David VomundSpecial to the Bonanza

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February 20, 2013
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Market Pulse: Why are stocks so strong? TINA

INCLINE VILLAGE, Nev. - Stocks have advanced for seven straight weeks and are at a five-year high. With rising taxes, deficits, and debt how can this be? Jason Trennert, of Strategas Research, explained it well on CNBC last week using the acronym TINA - There Is No Alternative. For readers of this column, that is a familiar theme.Alter-natives are unattractive. Cash equivalents, corporate and muni bonds, and Treasurys offer little. Real Estate and commodities are impractical for most investors. Stocks have attractive yields and the potential for dividend growth. End of story.That's why money is flowing out of bonds and into stocks, reversing the exodus of recent years. The trend is just beginning. More than $400 billion alone came out of stock funds, much of it into bonds but also to the sidelines as cash. Investors sold individual stocks as well. Now cash is slowly coming back to stocks. This trend has legs, long legs.There are other factors driving the bull market. Price-earnings multiples are expanding, because prices are rising faster than earnings. When earnings growth accelerates, that will be a one-two punch that will push stocks even higher.Hedge funds and many professionals are cash heavy and badly lagging the S&P (their benchmark), and that means their fees are low or in the case of performance fees non-existent. They need to put money to work and play catch up or risk facing another bad year.Perhaps most important is this: the Federal Reserve has an accommodative monetary policy and is providing billions and billions in liquidity, some of which is making its way into stocks. Stocks do well when the Fed is accommodative. The Fed will someday move to a neutral stance and later to a restrictive policy. That's certain and stocks won't be doing well as that trend unfolds. But going to a neutral stance is more than a year away, maybe even two years off. Bulls take heart. There are even better days ahead.All this is sinking in as investors tired of watching from the safety of money-market funds paying almost nothing are buying. For those saving for retirement or are in need of income from their investments, it's all about TINA. High yielding large-cap stocks offer the best value. That's why prices are heading higher.- David Vomund is an Incline Village-based fee-only money manager. Information is found at www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.

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Tahoe Daily Tribune Updated Feb 20, 2013 04:30PM Published Feb 20, 2013 04:29PM Copyright 2013 Tahoe Daily Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.