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.

Microsoft. Same old story.

You just can’t make this stuff up.

Looks like the Senate is trying to shutdown the SPR:

The U.S. Senate voted on Tuesday to suspend oil deliveries to the Strategic Petroleum Reserve until crude prices fall below $75 a barrel, repudiating the Bush administration’s policy of boosting the stockpile at a time of record oil and gasoline prices.

U.S. lawmakers have been bombarded with complaints from their constituents about soaring gasoline costs, which hit a record-high $3.72 a gallon this week. They want to divert the reserve’s oil shipments to the market in an attempt to give some short-term relief to consumers at the pump.

The proposal to halt shipments to the emergency oil reserve, which overwhelmingly cleared the Senate in a 97 to 1 vote after most Republicans abandoned the president on the issue, was tacked on to a flood insurance reform bill that also passed.

“Short-term relief”. And they’re waiting for $75 a barrel? That’s a 40% drop from where we are now. What makes them think that we’ll EVER see those prices again? Ok, maybe after we don’t even need to use oil anymore, some yet unknown decades into the future.

Oh, and those consumers that are crying about 3 and 4 dollar gas? Let’s not forget they’re the same people that have been happily paying a buck-a-bottle for bottled water for years now, probably costing them between 4 and 6 bucks a gallon. Never a peep out of them about bottled water prices. And they’d casually toss plastic bottle after plastic bottle in the trash, filling up our landfills and forcing the manufacture of even more bottles — which are made from… wait for it… crude oil.

I gotta go. I think I’m going to be ill.

Stocks struggled a bit early on, but the selling never really amounted to much, and going into the last hour the Nasdaq and S&P had both worked their way into positive territory, though things relaxed slightly heading into the closing bell.

The indices finished split, crowded around the flat line:

Treasuries fell fairly hard, and yields jumped:
6-month: 1.89%    2-yr: 2.47%    5-yr: 3.16%    10-yr: 3.91%    30-yr: 4.62%.

Internals were positive, even though the indices weren’t, and volume was better than the last couple of days. Advances/declines were 10 to 9 on both exchanges, with up/down volume 10 to 9 on the NYSE and 3 to 2 on the Nasdaq. The Nasdaq new highs/lows are still a ‘conundrum’ (had to use that word): new highs/lows were 91/28 on the NYSE but 55/67 on the Nasdaq.

It was back to the commodities in the groups. The winners were led by metals and mining (+2.1%), oil services (+2.0%), disk drives (+1.8%), steel (+1.5%), natural gas (+1.4%) and networking (+1.2%). The financials, which had gotten a boost yesterday, turned right back around and led the losers column: banks (-2.1%), brokers (-1.8%), HMOs (-0.9%).

Energy prices moved back up after only one day ‘off’. Crude edged above $126 again before finishing at $125.80/barrel. Gasoline is right around $3.20/gallon, and natural gas moved up to $11.40/mmBTU. The dollar index was higher, at 73.29. The PMs got another morning pop on the head, and stayed lower for the entire day. Gold fell to $866/ounce and silver to $16.68/ounce.

BMB Note:   I see that when the commodities took a day off, it was only that - one day. Today’s new high list is littered again with metals, oil, coal and the like.

Then again, the little rally in the financials yesterday didn’t last long either, as they topped today’s losers.

As the commodities and the other leading stocks continue to rise, the major averages have been unable to move above last week’s highs. I know some folks tell you to ignore what’s going on in the indices when other stocks and sectors are providing opportunities, but those of you trying to decide what to do with the mutual funds in your 401Ks don’t have the luxury of playing specific steel names or oils, so you’ve got to pay a bit more attention to the action of the broader market.

Right now, the major indices are either in a consolidation phase - a ‘pause that refreshes’ - or they’re stalling after nearly two months up off the March lows. And it’s still too early to tell which.

…for government-created problems.

Here’s Ron Paul:

The House passed two bills attempting to rehabilitate the housing and mortgage market this week. There doesn’t seem to be any shortage of criticism and blame for the bad decisions, and rightly so. Lenders and banks do share much of the blame for the overheated market. Lending standards were relaxed, or even abandoned altogether, creating an exaggerated pool of homebuyers that led to ballooning home prices that many, especially real estate investors, expected to continue forever. Now that the bubble has burst, the losses are staggering.

However, many in Washington fail to realize it was government intervention that brought on the current economic malaise in the first place. The Federal Reserve’s artificially low interest rates created the loose, easy credit that ignited a voracious appetite in the banks for borrowers. People made these lending and buying decisions based on market conditions that were wildly manipulated by government. But part of sound financial management should be recognizing untenable or falsified economic conditions and adjusting risk accordingly. Many banks failed to do that and are now looking to taxpayers to pick up the pieces. This is wrong-headed and unfair, but Congress is attempting to do it anyway.

These housing bills address the crisis in exactly the wrong way, by seeking to hide the problem with more disastrous government bail-outs and interventions. One measure, HR 5830 the Federal Housing Administration (FHA) Housing Stabilization and Homeowner Retention Act would allow the FHA to guarantee as much as $300 billion worth of refinanced home loans for those facing threat of foreclosure. HR 5818 the Neighborhood Stabilization Act, would provide $15 billion in loans and grants to localities to purchase and renovate foreclosed homes with the object of then selling or renting out those homes. Thankfully, President Bush has vowed to veto both of these bills. It is neither morally right nor fiscally wise to socialize private losses in this way.

The solution is for government to stop micromanaging the economy and let the market adjust, as painful as that will be for some. We should not force taxpayers, including renters and more frugal homeowners, to switch places with the speculators and take on those same risks that bankrupted them. It is a terrible idea to spread the financial crisis any wider or deeper than it already is, and to prolong the agony years into the future. Socializing the losses now will only create more unintended consequences that will give new excuses for further government interventions in the future. This is how government grows - by claiming to correct the mistakes it earlier created, all the while constantly shaking down the taxpayer. The market needs a chance to correct itself, and Congress needs to avoid making the situation worse by pretending to ride to the rescue.

Not much follow-through this morning to yesterday’s positive market action, as both the indices and the A/D lines dangle in the red. Leading the slippage are the banks, brokers, gold and silver stocks and chemicals, while airlines are higher.

Treasuries are slipping as well, pushing yields higher. Energy prices are flat to slightly higher. The dollar index got a bounce back up, gold and silver got bounced back down.

Retail sales numbers were either good or bad, depending on how or what you look at.

Big Ben says things are ‘better’ in the financial markets, but not ‘normal’. Makes one wonder what his definition of ‘normal’ is, doesn’t it? Was the crazy stuff that was going on in the LBO and housing markets ‘normal’ in Ben’s mind?