11/15: Record Day For Markets

November 15, 2006 may well be remembered as the day U.S. markets turned, although the media are being somewhat sanguine about it. In short, yesterday was a record day for all markets - the Dow, the S&P, the NASDAQ, and for the big new tech stocks like Google.

The Dow broke another all-time high, trading up to 12,326.10 and closing at 12,251.71. That's the first time the Dow has broken the 12,300 mark intra-day and the first time it's closed above 12,250 in the history of the market (the following is a three month chart because it shows the closes better):

The NASDAQ had an equally historic day, reaching a new high since the tech bubble of 2,442.75 and breaking an intra-day of 2,450 for the first time since then:

The S&P however is the really exciting one, since this is the market critics of the recent bull run have been using to justify their bearish views. Only until the S&P starts breaking records, goes the argument, does this rally mean anything (initially it was the same argument used for the NASDAQ until that started breaking records). Yesterday, the S&P broke a six-year high, and was only 8% off an all-time high of 1,530.09 on intra-day trading:

As an addendum, search engine giant Google was 15 cents off reaching the landmark $500 a share that analysts have been speculating about since the summer (yesterday was another all-time for Google too, incidentally):

I expect we will see the stock break $500 before the week's end, just as I said a few weeks ago.

It's getting harder and harder to justify bearish views, and now the talk is all about a bubble, mainly by people who don't understand that a bubble requires the employment of excessive leverage (amongst other things), which there isn't right now.

I have pointed out here many times that a bull rally was only to be expected with lowering commodity prices and a sharp increase in private investment - despite lower GDP, which is feeding that spike in the private investment curve. The equity markets will continue to get the best of it - my predicition is that the NASDAQ tops 3,000 before year's end. And even then it's still cheap.

*UPDATE* Welcome back Instapundit readers! This is a blog about the economy, which is really to say it's about everything from politics to the arts to technology too, because that's really the jist of the economy. There's also a greater analytical scope on markets here than you'll find in most places. As always, please feel free to take a look around, comment and of course, come back.

**UPDATE** The same warm welcome is extended to Ace of Spades HQ readers, Memeorandum readers, and Townhall readers.

Comments

[Mister Snitch!]

Good report. Well done, and thank you.

[Not a bear, but 11/15 wasn't that special]

The Nasdaq index is still down about 40% from the top of the tech bubble. A "new high since the tech bubble of 2442.75" sounds like it's a new high, but it's got another couple thousand points to go.

[Rob]

Sorry, i think you are missing the story (along with everyone else). When I adjusted teh Nasdaq for inflation via the CPI, there was no change since 1999, excluding the bubble years in 2000-2001.
I post it here.
http://gibbie.powerblogs.com/files/gibbie-adj_nasdaq.jpg

[NARC]

What a day for the markets...It has to be the spirit of Mr. Friedman...Okay so it sounds a little hookey...Still it's fitting for such a man to have the markets rise like this a day after he passes...I mean the S&P is going up up up...However, I'd preferred that he was still with us and to have the markets running bull...Rest in Peace you ole' dear man...Rest in Peace...

[Daniel]

Hmmm. Nicely done, but the S&P still has its work cut out for itself, I think, needing to break through that head-and-shoulders top and consolidate there before making a run at new highs.

And let's remember that the Nasdaq is still 50% off its record.

[Bryon Scott]

Since the Democrats are now in power look for the media to start giving them credit for this incredible turn-around in the economy. It's amazing what they can do in a couple of days, considering the disaster it was just a few weeks ago!

[Daniel M. Harrison]

Mr Snitch - Thanks!

Rob - are you just kidding? I seriously hope so ... that is the single worst bearish argument I have heard yet. The CPI is a depreciation-weighted basket of random consumer goods generally aligned with debt, not equity (even in that sense, time has shown it's not a very good measure of economic growth). You can see that because if someone were trying to read history from your graphs, they would assume there was no bull-run on the NASDAQ from the mid-90's, which is just untrue. If it's a joke, I apologise, and admire the quirky bearish satire!

NARC - it is indeed somewhat fitting that the great Milton should pass at this time - I know he would have appreciated the implication of his life's work! We will all miss him dearly, much like we missed Keynes. At 94, he got to see a lot in his lifetime.

"Not a bear" and Daniel - OK, so the NASDAQ is still off a bubble-level high but if you look at previous posts here (linked in the main post) you will see that the run on the NASDAQ flows from capital spillage from three main sources - private equity, Dow, and S&P. With all three major markets breaking records, 11/15 was a huge day on trading floors.

Bryon Scott - absolutely right. I have already seen some posts implying that the democrats return to partial power is responsible for market spikes, despite the fact that these spikes started two weeks ago with the Dow coming way up above 12,000 for the first time! Also notice how the media were saying 'the economy is in a terrible state with GDP growth falling' two weeks ago, now they're saying 'the economy actually isn't that bad because inflation isn't as high as expected'!

[Drew]

The bottom dropped out of the NASDAQ (as I remember it) when the Clinton DOJ hammered Microsoft, and probably spooked the rest of the listing too. That was an artificial high, which is historical, but not an accurate indication of the economy.