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.

As luck would have it, an article from The Daily Reckoning fits in quite well with the story on the California income ‘problem’ we posted earlier:

Although the disease manifests itself in a variety of ways, it often produces behavior characterized by reckless borrowing and insatiable consumption. The disease, known as “affluenza,” has infected millions of Americans already, but has reached epidemic proportions among California homeowners.

Read the whole thing.

The California Association of Realtors apparently keeps track of the gap between the state’s median family income and the income needed to purchase a median priced home. Needless to say, many people can’t afford the homes there. Why? This article implies that it’s because the median family income is too low.

Statewide households, with a median household income of $53,540, are $60,380 short of the $113,920 qualifying income needed to purchase a median-priced home at $488,600 in California

Yeah, ok. Lemme see - a median-priced home in California is how much?? Folks, I got news for you. Income isn’t the issue here. Did it ever occur to you that maybe home prices are just a little out of whack? Of course, if the study comes from the realtors, well then, I can understand why they’re not overly concerned with the prices. Hmm, 6% of $488,600 comes out to a cool $29,316. Doesn’t sound like much of a problem for the realtors, does it?

And there isn’t a housing bubble. Whatever you say. But these things usually have a way of working themselves out. You know - if the people living there can’t afford to buy the houses, how long can the prices stay that high??

Someday, all those ‘interest-only’ mortgages are going to blow up in all of our faces…

From Martin Goldberg’s market commentary on Financial Sense Online, regarding GM and Ford debt being tagged with ‘junk’ status:

Well today’s S&P debt downgrade to “JUNK” will be seen by millions of Americans on the evening news and morning drive time shows tomorrow. They will receive the subliminal message from newscasters uttering “General Motors” and “Ford” in the same breath as the word “JUNK.” Not a good subliminal message! This may, in my view, wipe out the subliminal effects of at least 3 years of expensive Super Bowl ads.

The market never really got going today, and the GM/Ford midday news didn’t help matters any. The Dow Industrials fell 44 points (-0.4%) to 10340, the S&P 500 dropped 3 points (-0.3%) to 1173 and the Nasdaq lost less than a point, finishing at 1962. The Russell 2000 gained less than a point to 596, the Dow Transports gained 0.3%, the Utilities dropped 0.8%, and the bond market rallied on the GM/Ford bond news, driving the 10-year Treasury yield down to 4.15%. The bond market continues to look very overbought to me, but it just keeps going higher. That move has to slow sooner or later…

Market internals were mixed on lighter volume than yesterday. Advances/declines were 17 to 15 on the NYSE but 14 to 15 on the Nasdaq. Up/down volume was negative on both exchanges at about 5 to 6, and new highs/lows ran 82/20 on the NYSE and 57/79 on the Nasdaq.

Not a lot of major movement in the industry groups today, with oil stocks (+1.0%) and natural gas stocks (+0.9%) moving higher, and disk drives (-1.9%), steel stocks (-1.4%), networkers (-1.0%) and paper stocks (-0.9%) falling.

Crude oil prices rose to $50.83/barrel, the dollar index remained near unchanged, and gold hovered near $430/ounce.

Standard & Poors has cut the debt ratings for GM and Ford bonds to junk status. The announcement, which was not entirely unexpected, has sent F and GM shares lower and that has taken the Dow down 80 points.

These companies are a real mess, with financial obligations stretched out for years that their businesses are unable to support (can you say “airlines”??). Here’s a look at the situation at GM, from Business Week Online.

Merck has named Dick Clark as its new CEO. No, not that Dick Clark…

A small Michigan-based company believes it may have found a 1 billion barrel oil deposit in Utah.