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August 24, 2006

The Pluto Effect

Well, I have to apologize, ladies and gentlemen. All my calculations have been way off base because, as it turns out, Pluto is not really a planet. Adjusting for the Pluto effect, the current astrological calendar shows we are clearly in an equity bull market that will last several more years at minimum, and the big run in precious metals since 2001 has ended. Greater forces will now escort gold and silver back down to new all-time lows.

Just kidding.

Watching the performance of equities today gave me the distinct feeling of being a kid trying to run up a hill of loose dirt. You may be able to frantically hold your place or slip just a little, but once you run out of energy, you're going to slide all the way down the hill. Maybe the bulls are wearing cleats and will be able to get a footing. I don't know. But it still seems that only a catalyst is needed to start a serious cascade.

As with yesterday, a weak report on home sales... this time new homes... provided the excuse for an early bout of selling. Today, the biggest victims were retailers, but this action may have more to do with the weak durable goods report published a couple hours beforehand. However, many of the names sold had nothing to do with durable goods. There was probably just a contagion of dismay among those trading retailers. Companies hit hard included Bed, Bath & Beyond, J.C. Penney, Circuit City, Best Buy, Limited Brands, and Nordstrom.

Speaking of dismay, a couple of news items in the corporate world have to be disheartening for Mr. Joe Investor. First and foremost, Fannie Mae is officially off the hook. The U.S. attorney's office investigating their improprieties will not be filing charges. I have to admit to being disappointed at the announcement, though I am not the least bit surprised. As I have previously postulated on these pages, the reason Fannie Mae has taken more than two years to restate financials is because a bailout has already occurred. The extra time was needed to get everything covered up, and the avoidance of charges is just the wrap up. Anybody shorting FNM shares has been playing a fool's game. But then again, so have the people who own them.

The second disheartening development came to my attention thanks to the ever handy list of news links on The Kirk Report. It seems the latest innovative perk being received by corporate bigwigs... one day this term will be changed to big pigs... is shelter from depreciation of their personal residence. Corporations, including eBay and Nike offer price protection by guaranteeing reimbursement for any loss of value from the purchase price. Interesting timing for this perk to be perking up, don't you think?

Disclosure: Long BBBY Puts


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