Today was all about window dressing and undressing.  It’s tough to take 100 points up and then 100 points down but don’t make too much of it.  Overall, it was a bit disappointing for the bulls to not be able to go on a run with all the economic data ripe for their spinning.  But like I said, it’s better to leave today’s action in the past and not give it too much thought.  The overall trend has been down for the month of June and yet, the market is still hanging on.  I’ve been bearish for the past two months and the reality is that we are 10 points higher on the S&P 500 since the HEDGEfolios Timing Indicator had a bearish crossover on April 30th.  So, as much as I like to be right - it hasn’t happened yet and today’s action didn’t do anything to change my opinion one way or the other.  Next week will be tough to evaluate as well given the Wednesday holiday and the light trading that will likely occur before and after.   Enjoy your weekend.

Reuters reporter Thomas Ferraro wrote a great article about financial consequences of war for the men and woman serving in our military. As we end another violent month in Iraq and Afghanistan, let’s not forget them and the families who are struggling to keep it together at home.  I have had my say on the Financial Casualties of War and my call for Supporting Our Military so it’s great to read what others are saying.

As I watched the countdown to Apple’s big day - I wondered what percentage of the people sitting in line to buy an iPhone were unemployed, self-employed, or part-time employed. Okay - I am sure there were some full-time members of the workforce out there, but I suspect that not too many people went to their boss and said, “I need a few days off to go sleep on the sidewalk.” After hearing some interviews with these squatters, it sounds like much of the premarket iPhanatics are entrepreneurs looking to sell the phones on eBay or just someone who has been paid to sit in line. Supposedly, each consumer is limited to two phones and it will be very interesting to see how many are remarketed today at ridiculous prices. Makes me think that the scalpers might end up making as much as Apple on this hyped up opening. However, once this day has passed and the fun of sitting on cement goes away, the next few weeks will help measure the true demand for the iPhone. I hope it goes well for anyone who bought into AAPL. The increase in the stock has priced in very optimistic expectations for dominating the cellular world. If there are lines two weeks from now, I’ll be convinced the hype was justified.

Consumers feel they are entitled to low gasoline prices….

Gasoline demand has grown independent of changes in prices…

Consumers are upset about high gas prices….

Food and energy inflation is high and getting higher….

There isn’t enough refining capacity….

There is too much dependence on foreign energy sources….

Consumers expect the government to provide subsidies to keep gas prices low….

I know all those headlines must sound familiar - except they aren’t from the United States.  They are all pulled from the coverage of Iran’s gas rationing situation.  A bit ironic don’t you think?  The 4th largest oil producer has similar problems to its political archenemy and the numero uno gas guzzling economy in the world - the United States.    The UN and President Bush can pressure for change due to nuclear energy and yet, it’s gasoline that is causing the biggest challenge to Prez Imanutjob.

If you think old news is not worth anything, you need to spend some time on these two Bloomberg articles written by David Evans - Banks Sell ‘Toxic Waste’ CDOs to Calpers, Texas Teachers Fund and CDO Boom Masks Subprime Losses, Abetted by S&P, Moody’s, Fitch. Maybe you read them the first time around or saw some of the coverage from other media sources that referred to them. But for anyone like me that missed them when they were written about 3 weeks before Merrill Lynch and Bear Stearns made CDOs a popular headline, these articles are scary in the issues they raised then and in retrospect, the concerns they bring out now.

Like many of you, I do a lot of research and read all that I can when I know I am not informed enough. But what usually happens on “hot” news stories is that you get overwhelmed with all the different commentaries that are being written in real time. I alter my approach and look for coverage from days, weeks or months before. It’s amazing what information is freely given before the spotlight is shining and you can find critical missing pieces that don’t make it into current articles. Sometimes old news seems like a scoop.

That’s the way I felt today when I was doing research on the regulatory aspect of the CDO market and stumbled upon these articles. I want you to develop your own opinion by reading the original content from Mr. Evans, remembering that this was written almost three weeks before it became popular news. But I will bias you with this summary - there are serious questions about who was selling what to whom and with what kind of assurances about returns and risks. Maybe even more importantly, there are serious implications about who was buying what based on what kind of understanding and on behalf of whom. The fiduciary responsibilities in our business are paramount and no amount of performance chasing can supersede it. As for the ratings and regulatory issues, they are at the heart of investor confidence and quality markets. In this case, I have no confidence now.

Many of today’s articles on CDO’s are trying to provide a comforting message that things aren’t as bad as they seem. We all know that keeping calm during a crisis is important. However, I cannot comprehend how anyone can read through the Bloomberg articles and stay calm about the dangers to the markets. Pretending there is no problem is not “calm” - it’s either ignorance, intentional neglect, or worse.

I cannot believe I am going to say this - but I agreed with many aspects of the Senate’s investigation into the Amaranth fiasco. I am often critical of government’s meddling in most things, and especially excessive regulation of capital markets. I don’t buy into the investigation claims that consumers suffered higher gas prices almost singlehandedly due to Amaranth. Markets are a bit more complex than that, but other than that assumption, I was extremely impressed with this postmortem analysis of what went wrong and what to do better.

