As the market wades through what many people hope is a sixth bull year, some have grown nervous about how long the run can go.
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Signs of trouble appear as small investors ramp up their bullish bets.
No doubt, it's been an impressive couple of months for the stock market. From its August low, the Dow Jones Industrial Average ($INDU) has gained more than 15%. The smaller, riskier stocks in the Russell 2000 have done even better, rising a whopping 24% over the same period.
Back in September, I urged readers to set aside their skepticism and buy stocks. I said that "investors are acting as if corporate America won't ever grow again" and warned that a bubble in fear was causing too many investors to rush into bonds instead of stocks. I even proclaimed that an "epic bull market" was on the horizon as companies use ultra-cheap debt financing to transfer wealth from bondholders to shareholders.
But now there is evidence that the rally is getting a little long in the tooth, that excessive confidence has replaced excessive pessimism and that stocks are headed for a meaningful correction in the weeks ahead. Here's why.
ASML Holding blows away its previous forecast for next year's orders, and the stock soars.
Banks are starting to offer more cards to customers with blemished records.
But times have changed. The mortgage crisis has created entirely new categories of credit card users. There are people who still shop and save and pay their bills -- but whose credit has been demolished by a foreclosure. There are people who should still get cards -- but traditional banking rules say they can't.
So now banking consultants are slapping new labels on borrowers in an attempt to figure out whom to offer cards to, according to The New York Times. Here they are:
The generics powerhouse wants to develop new drugs as well.
The country is on its way to becoming a global superpower. But there are risks to consider.
A fledgling economic superpower. The world's largest cattle industry. The most powerful country in South America. The largest producer of iron ore in the world. An economy growing at 7%.
"Allo! Time for Americans to wake up," one Brazilian tycoon tells Kroft. OK, so if "60 Minutes" has you fired up on Brazil, here are some ways to invest in the country:
They have performed extremely well for the past decade, but blue chips are coming back into fashion.
Looking over the past decade, you'll find small-cap stocks up about 8% each year, Paul Lim writes. By comparison, blue chips are returning about 0.8% annually.
"The stunning small-stock performance could push fearful bond investors back into stock funds, which have had net outflows of more than $40 billion since the start of 2009," Lim adds. Some analysts think this could even help the big stocks, because when Americans decide to jump back into the market, they'll buy the blue chips and not small companies they've never heard of.
Spain may be scary, but this native company isn't.
A little-known investor named Warren Buffett advises that we be greedy when others are fearful. For our pick of the day, Jordan DiPietro zeroes in on one of the most fearful regions in the world.
Rex Moore, Motley Fool Top Stocks editor
You think 10% unemployment is bad? Try 20% -- that's the unemployment number right now in Spain, one of the many Eurozone countries getting dragged down by anemic growth, massive debt, and a rigid labor market. And now that Ireland has officially accepted an EU/IMF bailout for roughly $90 billion in external support, many speculators think Spain might be the next domino to fall.
These funds track India, Canada, retail and silver.
By Don Dion, TheStreet
Here are five exchange-traded funds worth keeping an eye on this week.
The Indian markets were sent into a tailspin last week, weighed down by concerns about the nation's corruption. As a result, ETFs designed to track the nation's economy were battered. The small-cap companies underlying SCIF were hit especially hard, leading the fund to crumble to new lows.
Investor sentiment will likely be pressured heading into the near future, and this could cause products such as SCIF and WisdomTree India Earnings ETF (EPI) to be shaky.
Memo to president: When companies make more money, they hire more workers. It's that simple.
The meeting at the White House this week has to be different. Many of the CEOs who have gone to see President Barack Obama so far have told me the meetings are superficial, totally done for the media. Photo ops. They are not substantive. They say the president doesn't understand how big business works. He thinks it is parasitic and all about profits, not about doing the right thing.
That's why Wednesday's meeting is so important.
