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.

Remember how we (ok, the Dow Theorists) had been waiting for the Dow Transports to set a new high in confirmation of the new high in the Industrials? We’re still waiting.

Chart courtesy of StockCharts.com

Yet another relatively quiet day, with little movement in the indices or in the groups. This is getting old - and very boring:

Bonds gave up more ground, and yields made their biggest jump in quite a while:
6-month: 5.06%   2-yr: 4.67%   5-yr: 4.53%    10-yr: 4.56%    30-yr: 4.66%.

Market internals were mixed, but biased to the positive, but volume was at its lowest levels of the week. Advances/declines were 9 to 10 on the NYSE but 10 to 9 on the Nasdaq, while up/down volume was 6 to 5 on the NYSE and nearly 2 to 1 on the Nasdaq. New highs/lows were 216/18 on the NYSE and 118/32 on the Nasdaq.

Very quiet on the group front again, with only the brokers (+1.0%) registering a one-percent gain or better, and the gold stocks (-1.7%) and homebuilders (-1.9%) leading the losers.

Energy prices were mostly lower. Crude oil gave up some big morning gains, and fell back to a 46 cent loss on the day, at $62.03/barrel. Gasoline held steady at $1.62/gallon, and natural gas slipped a few cents to $7.56/mmBTU. The dollar index moved to its highest level in a week at 83.28. Gold dipped to $627/ounce and silver fell to $13.75/ounce.

BMB Note: Not much change from yesterday. I can’t decide if this market is just boring (certainly going nowhere on light volume qualifies as dull) because it’s consolidating for another move higher, or if this rally is really getting tired and things are getting ready to roll over. Seems to me, the market could do either at this point, but it’s sure taking its time trying to decide which one it’s going to be. Some groups are looking a little toppy, but you can’t really call most of those moves real ‘breakdowns’ as of yet, so it’s still a little dangerous to get too trigger happy on the short side.

So as far as long positions go, I’d still keep my eyes on those areas that may move more independently of the rest of the market, namely the commodities. The pullback in gold and gold stocks still might be interesting. Something else that could be of interest is the pullback in bond prices. If yields really do continue to dive over the longer term, the current pullback may provide good entries into the bond ETFs. Something to keep an eye on.

Isn’t there a Fed meeting next week? But wait, isn’t Bernanke headed off to China with the Treasury secretary? What - Big Ben has been on the job for less than a year and already he’s skipping out on work?

…you gotta do it yourself.

From Bankrate.com:

In a race for the best mutual fund returns between do-it-yourself investors and those who get guidance from financial advisers, you might expect the latter to win. After all, they’re receiving the benefit of expert advice. They likely have access to special mutual funds with complex investment strategies or funds that are smaller and lesser-known. Their advisers hypothetically would select funds with better risk-adjusted returns and lower costs (excluding loads, of course).

Plus, they’d give their clients better advice about asset allocation, which is the primary driver of portfolio performance, according to a well-known landmark study published in 1986 in the Financial Analysts Journal.

Meanwhile, individual investors without the benefit of this expert advice would lumber along slowly, achieving dull returns in a futile race. Right?

Nope. In fact, two recent studies arrive at the opposite conclusion: that do-it-yourself investors do better without help from the so-called experts.

According to the first study, buying funds through an ‘adviser’ doesn’t offer any “tangible benefit”. You’ll see no surprise on my face:

One of the studies promises to reverberate through the advice community for many years to come. Research scientist Dr. Donald Moine, in a recent article published by Morningstar, called it the “study of the decade,” and he likened it in importance to that asset allocation study published two decades ago.

Three academics, two from Harvard Business School and a third from the University of Oregon, published a working paper called “Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry.” The study analyzes mutual fund data from two channels: The “direct channel,” which consists of no-load funds that investors can easily buy through fund supermarkets (i.e., Fidelity, Vanguard, Schwab, T. Rowe Price, etc.), and the “broker channel,” consisting of funds that are sold only through advisers.

The study attempts to find tangible benefits that brokers provide to their clients. Guess what? They came up dry.

And I’m sure you’ll be absolutely shocked to find that buying through brokers will cost you more too. And they have incentive to generate revenue from fees. Fees that come out of your pocket:

Here’s more proof of broker self-interest: A study released last week shows that investors who buy index funds through brokers pay substantially more for the privilege than do independent investors who go through no-load channels. Not only are brokers’ clients paying distribution loads, which would be expected, but also higher operating expenses, to the tune of nearly half of a percentage point.

***

Faithful readers of The Wall Street Journal know how this works. For example, in recent months, A.G. Edwards announced that it was giving away bonuses of up to $50,000 to advisers who could lure high-net-worth brokers to that firm. The bonuses range from $15,000 “for recruits who produce at least $300,000 a year” on up to $50,000 for those “who produce at least $800,000.”

“Produce that much in what?” you may ask. Why, in annual commissions and fees! Guess where that money comes from?

So I ask you: Who do you think is going to pay more attention to and be more protective of your money than you are?

Even the monthly jobs report has been unable to get the market moving, in either direction. Indices are hovering around the UNCH mark, A/D lines are just below flat, and group movement is minimal. Oil services are higher by about a percent, and are the biggest movers, up or down.

The morning numbers did send bonds lower, thus yields are up. But the dollar has slipped.

Energy prices are higher, gold and silver are slightly higher.

The November non-farm payroll report, of fictitious jobs created, showed an increase of 132,000. September and October numbers were revised for a net additional gain of 42,000 as well. In contrast, the household survey showed that unemployment ticked up to 4.5% from 4.4%.

U Mich. consumer sentiment for December came in lower than expected.

Add another mortgage lender - NEW - to that 52-week low list. We mentioned LEND yesterday.

For the breakout players, a nice move in Barclay’s (BCS).

And I thought BCS was the Bowl Championship Series.

Update: This is likely the reason for the recent move.

Gary Kaltbaum alerts you to some distribution in the Nasdaq:

As you know, I believe in looking under the hood of the market and not just the market itself. I just wanted to briefly let you know I am seeing subtle distribution in the Nasdaq/Techs and not so subtle distribution in some leading names like Research In Motion (RIMM) and the almighty Apple Computer (AAPL) as well as others. Maybe this is nothing but things happen when they are least expected. December is believed to be a month where nothing bad could happen. I will let the market decide. Short term support on the Nasdaq is 2390 with the 50 day at 2370. The Nasdaq 100 is 1760 with the 50 day at 1740. A break below would start the first decent correction in quite a while. Of course, support will hold…and the market will romp again. Right? Well, that is what most expect these days because that is what most are conditioned for. We shall see.

And what would Gary’s report be without opinions on things like Home Depot, the dollar, the Iraq Study Group report and Henry Blodgett? But you’ll have to read the whole thing to get that stuff.

Oh yeah, - Happy Birthday to Eric!