Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

The rally may not solve all problems - or any of them - but it feels good nonetheless.

An interesting look at the challenges faced by the US economy.

Summary block:

• The Personal Savings Rate and Net National Savings Rate - Both have plunged to all-time lows over the past two years. This historic lack of saving is a clear indication of a nation living beyond its means.
• Current Account (Trade) Deficit – Lacking in domestic saving, America requires $2.6 billion of foreign capital inflows every business day to fund our economy. The U.S. is now absorbing 80% of the world’s surplus saving. This huge imbalance puts pressure on domestic job creation and may lead to protectionist policies. It also weakens the U.S. dollar, which will eventually mean higher prices and higher inflation.
• Budget Deficit - Like its citizens, the government is spending much more than it is taking in, over $400 billion this year alone. This number could grow significantly in 2005.
• Household Debt - The housing boom has allowed asset appreciation to be used as a means to fund current consumption, i.e., the home functioning as an ATM. As a result, household indebtedness is now at an all-time high.
• Demographic Reality Check - It is a mathematical certainty that retiring Baby Boomers will wreak havoc with the Medicare and Social Security systems, given our current political reality. A recent government study on future Medicare and Social Security needs shows a present value “gap” of promised outlays and projected revenues of $51 trillion, and rising. To quote the obtuse Alan Greenspan, “significant structural adjustments will be necessary.” One has to wonder who will be able to make those adjustments, and when will they start? President Bush appears willing to address Social Security, but faces strong opposition. Even if successful, Medicare represents the lion’s share of the $51 trillion shortfall, which only grows larger.

The markets were pretty much treading water all day today, with the Dow and Nasdaq managing slight gains and the S&P 500 and Russell 2000 incurring slight losses. The Dow gained 11 points (+0.1%) to 10550 and the Nasdaq added almost 9 points (+0.4%) to close at 2094. The S&P and Russell lost less than a point each, finishing at 1184 and 621 respectively. Most internals were only slightly positive, but the Nasdaq up volume led down volume by 7 to 3. New highs again outnumbered new lows by a large margin.

Airlines (+3.5%), networkers (+1.7%) and semiconductors (+1.4%) were the big winners of the day, and a further drop in oil prices sent oil service (-32.%), oil (-1.8%) and natural gas (-1.8%) stocks lower. Gold stocks also dipped by 1.4%.

On the earnings front, Dow stocks WalMart and Home Depot report tomorrow. Economic numbers coming up include the Producer Price Index tomorrow and the Consumer Price Index on Wednesday.

Correction: Apparently the data I was looking at earlier was incorrect: the Russell 2000 actually gained 2 points or 0.3% today.

The weekly look at technicals and sentiment from Schaeffer’s.

Microsoft (MSFT) goes ex-dividend today - the stock price will be reduced by $3, the amount of the dividend to be paid in December. Friday was the last day to buy the stock and qualify for the special dividend payment.