Monday April 6, 2015 – Weekly Market Update

Friday the Non Farm payroll report was issued
when the markets were closed.

I feel like I was cheated.

That is because you usually get some really strong moves
on days when the Non Farm payroll are released.

Another day that has potential for movement is
a day like this coming Wednesday. That is when
the Fed releases the minutes from their last meeting.

With the dismal jobs report last Friday, will the
Fed couch a rate hike differently than they have?

They have made it clear that they will not begin to
increase rates until the economy starts to improve.

And their measurement for improvement is when
the unemployment rate drops to a level they are
feel comfortable.

The indication is when the unemployment rate
reaches 5.5%.

The market reacted today by heading up. In fact, as
I write this, the DOW is up over 150 points. And
the S & P 500 is up close to 18 points.

The result of the Fed bond buying has helped to
fuel the markets higher.

With rates low, the most attractive investment is
still the stock market.

I am starting to read articles saying that the Fed is
creating a massive bubble in the markets.

And that the next drop could be even larger than the
drop we saw back in 2008.

I tend not to listen to that.

Why?

Well first off, the Fed stopped buying bonds some
time ago. And the market has continued to make
new highs.

So, without the help of the Fed, the markets have moved
up on their own.

The second issue is rates of returns.

There is still no other alternative investment available that
can pay the rates that the market can.

How about real estate?

I think the recent mortgage crises drove alot of people
out of that market.

But, the drop in the stock market to the low in 2009 also
drove a lot of people out of the stock market.

So, then will this market see a big correction?

My feeling is we don’t start to see a major correction until
the corporations begin to taper their buyback programs.

As you know, I track the corporate buybacks.

One reason for the is you can find some decent companies to
invest in.

The other reason is to see if the activity is slowing down or
coming to a halt.

I am sure you want to know if companies are starting to
taper off their buybacks.

The answer to that question is no.

I thought perhaps that is would be the case because in
January 2015, there was only about $15 Billion of
buybacks announced.

Then in February, there was almost $75 Billion in
buybacks announced.

Granted, two companies accounted for almost 40%
of the total. But, that is still a huge amount of buying
activity.

And March followed with just over $65 Billion in
buybacks.

I have been saying for sometime now that this is one
of the reasons for the market being at such lofty
values.

Corporations, just like you and I, are not finding
any better investment alternatives than to buy their
own shares.

Another key activity I follow is office buybacks.

I like it when an officer buys their own shares in the
open market.

Usually it is a good sign.

A recent example is Sprint (S). In the middle of
February, there were over 5 million shares acquired
by various insiders.

You may want to follow the stock and see how it does.

Until next week, trade safely.

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