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Is a melt-up for US stocks into the end of the year inevitable? Will benchmark-chasing by the under-invested push us into the 16,000′s on the Dow and the 1900′s on the S&P?

Even the permabears like Hussman ? while still predicting a crash eventually ? concede that a continued run-up is more likely than anything else over the next few weeks.
After six straight weeks of gains for the market, this ripping rally into New Years and possibly beyond has now become the majority view. What a long way we?ve come, from both a price and a sentiment standpoint.

Here?s the New York Times:

?I think there is a general expectation that the market is going to continue to rally for the rest of the year,? said Brad McMillan, chief investment officer for Commonwealth Financial, based in Waltham, Mass. ?Retail investors are starting to move back in, and I think that?s providing a fair amount of support.?

Toward the end of the year, fund managers who are trailing their benchmarks may help bolster stocks as they chase performance.

?I think it?s going to be a slow grind up,? said Dan Veru, chief investment officer at Palisade Capital Management, adding that the only thing ?that can derail this is some exogenous macroeconomic event that comes out of nowhere.?

The gains have been incredibly easy to come by this year and the volatility has been almost non-existent ? provided you were listening to the right people and not getting chopped up to pieces by make-believe signals and indicators. But I?m not so sure the end of the year can be quite as inevitable as the consensus now expects. It?s almost never that simple?

Source:

SnapChat is ?worth? more than $3 billion.

Okay, sure, depending on how you define the term worth.

If by worth you mean what some other person is willing to pay for it, then yes, sure. But if by worth you?re referring to the amount of value that might someday be derived from it, well then keep smoking crack. There is a finite window in which the Web 2.0 landgrab will continue, and sellers should be thinking about cashing out sooner than later at this stage in the game, now that all the big ones are public and bloated with massive cash warchests and ?currency? in the form of obscenely high share prices. This will not continue indefinitely, it never does. ?

The SnapChat kids are adorable, they probably envision a world of tomorrow in which disappearing text messages are worth trillions of dollars and change life and civilization as we know it. Or maybe they think they can break Zuckerberg?s balls for a few more months and eventually extract $5 billion from him as Facebook grows increasingly worried about ?losing the younger teens.?.

Who knows?

Fun to watch either way. Facebook can afford to pay a few billion for SnapChat and then quietly write half of it down a year from now. What it cannot afford ? at least in its own mind ? is to let Google get it.

Let the insanity begin.

From the Los Angeles Times:

Snapchat is not even 3 years old. It?s run by a couple of twentysomethings with no prior business experience. And it has never made a cent.
Yet investors are fighting for the opportunity to throw hundreds of millions at the mobile messaging service that is all the rage with teens.
The tiny Venice Beach start-up just turned down a $3-billion all-cash offer from Facebook Inc. And then, according to the Silicon Valley rumor mill, it rejected an offer from Google Inc., this one for $4 billion?

The tech industry may not be in another bubble, said Aswath Damodaran, professor of finance at the Stern School of Business at New York University, referring to the rapid rise and fall of Internet companies in the late 1990s and early 2000s. But these paper valuations are a ?form of delusion,? he said.

What is pushing up the price tags? The ability of these companies to draw a fast-growing following of young users, analysts say.

Yes, young users are the key to crazy valuations. If only said young users had a clue as to their value ? they might actually ask for a couple of dollars at some point rather than contentedly have their content and identities sheared from them like wool from a lamb.

Source:
Social media start-ups? value is enormous ? if you trust investors (LA Times)

SnapChat is ?worth? more than $3 billion.

Okay, sure, depending on how you define the term worth.

If by worth you mean what some other person is willing to pay for it, then yes, sure. But if by worth you?re referring to the amount of value that might someday be derived from it, well then keep smoking crack. There is a finite window in which the Web 2.0 landgrab will continue, and sellers should be thinking about cashing out sooner than later at this stage in the game, now that all the big ones are public and bloated with massive cash warchests and ?currency? in the form of obscenely high share prices. This will not continue indefinitely, it never does. ?

The SnapChat kids are adorable, they probably envision a world of tomorrow in which disappearing text messages are worth trillions of dollars and change life and civilization as we know it. Or maybe they think they can break Zuckerberg?s balls for a few more months and eventually extract $5 billion from him as Facebook grows increasingly worried about ?losing the younger teens.?.

Who knows?

Fun to watch either way. Facebook can afford to pay a few billion for SnapChat and then quietly write half of it down a year from now. What it cannot afford ? at least in its own mind ? is to let Google get it.

Let the insanity begin.

