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.

Some of the stocks that led the big move up in the transports at the beginning of this rally look like they may be decelerating quite a bit. This could be one of the first groups to break down if the market starts to encounter a rough road. The symbols for these stocks are EXPD, FDX, R and UPS.

Charts courtesy of StockCharts.com

Well, Fed day has come and gone. The market got a bit of a boost after the Fed announcement, but gave a lot of that back before hitting the closing bell. The Dow was up more than 100 points at one time, but finished up 56 points (+0.5%) at 10824. The S&P 500 moved higher by 7 points (+0.6%) to 1267 and the Nasdaq gained 4 points (+0.2%) to 2265. The Russell 2000 went the other way, falling a half-point to 689. The Dow Transports were lower by 0.1% and the Utilities gained 1.2%. Bonds spiked on the Fed news, then fell back, leaving interest rates slightly lower on the day: the 5-year at 4.44% and the 10-year at 4.54%.

Call it a rally if you’d like, but the internals don’t really back that up, although volume did pick up from yesterday’s levels. On the NYSE, advances/declines were 6/5 and up/down volume was 13/9, but on the Nasdaq advances/declines were actually just below the flat line, with up/down volume at just better than even. New highs/lows were 179/168 on the NYSE and 117/43 on the Nasdaq.

Looking at the industry groups, the winners were led by the drug stocks (+1.7%), thanks to a 6% move in Pfizer on their dividend increase. Following the drugs were rate-sensitive groups, like housing (+1.4%), banks (+1.3%) and utilities (+1.3%), as well as natural gas stocks (+1.2%). On the losing side were oil services (-1.5%) and airlines (-1.2%).

Crude oil prices finished the day up 7 cents at $61.37, but again, the big move was in natural gas, which closed above the $15 mark for the first time at $15.37. The dollar index barely budged (90.46), and gold pulled back to near $520/ounce.

BMB Note: The “Fed rally” looked good to start with, but didn’t amount to much, and it was never very broad based, especially on the Nasdaq side. The financials got a nice bump, but it doesn’t seemed to have done much to change the character of the market. We’re still stuck in the 3-week range, with prices and technicals holding up, but with little to no momentum. Sentiment leads us to believe that the next move will be downward - but until some move occurs, one way or the other, there’s really nothing to do except wait.

The Federal Reserve raised its interest rate another quarter point. No surprise there, but they did remove the statement that says their policy was ‘accomodative’, implying that they may believe they are getting closer to whatever the imaginary “neutral” rate is.

The stock market rejoiced, but I’m not so sure the Fed is that close to being done with rate hikes. I think there’s probably another 1/2 point coming in the next few months.

Louis Vuitton (LV) is one of the top luxury brands for fashion and personal accessories. Handbags start at near one thousand dollars (U.S.) and go up to several thousand. Along with brands such as Gucci and Fendi, LV is desired among the rich and famous. LV products are found in upscale department stores such as Neiman Marcus and Saks Fifth Avenue. In some major cities, LV establishes individual shores in the upscale districts. In Hong Kong, there are 6 such stores. One of the stores is located within the world-renowned Peninsula Hotel.

You’ll get a discount in Hong Kong compared to other places, but only because the tariffs are cheaper in Hong Kong and there is no sales tax (No sales tax knocks off at least 8 percent compared to most U.S. cities and on a thousand dollars that ain’t a bad sale price.) Don’t expect to get huge discounts for LV items in Hong Kong though. A little sluething turns up this rumor: LV pays somewhere around HK$250 per sq ft per month for its 8000 sq ft space in the Peninsula Hotel. That rent adds up to HK$2 million (US$258K per month) or over US$3 million a year. This amount does not include the cost of electricity, water, and the 2 security personnel guarding the entrance.

Not a lot of movement out of the gate today, with many awaiting the Fed announcement this afternoon. The November retail sales report, which was helped by a bump in auto sales (go figure), hasn’t had much of an effect, leaving the major indices just below the flat line. Natural gas stocks have moved higher, while airlines, transports and retailers are lower. Bonds are slightly higher, yields down.

Crude oil is slightly higher, but another big move up in natural gas, to $15.37. The dollar is holding its ground, while gold is continuing its pullback.

Fed announcement should be out about 2:15 ET.

BMB intrepid reporter, WK, has been cruising the streets of Hong Kong and not only has he found plenty of places to take a coffee break, he is finding that many travel in the seats of luxury:

I see more exotic cars here in a single day than I would see in a year in the US. For example, I saw a Maserati, a Bentley coupe, a couple of Rolls Royces, an Aston Martin, two Lamborghini, and several Ferraris–and that was just yesterday when walking the streets of HK. Porsches, BMW, and Mercedes are everywhere. They are quite common in HK.

Starbucks is everywhere also. Like the US, there is a coffee shop at almost every corner. However, there are a few other coffee shop chains competing with Starbucks such as Pacific Coffee, which was founded in HK. Pacific Coffee is Starbucks biggest competitor in HK. Prices for a cup of cappuccino are about the same price as in US.

And just in case you left your Rolls at home while visiting HK, don’t worry. WK reports:

I don’t think there is another city on earth that has a more convenient public transportation system than HK. Moreover, the variety of public transportation is astounding: There is the taxi, double-decker bus, double-decker tram, light rail, subway, mini-bus, and railways. HK’s subway system is the cleanest and most advanced subway system I have ever experienced–and I have ridden on the subway in New York, Altanta, Tokyo, and Paris. They don’t hold a candle to Hong Kong’s underground genius.

The volume of Rolex brand watches sold in HK is second only to Switzerland (where the watch is made). The city of HK sells more of this brand of watches than is sold in the entire US.

WK from Hong Kong