Overnight markets were mixed with Asia a bit better but Europe weaker. Initially, stocks here tried to rally but soon turned red, led lower by the Nasdaq which a couple of hours into the day had lost 1.5%. The market then flopped back and forth in a wide range around unchanged (though the Nasdaq remained over 0.5% lower) until about 90 minutes to go. The last hour saw the Dow lead a charge higher and by day's end both it and the S&P had gained just over 1% while the Nasdaq remained slightly lower.
Away from stocks the dollar was mixed, bonds were flattish, and oil rallied 1%. The metals were initially strong, gaining 1% a piece, but those gains didn't stick. By day's end silver added just 0.5% while gold lost 0.2%.
For those who have been worried about the Australian mining tax, the Rudd Administration is now losing badly in the polls. A Bloomberg story today suggested that this tax proposal is helping Rudd's opposition, so it's looking less and less like that plan will be implemented as proposed.
Drawing a Line in the Quicksand
As for the stock market, according to Mr. Skin and Jason Goepfert, it's beginning to look more and more like we may have entered a bear market, though that can't be known yet for sure. (While Mr. Skin had been sensing this, it's a potential change of heart for Jason.) I had thought we would see some sort of a failing rally, and perhaps we did. It just didn't amount to much before it failed. On the other hand, a more-meaningful-but-ultimately-failing rally still might occur. Trying to read the tape with so many quants operating is more treacherous than usual. The quicksand-like environment combined with the balsa wood structure is just another reason why I prefer to avoid stocks generically and continue to focus on money printing.
Hey, Dad, Can I Borrow the Convertibles?
As for stocks in general, I've made the comment a few times that if you can't make money in Microsoft you're not going to make money in any plain vanilla stocks and, to be sure, Microsoft has been a very poor performer in the last month or so. Today the company announced a convert. On the surface this seems to make no sense for them, but looking at the details it appears it had something to do with moving cash on shore and they will take steps to avoid dilution, so it's not as crazy as it looks at first blush.
I think they're pretty capable at managing the balance sheet there and would be wise to issue more debt. They could always pay it off with their cash on hand, but if rates rise down the road, issuing debt in small single digits is probably going to be a good decision over time. Besides, I'd rather lend money to Microsoft than the U.S. government if I had to pick between the two. Nevertheless, there's been no joy for Microsoft holders as the stock continues to lead the charge lower thus far.
