I don't get this market

Oil is hitting a new high every day.

Food costs are soaring, leading to shortages and riots.

The Fed is handing out money like Fun Size Snickers on Halloween.

The economy is hitting the skids worldwide.

Private equity deals are falling apart.

Retailers are going bankrupt.

Foreclosures are up nationwide.

Gold is over $900 an ounce.

The U.S. dollar is basically toilet paper.

Yet the U.S. markets ignore all of this. I guess that it didn't get the memo. What will cause the bulls to throw in the towel? Any ideas.

P.S. Oh, one more note. The proposed Blockbuster-Circuit City merger is moronic. Two bad companies don't equal one good entity. You really have to work hard to upstage a bad airline merger.

Wall Street finally sees a recession coming

That's all the financial press has been writing about for the last few days. I don't think that this is any more newsworthy than Helio Castroneves winning "Dancing With the Stars." Actually, it's less important because so many people have been predicting it. Hell, Jim Rogers for months has been saying that we're already in a recession. If the press is now writing stories about it, than it must be an old story. Don't fixate on the magical 10% number for a correction, or get caught up in these huge sucker rallies that happen once a week it seems.

Enjoy the Fed Rally while it lasts

So the market got a bigger cut than it expected and now everyone's singing Bernanke's praises. All he has done is stave off the inevitable. This problem is bigger than the Fed or even all the world's central banks put together. The system needs a painful cleansing, sooner or later. Bernanke's hair of the dog that bit you cure for the hungover U.S. financial system works in the short-term, but doesn't address the bigger issue which is our drinking problem.

Bill Miller's latest letter to investors

Has Bill MIller been needlessly contrarian? He still has refused to put any money into energy stocks. Not only, is he not buying energy stocks, he's buying housing stocks nad has large exposure to financials. Consequently, on the year, he is trailing the S & P 500. He explains his reasons in his quarterly letter to shareholders of Legg Mason Value Trust.
I am not saying that Bill Miller has lost it. He is doing exactly what great value investors do; he's buying extremely cheap companies that others don't want and being patient. He readily admits to being very early on his housing stock buys. Also, he isn't convinced that we're in the midst of a secular bull market for energy. He shouldn't buy energy stocks because they've been the market leaders for the last five years. He should buy them because they are still cheap and are throwing off record amounts of cash.

Slow news day

The biggest story this morning is that Microsoft(MSFT) has raised its dividend. McDonald's(MCD) has hit an all-time following, following a 50% dividend increase. No big earnings news. Crude is down a bit. Gold is down a smidgen. The unemployment numbers were better than the abysmal ones analysts were expecting. The UAW might establish a trust fund for its members healthcare costs. These are not big, market-moving stories. Still the market is up huge. Perhaps buyers are desperate that they are looking for any hit of good news. This is a great example of how it makes absolutely no sense to try to parse meaning from the daily fluctuations of the market.

Traders and the poor

Michael Lewis' irreverent take on the subprime mess. Lewis pens his latest piece for Bloomberg from the perspective of a burned sub-prime credit trader. As always, Lewis is insightful and funny. I wish that he wrote more often for national publications.

Stop paying attention to Wall Street research!

Is it just me or are Wall Street analysts asleep during every bubble? First the equity analysts with theInternet bubble, now the ratings agencies(Standard and Poor's, Moody's, Fitch) with the current credit bubble. Why do investors, retail and institutional alike, rely on them for information? Well, I can see why the big boys would put such faith in research, since they're the authors, but the little guy should take a page from Warren Buffett and only read Wall Street research for laughs. Wall Street analysts and ratings agencies are not the SEC. They're not interested in protecting you or your money.

Dow down 280 points

So Wall Street didn't get the word of a rate cut that it wanted from the Fed. Boo-hoo! I say no welfare for the rich. A rate cut would help the markets temporarily, but in the end, no one can stop the inevitable correction that's coming this market's way. The FOMC can only delay it. The business cycle is real. It can't be outsmarted, not even by PhD. economists. Besides, why should homeowners and mortgage companies go belly up, while their Wall Street co-conspirators get bailed out?

Don't fixate on the United States

Yes, it's been a rough past few months for the S & P 500 and the Dow, but they represent only one market. There's still the rest of the world out there. Look at Europe. Look at Asia, ex-China. They've taken a hit too, but not as big a one as the U.S. YTD, these markets are up over twice what we are.

Bogle hopeful

The father of indexing says that hope will return.

Bill Fleckenstein is absolutely right

Bill Fleckenstein has been warning of the impending demise of the current asset bubble for at least a year. Central banks have to stop bailing out the market. They are guaranteeing that we will will have even more egregious bubbles because idiots and crooks won't get punished. Whatever happened to capitalism? Creative destruction?

More on the Yen Carry Trade

Bryan Moore at SeekingAlpha writes that it's not dead.

