Mergers and acquisitions allow firms with high PE's to profitably buy cash strapped corporations with beaten down stock prices. After the recent rally that is what is happening now. However it is not easy to profit from M&A's without illegal insider knowledge. Illegal insider trading apparently occurred at Perrot before Dell made its recent offer.
Yesterday was a Jewish Holiday and trading volume was 30% lower than usual as the S&P rose 1.8%. Today is the one-year anniversary of the Dow's biggest one-day point loss ever, when the blue chip average plummeted 777.68 points and the broad market lost $1.2 trillion in market value.
Market forces September 29
We are cautious and recommend setting market re-entry price targets anywhere from 50% of the most recent gains to down to the highs of the previous stock cycle. Many stocks are already there and many declined yesterday even as others made new highs.
Oil, gold, and commodities and some manufacturing and technology stocks have peaked and have declined close to previous lower levels. Inflation probably will become evident later this year so the recent gold and oil rally was premature.
Market Outlook
President Obama has done a great job overall at the G20 meeting. It is not often that the group focuses on real issues like the economy, Afghanistan, and Iran's nuclear threat instead of socialist wealth redistribution plans.
After falling sharply Monday, Asian markets were up last night; China down -0.3%, Hong Kong up 2%, Japan up 0.9%, and India was up 1%.
European markets are down about -0.5% this morning about half way through their day.
US market futures are flat about -0.1% at 7:00 AM EST. The sharp sell-off of a correction has not happened yet. Germany halted their political advance of the green/socialist/communist coalition with their election last weekend.
The market correction does not seem to be over. Investors are beginning to see through Jim Cramer's strategy of Wall Street low-balling quarterly profit estimates just before official announcements. Many executives play the same racketeering game and follow their bad but better than Jim Cramer income estimate with a glowing projection for the next quarter. This racketeering practice is not new to seasoned investors who do their homework. The racketeers pick their leadership sectors and buy in driving the prices higher. Then they pump up the stocks like Jim Cramer pumped up nitrates, then the financials, and then technologies such as wireless and most then recently illiquid transmission tower companies. They then recently dumped their PALM and RIMM stock holdings at profits and are probably buying them again right now as investors flee. Now is the time to be buying the stocks that the racketeers dumped as long as they have not dumped the entire sector. When they dump an entire sector they may not touch it again for a year.
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