Market Talk

Today we’re talking about the bull run’s two-year anniversary, and where it may go from here. We have Tomi Kilgore on again, and he’s a sharp guy. Good stuff in here for pros and neophytes alike.

I really considered having us all wear party hats. But it just didn’t seem very dignified, not when there are people being killed in Liyba as we speak. Plus, we didn’t have any party hats to wear anyhow, so it was kind of a moot point.

Stocks had their best September since Germany invaded Poland, launching WWII, but mutual-fund investors continued to keep their ears plugged with beeswax, refusing to listen to the Siren song of rallying markets.

Even with S&P 500 up nearly 70% from its March 2009 low, retail investors refuse to be drawn in. Fund industry’s main trade group said investors pulled another $14.7B from funds that invest mainly in US stocks, on top of $15.5B they withdrew in August (an ugly month for stocks).

Fixed-income funds remain the preference, with taxable bond funds adding another $24.2B in Sept. This year through Sept, taxable and muni bond funds have seen a total $243B of inflows, while US stock funds have surrendered a roughly $60B outflow.

Equity fund managers also continue to run their portfolios with very thin buffers of cash, as liquid assets as a percentage of overall fund assets remain at a low 3.5%.

- It’s debatable whether technicals or valuation are driving stocks higher, but “excessively bullish sentiment is the biggest risk right now,” Barry Ritholtz writes at The Big Picture.

- The ratings agencies’ flaws need to be addressed. “Perhaps the recent attention to the role the ratings agencies played in the crisis will change that, but I’m certainly not counting on it,” Mark Thoma says on his blog.

- It’s hard to see how Palm considering licensing its WebOS platform to other hardware makers could ultimately be successful, especially as Google’s (GOOG) Android popularity rises, Dan Frommer writes at Silicon Alley Insider. “While licensing WebOS might make a sexy story to tell potential acquirers or Wall Street, it’s not going to save Palm.”

- Can’t be too defensive, right? “I do recognize that my credibility in sounding a cautious note would presently be stronger if I had ignored further credit risks and captured some of the past year’s gains,” John Hussman says. “But the awful outcome of this same set of conditions, which we also observed in 2007, should provide enough credibility.”

- Newspaper circulations keep declining, as average weekday sales have dropped almost 9% since last year, NYT’s Media Decoder writes, citing data from the Audit Bureau of Circulations. “The reality facing American newspaper publishers continues to look stark.”

- “It’s ironic how the ‘Goldman was so smart to have shorted subprime’ meme is now being turned on its head…as Goldman’s conduct in the run-up to the crisis is being re-examined in a new light, Yves Smith writes at naked capitalism.

- Felix Salmon details the continuing Goldman wars.

- Whirpool (WHR) shares soared after its blowout 1Q report. “I continue to think that the panic a year ago was greatly overdone, as individuals and companies cut costs wherever they could, while waiting to find out if forecasts of Great Depression II were going to be borne out,” NYT’s Floyd Norris says. “But now the spending — and the hiring — is coming from people and companies that overreacted in the panic.”

- Google’s (GOOG) decision to scrap plans to sell Nexus One through Verizon Wireless seems a bit curious.

- The current bull market has now gone 400 days without a 10% correction, Chad Brand notes.

What's rising today, guv'nor?

Wondering how batty this stock market has gotten, citizens? Behold.

Home builder Standard Pacific’s (SPF) shares rose almost 9% to $5.65 in heavy volume today, ostensibly due, we’re told, to a positive trade-publication profile (is there any other kind?) of CEO Ken Campbell.

Note that the publication date at “Big Builder” online says last Thursday, but supposedly a “blast email” about the story went out today. For whatever that’s worth.

Sure, SPF may be in better shape thanks to Mr. Campbell’s stewardship. We’ve read conference call transcripts and he seems like an affable straight shooter and a capable CEO. And, no doubt, investors were well aware of his abilities before Big Builder’s recent profile.

But today’s action makes one thing abundantly clear, and it goes beyond Campbell and SPF: This market is riding on a massive momentum buzz, with traders/investors scrambling from one ascending stock to the next, hoping to leap to another high-riser just as their current ride shows the first signs of fatigue. Doesn’t really matter why it’s going up, as long as it’s going up.

Simply put, when a trade-mag puff-piece (and a dated one at that) has enough influence to vault a stock up nearly 9% amid close to four-times the average daily volume, then we say things have reached the patently absurd level.

And the Fed says it’s hard to spot bubbles before they pop.

It's just been go, go, go, go, go.

With stocks continuing on their unrelenting move toward the heavens, there’s just a hint of caution creeping into the tone of some of Street’s more consistently bullish voices.