From the Los Angeles Times:

Snapchat is not even 3 years old. It?s run by a couple of twentysomethings with no prior business experience. And it has never made a cent.
Yet investors are fighting for the opportunity to throw hundreds of millions at the mobile messaging service that is all the rage with teens.
The tiny Venice Beach start-up just turned down a $3-billion all-cash offer from Facebook Inc. And then, according to the Silicon Valley rumor mill, it rejected an offer from Google Inc., this one for $4 billion?

The tech industry may not be in another bubble, said Aswath Damodaran, professor of finance at the Stern School of Business at New York University, referring to the rapid rise and fall of Internet companies in the late 1990s and early 2000s. But these paper valuations are a ?form of delusion,? he said.

What is pushing up the price tags? The ability of these companies to draw a fast-growing following of young users, analysts say.

Yes, young users are the key to crazy valuations. If only said young users had a clue as to their value ? they might actually ask for a couple of dollars at some point rather than contentedly have their content and identities sheared from them like wool from a lamb.

Saturday links: the coming robot age

The weekend is a great time to catch up on some long form items that we passed up on during the week. Thanks for checking in.

Profiles

A profile of the newly resurgent Suze Orman. (The Daily Beast)

How Peter Lynch gives away his money. (NYTimes)

Lunch with Henry Blodget who is a bull on media. (FT)

Steve Ballmer on his exit from Microsoft ($MSFT). (WSJ)

Finance

Midsize endowment funds are getting more sophisticated. (Insitutional Investor)

Finance people say any number of stupid things. (Morgan Housel)

Why every asset manager needs an ETF strategy. (PWC via Focus on Funds)

Economics

Tyler Cowen on how the coming robot age could lead to a new libertarian age. (Politico Magazine)

Switzerland is taking the idea of minimum income to its logical extreme. (NYTimes contra Marginal Revolution)

The shadow banking system is evolving but not necessarily for the better. (FT Alphaville)

Startups

Why startups are attractive for techies relative to finance. (Points and Figures)

Selling solar power door-to-door works. (Reuters)

Technology

Who will be the ?Time Inc.? of the online news world? (smithy Salmon)

Amazon?s ($AMZN) greatest weapon is Jeff Bezos? paranoia. (WSJ)

An interview with Tony Fadell of Nest on the lack of innovation in the home. (Bits)

Health

You can thank the anti-vaccination crowd for the return of whooping cough. (TNR)

Anti-gluten is a full-blow fad. (Bloomberg)

Society

Why lifetime appointments to the Supreme Court no longer make sense. (Slate)

What can small post-industrial towns do to survive? (New Geography)

Food

There is a ?souvlaki renaissance sweeping Greece.? (WSJ)

The bourbon whiskey family tree. (GQ via @kottke)

Sports

Sports fans are tapped out. That is why sports leagues are looking elsewhere for dough. (Buzzfeed Business)

On the possibility of enhanced use of technology to call balls and strikes. (Grantland via MR)

Rock

How selling out saved indie rock. (Buzzfeed)

How The Beatles became the biggest band in the world. (The Daily Beast)

Books

An excerpt from Ninety Percent of Everything: Inside Shipping, the Invisible Industry That Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate, by Rose George. (The Week)

An interview with Michael Mauboussin author of The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing on complexity. (Compounding My Interests)

James Pethokoukis talks with Tyler Cowen author of Average Is Over: Powering America beyond the Age of the Great Stagnation. (AEI)

An excerpt from The Power of Glamour: Longing and the Art of Visual Persuation by Virginia Postrel. (Slate)

An excerpt fromRob Delaney?sRob Delaney: Mother. Wife. Sister. Human. Warrior. Falcon. Yardstick. Turban. Cabbage. (The Atlantic)

Earlier on Abnormal Returns

What you may have missed in our Thursday linkfest. (Abnormal Returns)

When actively managed funds make sense. (Abnormal Returns)

Mixed media

Why prostitutes are a safer bet for Justin Bieber. (The Kernel via @thestalwart)

The contemporary-art bubble is entering its final stages. (smithy Salmon)

How to waste time properly. (Nautilus)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The weekend is a great time to catch up on some long form items that we passed up on during the week. Thanks for checking in.