After reading the Senate summary report and Senator Levin’s excellent opening statement, I was a little shocked by the unlevel playing field and regulatory exceptions for ICE versus NYMEX via the “Enron Loophole”. But what really got me was the ridiculously low budget of the Commodity Futures Trading Commission who has oversight of currency, futures, options and commodities markets. Right now, the entire CFTC annual budget is $98 million versus $880 million for the SEC. With the unbelievable growth in commodities, futures, options and currency trading and their impact on all other asset classes, this underfunding is just ridiculous. Amaranth investors lost billions and as much as throwing money at another government agency does not guarantee that regulation will save blowups, I just cannot help believing that it would not have hurt. The CFTC needs more funding and a better delineation of its regulatory responsibilities. I hope they get it and will put it to good use.

When Blackstone bought EOP from Sam Zell, many commentators theorized that it marked the top in REITs. The performance in the public real estate sector has in fact declined 20% since then, but that is not evidence of anything.  Defining it as a “top”? - I am not so sure.  Now that BX is public, the media is lampooning how easy market timing is and says that Blackstone is once again signaling a top in the Private Equity world and I guess, the market as a whole.  Hey, isn’t this the same crowd that says no one can time the market?  I am a big Barron’s fan but found their cover story “Top of the Market” to be a stretch.  AHHHH - investing is so easy under this scenario - just wait to see what Blackstone does and call it a top.   Of course, this is absurd.   Investing is not easy and no one, not even Blackstone, defines a top.

Altria (MO) announced it was going to close a cigarette manufacturing plant in North Carolina and about 2,500 jobs will likely be up in smoke. Will protectionists who complain about the loss of manufacturing jobs have anything to say? We hear about the need for quotas and tariffs or Yuan and Yen currency appreciation to save auto jobs or textile jobs or whatever industry group can be swayed by the incorrect promise that protectionism will keep them employed or create new opportunities. So I wonder if there will be any sympathy for tobacco employees? Typically the group that is most active in protectionism is also critical of tobacco companies and their political influence. I am concerned about all manufacturing job loss in the US, not just industries that fit a political agenda. And yet, I am supportive of the business decisions for Phillip Morris to segregate their domestic and international production. As for the concept of reduced smoking and a healthier America - that would be great. I worry about the North Carolina tobacco workers as I suspect that replacement jobs may not be so plentiful and the wage/benefits packages might be tough to beat. We lose manufacturing jobs in this country for many reasons and protectionist policies do not solve any of them. The political abuse of economic loss to win votes can only be fought by pointing out the hypocrisy inherent in these efforts. If Smith & Wesson (SWHC) or Sturm Ruger (RGR) cut a bunch of jobs like Altria, would the politicians have the courage to support them? Manufacturing job loss is not a political opportunity whether the industry supports the party or conflicts with the platform.

Maybe I just missed it before, but I noticed a CNBC screen shot today that said something about it being a service of NBC and Dow Jones. If the video image was new, then I guess it could be a reminder to Rupert and everyone else that CNBC has a stake in this deal whether he likes it or not. Initially, I just assumed it has been there all along and chalked the ignorance up to my constant attempts to tune out as much tv crap as I can. But then I saw a news stream on Bloomberg reminding me about the NBC and News Corp partnership to compete with Google. Seems there are some strange bedfellows in the media business despite the attacks on Murdoch from liberal press and from Fox towards CNBC. I can almost hear the refrain from “Kumbayah” and I started dreaming….

If News Corp. and the Bancroft family finally come to agreement, there’s still the matter of CNBC’s contract with Dow Jones that runs through 2012. We’ve been hearing about the new Fox Business channel for over two years and despite all the postponements (what’s the holdup?), I am not sure the US needs another channel to feed us with financial news (ask CNNfn).

And yet, I keep thinking about that CNBC screenshot and cannot help but wonder if it wouldn’t just make more sense for Rupert to acquire CNBC and avoid the whole mess of the Dow Jones partnership. It certainly would make the dog-eat-dog world (no offense to the canines) of financial journalism be less of a fight. Competing with CNBC to take away viewers may seem like a great challenge for the Fox Business Channel, but I doubt it will be an easy or immediately profitable one. Buy CNBC and resolve the MSNBC mess and things look a lot cleaner. Hey, the suggestion for GE to sell off NBC and its media holdings has been bouncing around for a while so don’t blame me. But since I am at this shameless dreamworld of speculation and rumoring that I hate, I might as well remind anyone that has forgotten that Roger Ailes ran CNBC from 1993-1996. As for regulatory issues, I am leaving those out for now.

Okay - enough of my rant. If it never happens, remind me the next time to keep my mouth shut. If it does, ask me what I think should happen to Bloomberg, especially if Mayor Mike decides to run for President.

Two weeks ago, I broke from my own rules and decided to comment on the technicals of the three major indices. PLEASE READ THAT POST HERE. The market has been getting pretty close to the bearish levels I mentioned then and the last few days have been pretty ugly. In fact, since last Wednesday the market action has been filled with big declines like last Friday and more importantly, failed rallies that declined about 100 points on the Dow and 20 points on the S&P 500 from noon to the close. And yet, I am a bit surprised that it has done so poorly before window dressing prior to the end of the month, quarter and mid-year periods. So while I am changing nothing about my technical analysis of the indices from 2 weeks ago, I am still waiting for a few more negative closes beneath the levels I mentioned.