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.

Peter Schiff is right — it’s hard to imagine that the changes that have taken place in the American economic landscape over the last 25 years have been good:

…the belief that the U.S. economy has fared better than those of surplus nations and that our current account deficits actually result from our superior growth is now widely accepted in both academia and on Wall Street. Excuse me folks, but I beg to differ.

In 1982, the last year in which the U.S. enjoyed a current account surplus, America was the world’s richest creditor nation. Today, we are the world’s greatest debtor. How can such a transformation be interpreted as being positive? Can someone really say with a straight face that being a debtor is better than being a creditor? In 1982, America still flooded the world with high-quality, low cost manufactured goods. Today we flood the world with our IOUs. How can the disintegration of American industry be seen as anything other than a colossal economic failure?

BMB often wonders just when the stream of American consumption will be reversed. Someday, things will have to change. It’s just a matter of when, and why.

A break even day, as the market seemingly spent some time digesting the gains from the past week or so. The major indices started off hot, then pulled back, but managed to claw their way back above the flat line before the close. The Dow finished up 8 points (+0.1%) at 10531, the S&P 500 gained less than a point to hold at 1220 and the Nasdaq picked up 9 points (+0.4%) to 2169. The Russell 2000 fell less than a point (-0.1%) to 658. The Dow Transports gave back 1.0% and the Utilities fell 0.3%. Bonds had an up and down day, ending down slightly, with the 5-year yield up to 4.56% and the 10-year at 4.66%.

Market internals were mixed, slightly negative on the NYSE but positive on the Nasdaq. On the NYSE, advances/declines were 4 to 5 and up/down volume was 9 to 10, but on the Nasdaq advances/declines were just above flat and up/down volume was 3 to 2. New highs/lows were 69/87 on the NYSE and 97/58 on the Nasdaq.

No big winners in the industry groups, with biotechs (+0.7%) and HMOs (+0.7%) leading. The down side was led by energies: oil services (-2.9%), oil stocks (-2.7%), natural gas stocks (-2.6%), natural resources (-2.4%), commodities (-1.2%) and transportation (-0.9%).

Crude oil prices fell back $1.20 to $60.58/barrel, with natural gas and gasoline down as well. The dollar had a big day, gaining ground against both the yen and the euro, pushing the dollar index up 0.9% to 91.26. Gold paid the price of the stronger dollar, falling to $456/ounce.

BMB Note: Not surprising that the market paused a bit today, but it didn’t seem to be much more than that. Energy prices don’t seem to be in any hurry to move higher, so that’s good, but interest rates don’t seem willing to move lower either. That’s good for savings, but not good for borrowers and usually not great for stocks. The higher rates also seem to be helping the dollar.

For stocks: until things change, we have to assume the path of least resistance is higher. How much higher, we don’t know.

Lawrence McMillan of OptionStrategist.com, from his free weekly market update (sign up):

In summary, we are on an intermediate-term buy signal — much as we’ve seen in other Novembers. This one is coming off a good technical base, which makes it much better than the post-Katrina rally we saw in September. It’s interesting to note that there seems to be a lot of bullish consensus in the media, but we can’t trade that — we can only observe the sentiment indicators we have on hand, and the extremely high levels of the put-call ratios would indicate that traders might have been saying they were bullish for November, but weren’t actually trading that way.

The market started off higher this morning, but those gains quickly faded and the majors now stand mixed, but off their worst levels. Internals, too, are mixed. Looking at the groups, energy stocks are getting hit the hardest, with HMOs leading a small group of modest winners.

Bonds had moved lower before the open, then rallied on the rather weak jobs number, but have since come back to just a slight loss. That has yields just higher, with the 10-year at 4.66% after hitting 4.68% before the jobs report.

I don’t quite understand the rally in the dollar the past couple of days, but it has been strong. The dollar index is up another 0.9% today, and gold is lower.

Robert Kiyosaki on how savers are punished by inflation:

My poor dad believed in saving money. “A dollar saved is a dollar earned,” he often said.

The problem was he didn’t pay attention to changes in monetary policy. All his life he saved, not realizing that after 1971 his dollar was no longer money.

You see, in 1971 President Richard Nixon changed the rules of money. That year, the U.S. dollar ceased being money and became a currency. This was one of the most important changes in modern history, but few people understand why.

The October jobs number came in lower than expected - September’s figure was revised upward, but August’s numbers were revised downward.

I don’t place much stock in the accuracy of these numbers, but they do generate a lot of discussion, and the market does react to them, so you can’t totally ignore them.