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.

An excellent exchange between Gary Kaltbaum and Scott Bleier of Hybrid Investors on Gary’s radio show today, regarding the state of the market, why we are where we are, and the possibilities for the near future.

Here’s Scott on where we are today:

“…the towel has been thrown in, the weak dollar has gotten all the foreigners money, the mergers and acquisitions have created a frenzy, and I think this is a great time to be lightening up on those 401Ks and all those index funds that everybody has bought, month after month…

Here’s the MP3 file of today’s show - the discussion starts at about the 3:00 mark.

I finally got it. What we have here is an “Ever Green” market.

You know the drill. Nearly all the indices finish up after a lousy jobs report - the Nasdaq 100 finished flat. Dow makes it 23 of 26. I’d venture to guess that has never happened before - like in recorded history. If so, we’ve gotta be talking like once, maybe twice at the most.

Bonds rallied along with stocks, and yields were sent lower:
6-month: 5.01%    2-yr: 4.67%    5-yr: 4.55%    10-yr: 4.64%   30-yr: 4.81%.

Market internals were positive, of course, but volume didn’t pick up over the last couple of days. Advances/declines were about 11 to 8 on the NYSE and about 5 to 4 on the Nasdaq, with up/down volume 3 to 2 on both exchanges. New highs/lows were 304/20 on the NYSE and 189/52 on the Nasdaq.

Most groups were green, but there wasn’t a long list of movers. The winners were airlines (+1.7%), brokers (+1.4%) and semiconductors (+1.0%), while the homebuilders (-1.1%) led the losers.

Energy prices were lower, as crude oil dropped more than a buck to $61.93/barrel, gasoline lost a few cents to $2.21/gallon and natural gas slipped back to $7.88/mmBTU. The dollar index fell back to 81.73. Gold moved up to $687/ounce and silver moved up to $13.42/ounce.

BMB Note: Same ol’, same ol’. Market still up, and I still don’t understand it. I don’t know how to trade something I’ve never seen before, so I’m pretty content to let the ‘investing’ side of me enjoy some mutual fund gains.

As good as the market looks from the outside, there are some areas inside that are still lagging badly, and these should be avoided, in my opinion. Those areas would include the airlines, homebuilders, REITs, selected retail and gaming stocks, as well as some of the financials.

I find it rather amazing that the Dow can run five weeks with only 3 down days at any time, let alone in a time with a weakening housing market, sagging GDP, slumping retail, inverted yield curve - basically staring down the barrel of a big slowdown or possible recession. And we can toss sky-high gasoline prices into that mix as well.

But then, the market doesn’t really care whether I ‘get it’ or not. Just be careful, and be aware of the situation.

Update: I stand corrected - apparently the 23 of 26 run has happened before. Once, quite a while back, according to CNN:

The Dow has now risen in 23 of the last 26 sessions, marking its longest bull run since the summer of 1927, when the indicator ended higher in 24 of 27 sessions, according to Dow Jones.

A flurry of selling in the last half-hour smashed the indices back down to flat on the day. We’ll have to see what the afternoon holds in store.

I’m having trouble deciding which is a bigger government scam - the computation of the CPI, the huge margin of error in the housing starts number, or the use of the birth/death model in the ‘computation’ of the monthly non-farm payroll numbers.

Here’s Kevin Depew from his ‘five things’ today:

1. Economic Deceleration Contained to Overall Economy

U.S. job growth in April slowed to 88,000, less than the 100,000 economists expected. And that’s actually the good news.

• The bad news is related to the comical shenanigans of the the Birth/Death Model.
• The Birth/Death model contributed 317,000 adds.
• That’s not a typo. That’s 317 thousand adds.
• According to Minyanville Professor Scott Reamer, since 1999 there has been only one other month in which the add was bigger, January 2004.
• For some perspective, in the 36 month period ending March 2002 - 36 months - the total adds from the birth/death model were 353,000. Over 36 months.
• Since the beginning of the year, the birth/death model has accounted for a net 388,000 jobs.
• Last year it added 964,000 jobs.
• The kicker is that the Bureau of Labor Statistics refuses to allow academics and commercial economists access to the models they use for the birth/death additions.

So we had to depend on a computer model that added 317,000 fictitious jobs to get to a ‘total’ of 88,000. Hmm. Can we believe any numbers that the government puts out anymore? I’m thinking that answer is a resounding ‘NO’.

On Star Trek, a couple of planets fought an interplanetary war with computers. Here in the US, we just create jobs with them.

Here’s Barry at The Big Picture on the big B/D figure:

Birth Death Adjustment: A whopping 317k B/D adjustment — that is the single largest “adjustment” on record for any single given month. And despite that giant add, the number was a very soft 88k.

To put this into some context, of those 317k new jobs hypothesized by BLS, 49k of those supposed jobs are in construction. Now what are the odds of that?

While Wall Street celebrates the upcoming recession, let me remind you that this economy requires about 150k new monthly jobs to merely keeep up with population growth.

BMB has some business to attend to this morning - be back by lunchtime or so.

These numbers don’t look that great to me - April jobs less than expected, Feb. and March revised lower, unemployment up a tick - but the futures moved higher on the news anyway.

Go figure.

The gains were concentrated in government and the ’service sector’, whatever that is:

In April, the weakness in payrolls was concentrated in the goods-producing sector, which lost 28,000 jobs. As expected, construction employment fell by 11,000. Manufacturing employment continued to be weak, falling by 19,000. But the weakness also spilled over to the retail trade sector, which shed 26,000 jobs in the month. Service sector employment continued to be the major job engine, with 116,000 jobs created in April.

Here’s an interesting note on the employment survey:

The separate survey of households showed employment fell sharply by 468,000 jobs in April. This is the biggest drop since November 2002. Unemployment rose by 77,000 to 6.80 million. The civilian labor force declined by 392,000.

When the jobs go, the economy goes. It’s as simple as that.