“Although we remain positive on the equity markets, the risks have also risen” as DJIA approaches 11000, Baird strategist Bruce Bittles writes. “The stock market is overbought, investors are growing increasingly complacent, earnings expectations allow little room for error with valuations stretched,” he adds. “In addition, the long end of the bond market is beginning to make noise with the benchmark 10-year Treasury note yield climbing to the highest levels since last June.”

Meanwhile, BlackRock investment chief Bob Doll notes stocks have climbed more than 10% since mid-February, and are currently up 4%-5% for the year.

“So far, equity markets have frustrated the bears, since any signs of price weakness have been quickly reversed,” he says. Short-term, however, “there is a possibility that stocks may have gotten ahead of themselves, as some technical indicators are looking stretched.”

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Stocks well off session highs, after ECB’s Trichet said IMF involvement in Greece’s problems was “very, very bad.”

That drove down the euro, which drove up the dollar, which cut into the risk trade, which took the steam out of the bulls’ march to Dow 11000. See how easy that works?

When the wards of the state (Citi, AIG) are leading the market higher, you’ve got to question whether this is a fundamental or speculative move. Financials, consumer discretionary still leading the pack. Energy, materials bringing up the rear.

Meanwhile, by our count, looks as if ten DJIA components (one-third of the average) have hit multi-year highs today, most going back to mid to late 2008.

McDonald’s (MCD) is a standout in the average, earlier reaching an all-time high at $67.44. Another star is H-P (HPQ), which earlier hit intraday high at $53.79. Shares haven’t traded that high since September 2000, before HPQ bought Compaq.

Other stocks hitting fresh highs include UTX, Boeing, DuPont, Disney, Cisco, Kraft and Travelers and Home Depot.

DJIA up 73 after rising about 120 earlier, S&P 500 up 6, Nasdaq Comp up 19.

(Paul Vigna contributed to this report.)

(Photo courtesy of McDonald’s.)

- “Here we are, up 70% or so from the lows of over a year ago, and there is no uniformity of thought – which is probably a good thing,” Barry Ritholtz says.

- Treasury’s Geithner insists a resolution authority will help manage a failure of a large cross-border financial institution. “It simply will not,” former IMF chief economist Simon Johnson writes. “Mr. Geithner wanted to sound tough. But is he really coming out to fight? Or did he and his colleagues already throw in the towel?”

- Palm hopes distribution deal with AT&T (T) will boost sagging smartphone sales, but analysts aren’t so sure, John Paczkowski reports.

- “The home buying tax credit expires at the end of April and time is running out,” Miller Tabak’s Peter Boockvar says. “Bottom line, the next big test for this phase of the housing recovery is just ahead.”

- February existing home sales are proof the home buyer tax credit “has run out of gas,” Karl Denninger writes at the Market Ticker.

- Year-over-year decline in housing inventory is getting smaller. “This is something to watch,” Calculated Risk says. “This slow decline in the inventory is especially concerning with 8.6 months of supple in February – well above normal.”

- “Once upon a time, you could set your watch with the Google-Goldman super-tell duopoly,” Todd Harrison says at Minyanville. “As both are pointing due south today, it’s worthy of a mention.” Google (GOOG) drops 1.5% to $549; Goldman Sachs (GS) drops 0.8% at $174.83, but the Dow Jones Industrial Average rises 103 points.

- UK authorities arrested of six men, including an employee of hedge fund Moore Capital and another from Deutsche Bank, in what’s being billed by the government as a major crackdown on insider trading, WSJ reports.

- Solar stocks, which got hit hard during the bear market, have been really struggling during the recovery, Bespoke notes. For solar stocks over the last six months, “it’s not a pretty sight,” firm says. “Is now the time to buy or will solar continue to trade lower?”

- Jeff Saut, Barry Ritholtz, Bob Doll and Mike Santoli all correctly called the bull market, Josh Brown writes at The Reformed Broker.

- Microsoft (MSFT) doesn’t want to talk about the Courier, a rumored response to Apple’s (AAPL) iPad, but it’s willing to concede the blogosphere is a great way to read about it. All Things Digital says MSFT’s JobsBlog tells those looking for a job to check out “online chatter” about, among other things, “the upcoming Courier digital journal.” The JobsBlog links to a post on Engadget that claims exclusive pictures and details.

(UPDATE: Looks like someone at Microsoft’s (MSFT) JobsBlog might be in trouble. MSFT has now deleted a reference to its rumored Courier tablet from a JobsBlog post. “Hilarious,” All Things D’s Peter Kafka tweets. The post is still on JobsBlog but no longer mentions the Courier.)

- Mark Hulbert says some are drawing the wrong lessons from this week’s market anniversaries.

- The view from the bottom. Our MarketBeat bud Matt Phillips compiles some quotes from market watchers when stocks were bottoming out this time last year.