Profiles

A profile of the newly resurgent Suze Orman. (The Daily Beast)

How Peter Lynch gives away his money. (NYTimes)

Lunch with Henry Blodget who is a bull on media. (FT)

Steve Ballmer on his exit from Microsoft ($MSFT). (WSJ)

Finance

Midsize endowment funds are getting more sophisticated. (Insitutional Investor)

Finance people say any number of stupid things. (Morgan Housel)

Why every asset manager needs an ETF strategy. (PWC via Focus on Funds)

Economics

Tyler Cowen on how the coming robot age could lead to a new libertarian age. (Politico Magazine)

Switzerland is taking the idea of minimum income to its logical extreme. (NYTimes contra Marginal Revolution)

The shadow banking system is evolving but not necessarily for the better. (FT Alphaville)

Startups

Why startups are attractive for techies relative to finance. (Points and Figures)

Selling solar power door-to-door works. (Reuters)

Technology

Who will be the ?Time Inc.? of the online news world? (smithy Salmon)

Amazon?s ($AMZN) greatest weapon is Jeff Bezos? paranoia. (WSJ)

An interview with Tony Fadell of Nest on the lack of innovation in the home. (Bits)

Health

You can thank the anti-vaccination crowd for the return of whooping cough. (TNR)

Anti-gluten is a full-blow fad. (Bloomberg)

Society

Why lifetime appointments to the Supreme Court no longer make sense. (Slate)

What can small post-industrial towns do to survive? (New Geography)

Food

There is a ?souvlaki renaissance sweeping Greece.? (WSJ)

The bourbon whiskey family tree. (GQ via @kottke)

Sports

Sports fans are tapped out. That is why sports leagues are looking elsewhere for dough. (Buzzfeed Business)

On the possibility of enhanced use of technology to call balls and strikes. (Grantland via MR)

Rock

Today's Chart of the Day is Noah Holdings (NOAH). I found the stock by sorting the New High List and then sorted for Weighted Alpha. Since the Trend Spotter signaled another buy on 11/4 the stock gained an additional 14.05%.

It is engaged in providing independent services primarily comprising of distribution of wealth management products to the high net worth population in China. It distributes over-the-counter wealth management products originated in China which mainly includes fixed income products, private equity funds and securities investment funds. The Company also delivers to its clients a continuum of value-added services including financial planning, product analysis and recommendation, product and market updates and investor education.

Markets were up slightly on Friday after U.S. factory output increased in October for the third month in a row. The Federal Reserve announced that manufacturing output was up 0.3% in October, following a 0.1% increase in September. Factory output accounts as the largest factor in industrial production. Industrial production, however, fell in October which was largely attributed to the mining sector. There was a decrease of 1.6% in oil and gas drilling after six straight months of gains. The saving grace in output has been the factory sector. They have been stepping up hiring in the past three months. The increasing growth at factories is partially due to a growing demand overseas and the stronger housing market has increased demand for furniture and other wood products. Paul Dales, a senior economist at Capital Economics, said, ?As long as the overseas recovery continues and the domestic fiscal drag fades, output should continue to grow at reasonable rates.?

The United Sates Postal Service announced that they have lost a total of $5 billion over the last year. This will mark as the seventh straight yearly loss for them. The agency said that they have been trying to keep up with the decreasing amount of mail along with $5.6 billion yearly payments for health care costs for future retirees. They also said this should underscore the urgency for Congress to allow them to cease mail delivery on Saturdays and reduce payments for their retirees health benefits. There was, however, a growth in package delivery of 8%, but this is not nearly enough to offset the losses they have accrued. This year?s loss does show quite a substantial improvement over last year?s loss. This time last year the agency reported a loss of $15.9 billion. This year operating revenue came in at $66 billion, while operating expense were reported at $72.1 billion. Joseph Corbett, chief financial officer at the Postal Service, said, ?It?s the first growth in revenue since 2006.?

Berkshire Hathaway, who is owned by the famous Warren Buffett, disclosed that they have purchased a $3.45 billion stake in Exxon Mobil Corp (XOM). This attributes to a total of 40.1 million in shares of the oil company. This stake totals about 0.8% of Exxon. Despite such a seemingly small share of the company, this purchase speaks volumes. Pavel Molchanov, an energy analyst at Raymond James & Associates, said, ?When Warren Buffett gives his seal of approval to any company, that is never a bad thing.? Shares of Exxon were trading higher after the announcement. Fadel Gheit, a senior oil analyst with Oppenheimer & Co, said, ?He likes buying big, established global brand names, and Exxon is a good flight-to-quality stock. The stock has also lagged the market in the last three to five years. That makes it a typical Warren Buffet holding.?

That?s all for the day.

The Great Depression is an era few of us would choose to revisit.

Though the economy isn't especially perky these days, key measures of joblessness, poverty and hunger are nowhere near the levels seen back in the 1930s.

But by one key measure, the economy is actually in worse shape. From 1930 until 1933, the U.S. economy grew less than 3% each year. That was the longest such streak of the 20th century -- and we've already broken it in the 21st century.

