Friday, December 26, 2008

Stocks Gain Without Volume

To say that today's trading is insignificant would probably be a gross overstatement.

When two-thirds of the investment community is at Nordstrom's or J.C. Penny's returning unwanted Christmas gifts or trying to get cash back for credit purchases (a nifty trick, if only it could be done) we can fully appreciate the dysfunctional qualities of the decrepit financial system which has almost fully devolved over the past three months.

Actually, the deterioration took much longer, but it's only being understood for what it really is, now. The system, based on Wall Street's over-leveraged credit machine, is not only broken, it is defunct. There will need to be structural changes in finance unlike any we've ever before witnessed. Either the US Government will have to step to the plate to become the lender of last resort (which is happening now) along with the Fed, or the country is going to become more localized and fragmented - a lot less like Wal-Mart and a lot more like your local bagel shop.

As America wends through its second greatest depression (Americans love to organize things in grandiose terms), big companies are going to find it more difficult to borrow, raise capital via stock offerings and attract the best talent. In reality, Wall Street may think better of attracting the cream of the B-school breed as those same silver-spoon cretins are the ones who are primarily responsible for all the structured debt, risk management and business rationales that have produced the current big bust in all asset values.

Those companies which do find a way to borrow for capital projects will meet with less success on the other end of the ledger sheet. Their borrowing will be more costly, more scrutinized and their projects less successful. America is turning its back on the corporate culture, along with massive CEO salaries, income disparity and the relative virtue of greed in favor of a more basic, functional, and above-all local business climate. In coming years, you'll be more likely to find recent business school graduates managing community-based organizations than mingling with the corporate elite. In fact, being a member of the corporate elite is about to become so serially uncool that billionaires in bullet-proof limousines will become targets of ridicule and scorn. Some may have to fear for their very lives. Some, undeniably, will lose theirs, as already has been the case with Thierry de la Villehuchet, the French investor who apparently committed suicide last week. Some inner forces are telling me to not believe the "official" story as so often apparent suicide is merely a cover for a more grisly and gruesome crime.

Be that as it may, the investment world is turning a blind eye toward Wall Street as this worst year since the 30s comes crashing to conclusion. Wall Street's about to become a very lonely place, very soon.

Dow 8,515.55, +47.07 (0.56%)
NASDAQ 1,530.24, +5.34 (0.35%)
S&P 500 872.80, +7.38 (0.85%)
NYSE Composite 5,538.19, +50.86 (0.93%)

Advancing issues outweighed losers, 4442-2080, while new lows beat out new highs yet again, 167-17. Volume was the lightest of any full trading day this year.

NYSE Volume 516,782,000
NASDAQ Volume 595,498,000

Crude oil for February delivery gained $2.36, to $37.71. Gold caught a huge updraft, gaining $23.30, to $871.20. $900 seems like a watershed for gold, one which it cannot seem to overcome. Silver was likewise on the rise, up 18 cents, to $10.53, which oddly seems like a fair, albeit slightly undervalued, price.

With 2 1/2 days left in the 2008 market year, investors are hoarding cash and looking elsewhere for investment, or, alternatively, safe parking for the next 18-24 months. While treasuries may not offer the greatest of return (around 2.15% for 10-year notes), at least they seem safe.

Happy Holidays, again.

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