup is like throwing water on lava; it simply evaporates. I would tell him to stop throwing money away and to let the lava flow run its course. Have faith in the free market. Low prices bring in demand so let prices fall where they must as opposed to propping up assets artificially.
What areas of the market do you perceive as most safe today?
Nothing is safe, nothing. Bonds are a bubble so there’s no safety there. The economy is in a global deflationary death spiral so stocks are full of day traders and extreme volatility. Foreign countries are worse than the United States, so foreign stocks are not safe. There are no ‘crash proof’ stocks as all stocks can crash. I would say the best area to focus is commodities and commodity-related stocks, especially gold and oil.
What do you say to people who are tempted to buy technology, even financial stocks at these low, low prices?
Buying low and more importantly, selling high are the only ways to deal with a global secular bear market.
What investment advice would you give to someone with a 5-year horizon?
Buy severe corrections, and sell powerful rallies until the global de-leveraging fully runs its course.