- “As we celebrate the one year birthday of the current bull market, a key characteristic that still looms one year in is the lack of conviction and confidence in the economic outlook for those on Main Street versus the more optimistic view of those who work on Wall Street,” Peter Boockvar writes.

- Wards of the state enjoy a nice day. Citi (C), AIG, Fannie Mae (FNM) and Freddie Mac (FRE) all rally.

- Small business owners now say conditions will be worse six months from now. “It’s not a pretty picture,” Economist’s Free Exchange blog says. “The problem is clearly not labor supply. Rather, the economy’s principal job creators are seeing too little demand to justify increases in hiring. That’s the drag on recovery.”

- Cisco (CSCO) says faster router “will forever change the Internet? Does the announcement live up to hype? Shares close flat at $26.13.

- Government has bailed out the banks, now it’s time to bail out our nation’s schools, former labor secretary Robert Reich says.

- An improved Web browser on Amazon’s (AMZN) Kindle is long overdue, MediaMemo blogger Peter Kafka notes. “At this point having a wireless device that only grudgingly accesses the Web makes no sense. And it certainly won’t fly once Apple’s (AAPL) iPad ships next month.”

- “The biggest banks in some European countries today are already too big to save,” former IMF chief economist Simon Johnson says. “Unless we take immediate and real action to reduce the power – and size – of our largest banks, we are heading in exactly the same direction.”

- Monetary policy and unemployment: Should the Fed have done more? Mark Thoma ponders.

What a difference a year makes.

As investors celebrate the bull market’s one-year anniversary, US stocks are up yet again today, although there’s some curious trading occurring in some beleaguered financial stocks.

Several government-owned financials, including Citigroup (C), experiencing big gains after Fox Business reported the government’s discussing plans to sell its 27% stake in the bank, perhaps as soon as the next three months. Citi was recently up 6.4% at $3.79. AIG, Fannie Mae (FNM) and Freddie Mac (FRE) also seeing big gains.

The curious trading today largely symbolizes much of the trading experienced since March 2009. The Dow Jones Industrial Average sank to a 12-year low on this day one year ago, as pessimism was running rampant through the market. With the Dow trading around 6500, there was little hope that good times were on the horizon.

Fast forward one year later and investor sentiment has definitely shifted for the better, prompting a 60% rally. While jitters about the recovery’s sustainability still exist, investors for the most part feel much better about the economy’s prospects than they did a year ago.

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- Stocks rebound nicely today after rough few weeks, validating research from UBS and JPMorgan, each saying they aren’t worried about the bull market’s sustainability, FT’s Alphaville blog says.

- Amazon gives in to rising e-book prices. But “bear in mind that publishers will actually make less money with the Apple pricing plan,” MediaMemo blogger Peter Kafka says.

- January was a tough month for risky assets as stocks, REITs and commodities all fell substantially while bonds generally held their own, James Picerno notes at The Capital Spectator. Doesn’t mean a new bear market is beginning, but it does show the days of “strong, sustained rallies in everything” are probably over. “The money game now appears destined for a more complicated era.”

- The once-robust charity sector hit with mergers, closings. “Hit by a drop in donations and government funding in the wake of a deep recession, nonprofits—from arts councils to food banks—are undergoing a painful restructuring, including mergers, acquisitions, collaborations, cutbacks and closings,” WSJ says.

- Insider buying picked up a bit last week. but the trend of low levels of buying and continued high selling remains intact, Pragmatic Capitalist says.

- Mark Cuban offers advice on a simple way to create jobs: reduce paperwork. Small businesses and entrepreneurs should spend less time and money on lawyers and accountants and “redirect that intellectual and financial capital to the core competencies of their business,” he says.

- DVD sales are collapsing, nearly as quickly as music sales did over the last decade,” Kafka says. Not good, especially since Hollywood studios are desperately looking for new revenue streams to replace the struggling DVD (hence their big push for a 3-D boom.)

- A $100 million bonus for Goldman Sachs (GS) CEO Lloyd Blankfein? Don’t count on it, Reuters blogger Felix Salmon notes. “It frankly boggles the imagination that he’s going to get anywhere near $100 million,” Salmon says. “Goldman knows that bonuses are a hot-button issue politically, and it’s going to keep them (relatively, by its standards) modest for 2009.”

- Toyota says it’s already begun shipping a fix to the gas pedal problem involved in the recall of millions of vehicles. Time’s John Curran highlights the “Toyota Stimulus.”

- Yahoo (YHOO) and AP reach new licensing agreement; web portal will continue hosting AP articles. “The agreement could help define a core issue facing news organizations: How to deal with the Internet portals that help distribute their material but that some publishers say unfairly profit from their work,” WSJ says.