How to play these rallies

Don't. Just sit on the sideline until the market has made a definite decision about where it's headed. Don't try to be a hero. There's nothing wrong with sitting in cash. It's safe and it's smart when the market is this volatile. Pick some stocks for your watchlist and try to pick up a screaming buy if you want, but don't get cute.

REITs on a buying spree buying back shares

Do not follow them into the breach. A lot of companies in this space or undervalued right now. A lot of them will be even more undervalued in the near future. The same goes for insider buys at troubled firms like Yahoo(YHOO). Yahoo is still a good company with a dominant, entrenched brand. However it is also a mess right now and has large problems. Susan Decker's $1 million ante, while encouraging, shouldn't be seen as a sign of a turn. Keep your powder dry for the moment.

Merrill downgrades Countrywide

Merrill Lynch(MER) wants you out of Countrywide Financial(CFC), downgrading it from a buy to a sell. Like everybody else, they got spooked by Thornburg's(TMA) enormous drop yesterday. Countrywide shares have lost nearly half their value since February.
This morning on CNBC, Thornburg president/COOLarry Goldstone attempted to calm the waters. It may have worked for now. The stock is up about 47% thus far. Yesterday, they announced that they were delaying paying the second quarter dividend in order to preserve cash. Goldstone says that the company is not for sale.
These are stop gap measures. They are the appropriate actions, but they are bandaids on a massive head trauma. Yesterday, Goldstone said that they had no "intention" of filing for bankruptcy. What's that line about the path to Hell?

The Dow loses more than 200 points

Wal-Mart said that the consumer is reigning in spending. Home Depot warned that the slowdown in the housing sector would hurt its profits. No shit.
Quant funds are blowing up left and right. Everybody's trying to stop their partners from taking the money and running. blue chips are selling off as people try to raise cash. The credit crunch continues. The Fed and the other central banks don't have the firepower necessary to stop this run. They can put some speed bumps in the way, but the financial system needs an enema. They are only delaying the pain.
I'm still shorting the bank, brokerages, mortgage lenders, and mortgage insurers. Still, like any panic, there will be babies thrown out with the bathwater. Take a look at Goldman Sachs(GS). It's selling at 8x earnings and under 1 price to sales. Remember when this was a $230 stock? That wasn't that long ago. Or take a look at Sears(SHLD). That was a $180 stock at its peak. These are still two extremely well-run companies. Now they're significantly cheaper. I'm going to wait for them to get even cheaper, especially Goldman. They could both lose another $20-$30. We still don't know much about whete the dead bodies are in this sub-prime-credit crunch mess. Be patient during this downturn and try to find some gems that's been unnecessarily trashed.

The housing mess

Last week, BusinessWeek did a cover story on the meltdown in the U.S. housing sector, specifically the homebuilders, their overbuilding, entrance into the mortgage business, and even possible criminal misdeeds during the boom. It's worth reading. Unfortunately, this is just the sort of thing that occurs during any boom. Things become so good, so many people are making easy money, that no one notices fraud and other crimes being committed. These ugly realities are only revealed once the boom goes bust. Jim Cramer actually made a great point about this industry on Monday; this is a very small industry with a total market cap of 35 billion! Some homebuilders will go belly up, but that's not such a big deal. This used to happen all the time.
It's been tough shorting these stocks. Any hint of a rumor of good news sends these stocks through the roof. I've been up 40% on the position at times, and then the next day, been down 10-15%. I've hanging in there though. If you don't have the financial wherewithal to handle the swings, maybe you should look at buying puts as a way of reducing your cash exposure.

Dow plunges 387 points

Subprime worries continue to rear their ugly heads. This time BNP Paribas was the bearer of bad news. They suspended trading in three of its funds that traded heavily in subprime mortgages. BNP did so because, "the complete evaporation of liquidity in certain market segments of the U.S. securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating. " It added, "in order to protect the interests and ensure the equal treatment of our investors, during these exceptional times, BNP Paribas Investment Partners has decided to temporarily suspend the calculation of the net asset value as well as subscriptions/redemptions, in strict compliance with regulations, for these funds."

Dow lost 280 points today

Everyone still worried about subprime and the jobs report was weaker than expected. The yield on the 10-year Treasury note fell from 4.77% to 4.70%. S & P lowered it credit rating on Bear from stable to negative. The financials continue to swoon(even Goldman lost 3.5% today). The apocalypse is not upon us. This doesn't even qualify as a correction. However, the market may be coming to its senses. It's long denial of the subprime and housing messes might be over. The sooner the better. I think the dow will end the year at 12,300, the S & P 500 at 1100, and the QQQ at 2100. I think that we are in bear market territory, but I'm not quite ready to short the indexes or buy puts. I'm still looking for a catalyst.