We're on pace for a sixth straight year of sub-3% GDP growth, and signs are pointing continued anemic growth in the years ahead (which I'll expand upon in a moment).

Frankly, anything near 3% GDP growth would be welcome. We appear to have approached that level in the third quarter, hitting 2.8%. But almost a full percentage point of that was due to a buildup in inventories, and such gains tend to reverse in the following quarter. Translation: Get ready for 2% GDP growth -- at best -- in the fourth quarter. The recent government shutdown means we may end up closer to 1.5%.

Of course the stock market seems to be simply ignoring the economic travails. As I noted in a recent column, the Wilshire 5000 has risen 68% since the end of 2009 -- yet the economy has grown just 17%.

If you don't want to believe that the Federal Reserve's liquidity-inducing quantitative easing (QE) programs haven't been the main catalyst behind this impressive multi-year stock market rally, then you must believe that today's share prices reflect better economic days ahead. To be sure, if the economy began to grow at a 3% pace for several years, all of the market's recent gains would be justified, and stocks would likely rise much more from here.

So it's a huge question, especially in light of the fact that the Fed's QE programs are reaching the late innings.

How To Get To 3%
There are a few simple markers to assess an economy's growth potential. The first is population growth.

There's a long-standing argument between finance academics and investors.

Most academics assert that the market is efficient and there is very little edge available for traders and short-term investors. When challenged with long-term success stories of traders who consistently beat the market, the academics say those individuals are presently the statistical outliers. In other words, they are simply lucky -- just like the folks who win the lottery several times or consistently succeed at any game of "chance."

I am fortunate to be married to a woman who holds a doctorate in finance and is a great resource when it comes to programming trading strategies and understanding market microstructure.

However, we are often at odds when it comes to the viability of active trading. I love to prove her ideas wrong by showing her papers by respected academics who take my side. I am certain she gets the same vicarious thrill when my market ideas are proven inaccurate.

The one thing my wife and I agree upon is the wisdom of long-term dividend investing. (In that respect, we're also in agreement with regular readers of Amy Calistri's Daily Paycheck advisory, which emphasizes the portfolio-growing power of dividends.)

My wife recently pointed me to academic research that adds support to the no-nonsense power of dividend stocks. This research zeroes in on non-U.S.-based small- to mid-cap dividend payers -- and what it discovered is mind-blowing.

Heartland Advisors, investment advisor to the Heartland International Value Fund (Nasdaq: HINVX) in collaboration with the University of Wisconsin, will soon publish a paper asserting that international small- and mid-cap dividend-paying stocks significantly outperform their non-dividend paying counterparts.

The results of the study are nothing short of amazing. They researched the rolling average 12-month returns from 1993 to 2013 for the universe of non-U.S. stocks with market caps between $100 million and $5 billion. The average rolling 12-month return for these stocks was just over a respectable 6% -- but the highest dividend yielders returned 16.3% over the same time. It's great to see academic-led research confirming what long-term dividend investors have known for years.

International stocks may lie outside many investors' comfort zones -- but in today's global economy, the search for returns and yield often leads to foreign lands. While there are many unknowns with international stocks, that's no reason to avoid them. One key to success in the markets is to step outside your comfort zone to embrace opportunities with high potential returns, wherever they may lie.

One way to gain quick exposure to and earn high dividend-powered returns from international small-cap stocks is through the Wisdom Tree International Small Cap Dividend Fund ETF (NYSE: IDV). This exchange-traded fund is an ideal tool for gaining diversified access to the small-cap international dividend paying market. It has returned more than 20% this year and has a 12-month yield of just under 5%. (Here are the details of the ETF's holdings, sectors and countries invested.)

It's official... the United States is about to become the largest energy producer in the world (if it's not already).

According to the Energy Information Administration (EIA), the U.S. is currently producing about 22 million equivalent barrels of oil and natural gas a day -- up from 18 million barrels in 2008. While no one knows the actual figures for Russia (the largest producer for the past several years), estimates out of Moscow are forecasting the country will produce 21.8 million barrels a day in 2013.

Think about that for a second...

Just five years ago, lofty energy prices in the U.S. nearly crippled the state of the overall economy. Back then there was so much demand for energy -- and such little supply -- that companies like Cheniere Energy (NYSE: LNG) were working day and night to build natural gas import terminals to take advantage of cheaper prices overseas.

Today, the landscape in the American energy market has completely changed. Thanks to new developments in horizontal drilling and hydraulic fracturing ("fracking"), the U.S. has unlocked waves of oil and gas reserves that were once thought unrecoverable.

As you'd expect, the optimism surrounding this "shale boom" has made American energy stocks some of the best places to put your money over the past several years.