The music keeps on playing, and world stock markets keep dancing to the tune of ultra low interest rates, otherwise known as 'free money.'
It reminds me of the immortal words of Chunk Price, former head of Citigroup, who in 2007, near the peak of the credit bubble that preceded the GFC, said…
"…as long as the music is playing, you've got to get up and dance. We're still dancing."
The music is coming from Washington, courtesy of the Federal Reserve. The audience is the stock exchanges in New York, London, Beijing, Frankfurt and Sydney. The winners are investors around the globe.
The party's in full swing…
No wonder we're continuing to pop the champagne corks here at Fool Australia HQ. The party's in full swing, and we're not going to miss it for the world.
Overnight in the U.S., the S&P 500 closed at another record high. In 2013 to date, the U.S. benchmark index is up 23%, closing in on its best year since 2003.
But, as Bloomberg reports, 2013 is different. The 2003 gains followed a 49% plunge in 2002, after the bursting of the technology bubble. The 2013 gains are building on a 13.4% rise in the S&P 500 in 2012.
Compounding returns… how we investors love you.
It's a one-two combination that's impossible to beat…and spells "low interest rates" well into the future
Getting the U.S. markets fired up overnight was the joyful combination of the U.S. unemployment rate falling to 7.2% and U.S. payrolls climbing less than expected in September…
All of which the markets extrapolate to mean the Federal Reserve will continue pumping stimulus money into the biggest economy in the world, keeping interest rates at ultra-low levels, thereby by comparison, making stocks look like supermodels…
and term deposits look like frumpy cats…
In that same Bloomberg article, Darrell Cronk, the regional chief investment officer at Wells Fargo Private Bank, said…
"This report indicates the Fed is joining us for the holiday season at the current level of quantitative easing. And it will probably be ringing in the New Year with us as well as it continues QE through the end of 2013."
Christmas rally, anyone?
It's looking more and more likely.
By Christmas 2014, anything's possible…
And we could be talking next Christmas, not the one just 62 days away.
Bell Potter's Charlie Aitken, who has been banging the ASX 6000 drum for some time now, on Monday said…
"…equity markets are in for a fairy tale ending to 2014. I am genuinely struggling to find a serious speed hump ahead. In fact, we could easily see a blow-off upside move…"
Right on cue, the S&P/ASX 200 is 'blowing off' again in morning trade, following U.S. markets higher.
The Aussie dollar, not so long ago trading below 90 cents, is now above 97 cents. Time to go shopping again, surfing online for cheap American Christmas presents, and for (in USD terms) cheaper American stocks.
Speaking of buying U.S. stocks, in his most recent update to subscribers of Motley Fool Share Advisor, Investment Advisor Scott Phillips urged members to use the strength in the Aussie dollar to buy shares in some of the wonderful businesses listed on the US exchanges, that are truly global success stories.
2 stocks punching well above their weight
He named five such U.S. companies, one of which was Google (Nasdaq: GOOG), a stock I own.
Each share in the search engine powerhouse might trade above $1,000, but don't let that put you off. It's not the number of shares you own that count, it's the dollar value that matters.
Just ask shareholders in Warren Buffett's Berkshire Hathaway A shares (NYSE :BRK.A) — currently trading at around $176,000 each — how they've fared over the years.
Or as Mark Twain put it…
"It's not the size of the dog in the fight, it's the size of the fight in the dog."
Warren Buffett and Google — they can sure fight the good fight for shareholders.
BHP — closing in on $38, with blue skies ahead
Here in Australia, BHP Billiton (ASX: BHP) continues to punch above its weight in morning trade, its shares jumping another 1.7% to $37.70, well above the 0.43% gain in the S&P/ASX 200 index.
Yesterday's quarterly production update was well received by the market, not surprising considering the Big Australian upgraded its iron ore production guidance for the 2014 financial year.
Iron ore contributes more than half of the miner's pre-tax earnings.
With the iron ore price around $135 a tonne, and when you can dig it out of the ground and ship it to China for an all-in cash cost of below $50 a tonne, no wonder BHP profits are on the up. It's like printing money.
And there appear to be no clouds on the horizon either, with the influential Financial Times Lex column saying…
"…the outlook for steel demand is brightening… in spite of fears that China's property market has overheated, there is still a shortage of housing supply… That should leave iron ore miners to bask in the sunshine, at least in the near term."
Keep dancing Fools. In this current environment, my goal of buying BHP at $30 is a pipe dream.
Never say never, but with all indicators pointing upwards, I'll need to set my price higher if I'm to have any chance of topping up my existing holding.
Telstra and the 3 most dangerous words in investing
No such problems with Telstra (ASX: TLS). Shares in the telco giant have been stuck around the $5 mark since they first smashed back through that level back in May this year.
Still, investors shouldn't be complaining too much. Since then they've enjoyed another 14 cents fully franked dividend, and the shares are up over 20% in 2013.
Long-time Motley Fool readers might recall, in August 2011, we called Telstra our "…number one ASX 20 pick for the long term…"
The rest is history.
In case you think you think you might have missed the boat with Telstra, consider the 3 words U.S. fund manager Whitney Tilson considers to be the most dangerous words in investing…
"I missed it"
Not buying Telstra, and its fully franked 5.6% dividend yield, at $2.90 is not your mistake.
The Sydney Morning Herald reports Telstra CEO David Thodey saying today at the company's annual investor meeting…
"We've just passed 1 million devices connected that are not mobiles. All networks are not created equal. It takes years and years to get to where we have."
Missing buying Telstra today, with its stable and potentially growing dividend, growth prospects and most importantly, huge competitive advantage in terms of their mobile network, could be the much bigger mistake.
Don't look back, Fools. Onwards and upwards…
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Of the companies mentioned above, Bruce Jackson has an interest in Google, Berkshire Hathaway B shares, Telstra and BHP Billiton.