We need the execs to leave with more than a photo. We need them to say that he listened and that he is going to take action on what they have to say. I just don't know, ideologically, whether Obama can accept the idea that hiring is a byproduct of CEOs trying to make a lot of money for themselves and for their shareholders.
How to play the market this week using ETF's
There is no sense being a hero in the middle of December. Professional investors are winding down the year making it difficult to predict anything given the expected lower volume for the remainder of the year.
On top of that general concern I am worried about stocks for the coming week. We saw the market rally more than 1% last week on top of 3% gains the week before. We have come a long way in a short period of time.
At the same time the politicians in Washington are up their old tricks. This time around it is the extension of the Bush tax cuts at issue. A supposed deal between Republicans and the President may be at risk given dissatisfaction among certain Democrats.
Put it all together and the time has come to play it safe in our ETF trading account. Front and center of that strategy will be to own the ProShares Short Russell 2000 (RWM).
After spending most of the year bouncing along the bottom, homebuilders are on the move again.
The housing market just can't catch a break. The expiration of the government's homebuyer tax credit resulted in a double-dip of sales activity over the summer. And now, prices are sliding again.
To make matters worse, the recent selloff to hit bonds -- which was the subject of my last post -- is pushing mortgage rates higher. The 30-year fixed mortgage rate has climbed from a record-low of 4.17% just a few weeks ago to more than 4.6% now. That's hitting housing affordability at just about the worst possible time as the "shadow" inventory of foreclosed homes starts to hit the market as the foreclosure moratorium related to shoddy bank paperwork comes to an end.
And by extension, the same goes for housing stocks. While the overall stock market is pushing to new multi-year highs, the Homebuilders Index ETF (XHB) has been stuck in purgatory since falling from its April highs and is down nearly 14% over the period. The same goes for its constituents, including Toll Brothers (TOL), PulteGroup (PHM), KB Home (KBH). But now, there is evidence that buyers are returning to the sector.
Despite criticism about printing money, the government struggles to make bills that work. A hedge fund takes desperate measures to try to close the book on a stock. The Treasury joins social media frenzy.
5. All about the 'Benjamins'
There's been a lot of talk -- largely related to the most recent round of quantitative easing -- about the government's penchant for "printing money." As it turns out, the government can't print money correctly.
Apparently the warehouse discounter thinks dealing with Apple's micromanaging style is too much hassle.
Unfortunately, Apple's strict supply and pricing rules seem to be a different story with retailers. Warehouse discounter Costco (COST) seems to think it's not worth the hassle to do business with Apple anymore -- even if it's products are wildly popular.
The video rental company now has 27% of the US market and is looking at side ventures.
One of those involves coffee. Redbox, a unit of Coinstar (CSTR), has partnered with the Seattle's Best Coffee chain to develop French-pressed coffee kiosks. About 10 of them are being tested, selling a cup of coffee for $1 (or $1.50 with flavoring added.)
It's an interesting side business for Redbox, which has seen amazing growth in recent years. Redbox's success boosted Coinstar's 2011 forecast for revenue to between $1.8 billion and $1.95 billion and profits of $3 to $3.50 a share.
The Chinese video site had a great IPO this week, but now the stock is crumbling.
Youku shares took a huge dive Friday, plunging to $38.61 at midday from nearly $50 in the morning. That's still well above the $12.80 IPO price. Youku was one of five Chinese IPOs scheduled for this week.
What's so bad about Youku? For starters, its revenue for the first nine months of this year was just $35 million, and it lost $25 million in that time, writes Shane Farley.
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Stocks are facing some serious resistance as the bears tear into the market's respite.
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[BRIEFING.COM] The stock market finished the Wednesday session on a modestly lower note, but it is worth mentioning today's retreat took place after six consecutive gains. The Dow Jones Industrial Average (-0.1%) and S&P 500 (-0.2%) settled not far below their flat lines, while the Nasdaq Composite (-0.8%) lagged throughout the session.
Equity indices started the day in the red, with the Nasdaq showing early weakness as large cap tech names and biotechnology weighed. The technology ... More
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