THE INVESTMENT STRATEGY LETTER

Another sleepy Day/ and once again All Time New Highs

The New York Stock Exchange finished quietly with barely eking out a new all-time high in the Dow to new  record levels. Action across sectors was more colorful as gains in energy and technology sectors outweighed losses in healthcare and consumer staples stocks. Investors appeared to focus on positive earnings results from retailers such as Best Buy and Urban Outfitters, while a rise in oil prices lifted energy stocks. Helping all sectors was a binge of information data that pointed to continuing improvement in the economy. Small companies outperformed large companies with the Russell 2000 adding 1.1%, the DAX, China and Nikkei averages were about unchanged. Transportation stocks were up one half of 1%, gold was up slightly.

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Because stocks are surging corporations are ambitious. Also debt is reasonably cheap. The result is that mergers and acquisition transactions are being booked at about $1.5 trillion, so far this year. This is the largest amount of mergers and acquisitions since the year 2000 during the.com bubble and in 2008 just before the financial crisis. The other thing that corporations are doing, is buying back their own stock, as treasury stock. Corporations are doing everything they can to spend their money on anything except creating new employment. This kind of exuberance for mergers and acquisitions, is usually unsustainable.
Just as a side note, China’s inflated and highly leveraged Real Estate prices are beginning to fall.

Carl M. Birkelbach 11/120/14

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