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.

Bill Fleckenstein says that the “next time down” has begun:

The next time down will be a time where people will be squeezed financially, because their main asset, i.e., their homes, will be declining in value. Meanwhile, their loan will be rising as a percentage of the value of that house and, in many cases, may ultimately pass 100%.

Jobs will be difficult to come by, as they have been for many, and that’s a lingering residue of our prior stock mania and our general lack of competitiveness (productivity protestations to the contrary). It will indeed be a very ugly period, as the economy shrinks and people scramble to figure out how best to service their enormous debt loads. This will play havoc with the dollar, and I believe the “vaporization” of the dollar will be part-and-parcel of the next-time-down scenario.

Meanwhile, the Fed will become thoroughly discredited at some point. It will ultimately be seen as the culprit that created the conditions for the bubbles (the cause of the next time down). And, more importantly, the Fed will be seen as impotent to do anything about it. The Fed will cut rates, which really won’t be effective, though it will put tremendous pressure on the dollar. Of course, the Fed won’t care about dollar weakness until it’s a problem, in the form of funding the Treasury market.

So, in the environment that I envision:
* Stocks will decline dramatically in value.
* The dollar will see serious weakness.
* Foreign currencies (as lame as they are) will do well.
* Precious metals will do the best, because they are currencies beholden to no central bank and without liabilities.

That’s what a thought will cost if the US government does away with pennies. With the rise in commodity prices:

For the first time, the U.S. Mint has said pennies are costing more than 1 cent to make this year, thanks to higher metal prices. “The penny is going to disappear soon unless something changes in the economics of commodities,” says Robert Hoge, an expert on North American coins at The American Numismatic Society.

Of course, more inflationary than thoughts, if there is no penny, all purchases will be rounded to the nearest nickel. No more gas at $2.96. The station will have to chose: $2.95 or $3.00. Guess which way they’ll go?

I suppose this means that instead of cashing in all your old pennies, you should take them to a metal scrap yard…

Items of note on the latest industry moves:

• For a refresher on how BMB gathers this information, take a look at this post from a few months ago.
• Since it’s the end of the second quarter of the year, we’ve thrown in the year-to-date numbers.
• A pretty decent recovery week, with only 2 groups in the red. But that hasn’t repaired the longer term damage, as only 5 groups are in the green over the past 8 weeks.
• This week’s winner were the energy and commodity related stocks, while the tech stocks continue to dominate the losers’ list.
• How the transports continue to hold up despite $70+ oil is beyond me. If that group breaks, you gotta believe much of the market will go with it.
• Still not a lot of strong charts out there. A lot of damage has been done over the past 6-8 weeks, and it’ll take some time to recover from that - that’s if we’re going to see a meaningful recovery anytime soon.
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page.