January 13, 2013
Weekly Market Outlook
By Keith Schneider
After years of cash outflow from US Equities, this week’s inflow amounted to $19 billion, the biggest weekly inflow since the 2008 meltdown. Investors that sold stocks to lock in a lower capital gains rate in 2012 and save 5% are finding that the train has left the station and the next stop is an express run up 10% or even more from current levels. Those beloved stocks will be bought back, fueling the bull market.
For a little perspective, the new government in France has jacked up tax rates to 75% causing French actor Gerard Depardieu to say "au revoir" to his French citizenship and put his $65 million dollar Parisian digs up for sale. Looking for a new home, he received Russian Citizenship after an audition with Putin, which of course is a lot better than a "green card".
The way I see it, 75% adds up to real money and the measly 5% capital gains tax increase here is about the daily range of a hot tech stock, which is hardly worth losing your portfolio over. Throw into the current scenario of a bond bubble looking ready to burst, and you have a recipe for an explosive move up as even more cash moves into equities. Of course, you can always count on Capitol Hill to throw some monkey wrench into the works, like playing football with the debt ceiling; but the stock market will most likely ignore this until a week or so before the deadline.
Besides a little frothiness in the market internals, the market is working hard to digest the explosive move to 5 year highs. This week’s video covers where this new cash is flowing to.
Have a great Weekend.
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