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.

Not surprisingly, Bill Fleckenstein is amazed by the “upside-down logic” of Wall Street. But he’s not convinced that the apparent ‘liquidity fest’ is for real:

Part of me thinks that the current mini-mania in equities is a response to Fed-induced liquidity. And yet, when I discuss with my good friend Jim Grant what the big central banks of the world are doing — Japan’s, the United States’ and Europe’s — he suggests that they really aren’t spewing out liquidity as aggressively as people think. Of course, if they were, one might expect commodities to be on more of a run than they have been. To me, they seem to be suggesting that the world economy is slowing down at the margin.

Therefore, I’ve concluded that what we may have is the illusion of a liquidity fest. The stock market is acting as though there’s an enormous fire hose of liquidity gushing forth — when, what might actually be the case, is that a wanton derivatives/credit/lending mania is in full force.

Markets in motion may stay in motion. If, however, the source of the propulsion is mispriced and badly structured credit, things can come to a sudden stop. But if that were to occur, the Fed at some point would ride to the rescue with plenty of liquidity. That is Marc’s (Faber) point and is, of course, the point of my pet saying that in a social democracy with a fiat currency, all roads lead to inflation…

…the important takeaway point: If the environment is as I suggest, it can end quickly and violently. Those who are tempted to participate are likely to be hurt. That’s my best attempt to make sense of what’s going on and what it may lead to.

This time it’s a big one in the mining industry:

Freeport-McMoRan Copper & Gold Inc. (FCX) said on Sunday it agreed to acquire Phelps Dodge Corp (PD) for about $25.9 billion in cash and stock, creating what it called the world’s largest publicly traded copper company.

	If the chart of the oil stocks looks like this…
	…and the chart of the oil services stocks looks like this…
	…why does the chart of crude oil prices look like this? There is a clear divergence between oil stocks and oil prices at this point, as the stocks have rebounded but the price of the commodity itself has not. This divergence will be resolved, sooner or later. The general belief is that the stock prices will lead the commodity, implying that oil prices will rise to catch up with the stocks. But there are no rules to say that the stocks can’t fall back if the commodity price never gets going.

Charts courtesy of StockCharts.com

A new edition of the ChartWatchers newsletter from StockCharts.com is available for your viewing enjoyment. This week, the experts discuss commodities and Canadian stocks, the four-year cycle, another breakout in the QQQQs and the state of the current Nasdaq rally.

Items of note on the latest industry moves:

• The airlines and tech are trying to take over the ‘best’ list.
• The semiconductors made a little breakout above their range this week ($SOX chart), but other tech areas like internet ($DOT chart), computer hardware ($HWI chart) and networking ($NWX chart), along with biotech ($BTK chart), have been much stronger.
• The commodities took the top spots in the ‘worst’ list this week, but health care still holds on to the ‘leadership’ spots over the past few weeks.
• The health care groups got a nice bounce out of their post-election selloffs.
• Housing stocks ($HGX chart) were able to save themselves after looking like they were going to roll back over.
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page.

I’m sure you heard all the buzz over the debut of Sony’s PS3 this week. Well, not all of those folks standing in line to get one of the newest ‘hot’ consoles was planning on using it themselves - many were looking to take advantage of the short supply and sell the new hardware at prices far above the retail price.

Here in Central TX, listings of PS3 consoles on Craigslist.com numbered well over 200, and asking prices reached upwards of $3000-$4000. However, it seems that far too many people had the same idea, and what do you know? Those consoles aren’t selling. And many of those who hoped to make a quick buck might not be able to afford to sit on their ‘inventory’ very long.

This response to the ’suppliers’ was seen on Craiglist today:

Face the facts, PS3 reselling losers…

The truth is, you people who are trying to sell for $1000 or more are getting desperate because no one is buying into your BS. Especially funny are the idiots that are claiming that the systems are going for $3000-$5000 on ebay. Yeah right, I was just there and most that were over $1200 had NO bids on them 5 minutes to end of auction.

Now the retards realize they spent upwards of $650-$800 and they will not get the windfall they were expecting. I’ve seen people on here whining that they have to get rid of it ASAP, have bills to pay, stood in line for days in the cold weather (like that gives you license to rip people off), etc. Shoulda thought of that before becoming greedy, scumbags. You took the opportunity that GAMERS (people who actually WANT to play the system) should have had to buy the systems. Now you sit on your “investment” whining that no one will buy it. Tough shit. Stop crying like a bunch of wusses because everyone else is smarter than you. Prices WILL NOT go up because YOU are flooding the market and the market will dictate that YOU will have to sell your system for little or no profit.

Oh, by the way, you can flag and remove this all you want since it scares you. I have all day tomorrow to repost it. And since Thanksgiving holidays are upon us, I have even more time to repost. Yeah, I do have a life, before you break out that lame old insult, but right now it seems that I may need to dedicate some time for a greater good (busting the chops of lowlife overpriced PS3 resellers).

Update: And of course, you have to factor in the competition from the release of Nintendo’s new console as well.