A 1% Distribution Day.

Stocks for the most part suffered their first decline of over 1% in something like 90 trading sessions yesterday. Stocks have gone pretty much straight up since late July so something like this shouldn't be viewed with too much concern. I think we will have to deal with two dynamics through the end of the year.

1. There are a lot of investors {hedge funds, mutual funds etc} that have a vested interest in higher prices between now and the end of 2006. From a marketing standpoint it always helps mutual funds to end on a positive note. It helps bring in new cash. There are many hedge funds (the 1% fee + 20% of the profits crowd) that simply haven't done as well as the markets this year. These funds will do what they can in the remaining time of 2006 to "make their year".

2. The other side of this coin is that a lot of money has been made since July and any sustained weakness will increase the pressure to lock in some of these profits.

I don't know which side will win but this dynamic is something to be aware of as we slide into years end.

Happy Thanksgiving

I would like to wish each and everyone of you a happy Thanksgiving. If you are staying in your neighborhood I wish you a memory filled day with friends and loved ones. If you are traveling I also wish you safe passage and God Speed.

Happy Thanksgiving from all of us at Lumen Capital Management, LLC.

Nothing Much To Say.

There's not much new to say about this market other than for now it wants to go up. Most major players need stock prices higher by the end of the year, so the path of least resistance is up. Most stocks and ETFs are overbought by my measurements but this is a condition that can last for a long period of time. Money managers that have missed parts of this move are desperate to put cash to work. They are finding a dearth of sellers.

Thanksgiving week is historically an up week for stocks. Volume tends dry up as the week progresses. The markets for most purposes will close down after Tuesday. Wednesday will see volumes taper off as the day moves along. Markets are closed Thursday and Friday is a half day (Doesn't everybody go shopping instead?).

Somethings in commodity land look attractive to me for more aggressive accounts but for the most part I'll be content to just watch from the sidelines. I am doing some more extended work on the new breed of inverse ETF's. These are basically ETF's that go up as the market goes down. I don't think markets have much downside left in them in 2006 (of course I could be wrong) but I want to better understand how these inverse funds work. The day will come again when we'll want this tool in our arsenal. It wasn't raining when Noah built the ark and I want to start preparing for the inevitable future correction now.

ETF's-It Had To Happen Sometime.

Remember that I believe ETF's represent a paradigm shift in how investing in the market will be done in this century. Apparently others feel the same way. There is a stampede now to bring new ETF's to market. I read today that there are close to 300 ETFs now in registration with the SEC. According to "Seeking Alpha" Rydex has filed for 96, ProShares 66, Wisdom Tree 60, PowerShares 35.

It is likely that a good number of these will have some investment merit. Yet it is hard to imagine that there isn't a significant amount of replication, index creation-The process where an issuer makes up an index first and then creates the ETF to track it and just plain stinkers lurking in the group.

Why so many? Follow the money! Every issuer on Wall Street wants to get in the game to earn the passive fee income that ETF's bring them. Fortunately we are the winners in all this because we have the luxury to sit back and watch how these trade and the investment merits of each. If they have merit money will flow into them and our systems will pick that up.

Armistice Day

Most of the world has never heard of John McCrae. A Canadian of Scottish descendent whose family had a history of military service, John Alexander McCrae was both a physician and soldier. McCrae served in the Second Boer War and World War I. He also taught medicine at the University of Vermont and McGill University in Montreal.
However, McCrae is not remembered for being either a soldier or a physician. McCrae was appointed as a field surgeon in the Canadian artillery and was in charge of a field hospital during the Second Battle of Ypres in 1915. There, touched by the battle death of his friend and former student, Lt. Alexis Helmer, and inspired by the red poppies that grew in profusion near Ypres, McCrae wrote one one of the best known poems to come out of the “War To End All Wars” It is still recited by Canadian school children……

In Flanders fields the poppies blow

Between the crosses, row on row,

That mark our place; and in the sky

The larks, still bravely singing, fly

Scarce heard amid the guns below.

We are the Dead. Short days ago

We lived, felt dawn, saw sunset glow,

Loved, and were loved, and now we lie

In Flanders fields.

Take up our quarrel with the foe:

To you from failing hands we throw

The torch; be yours to hold it high.

If ye break faith with us who die

We shall not sleep, though poppies grow

In Flanders fields.

In 1918, while still serving in the same field hospital, McCrae caught pneumonia and meningitis and died. Poppies, particularly in Commonweath Countries are still used as symbols of the Great War and are still closely associated with Veterin’s Day here in the United States.
Please take a moment today to remember all of our soldiers past and present. Especially remember those who have made the ultimate sacrifice in the service of our country.

Election Day.

It's "Election Day". Please Remember to go to the polls. As we say in Chicago. "Vote Early! Vote Often!"

One little election thought: "Trader's Almanac" or some such piece is out saying that historically when one branch of the legislature (House or Senate) changes hands, the other tends to go with it. Since the markets are likely pricing in only a GOP lose of the House, a Democratic sweep could be an unexpected investment event in the short term.

Election Thoughts (For traders mostly)

Saw this post over at Minyanville this AM and thought I'd briefly pass it along to you.

"Taking aggressive positions ahead of Tuesday's elections mean playing right into an invisible catalyst, something often hazardous to one's financial health. The market has plenty of reasons to move hard either way and to make individual patterns irrelevant."

Source Minyanville-"Buzz & Banter, Daily Spot, Fil Zucchi 9.04 AM. 11/06/06.

Uneven Income Distribution

Former Treasury Secretary Lawrence Summers takes note of the way various economic classes have been impacted by the recent changes. Writing in the Financial Times, he notes:

"Against all odds, we are living in a time of plenty. Neither the after-effects of September 11 2001 nor a tripling in oil prices has prevented the world’s economy from growing faster in the past five years than in any five-year period in recorded economic history.... Two groups have found themselves in the right place at the right time to benefit from globalisation and technological change. First, those in low-income countries, principally in Asia and especially in China, who are able to plug into the global system. The combination of low wages, diffusible technology and the ability to access global product and financial markets has fuelled an economic explosion.Second, it has been a golden age for those who already own valuable assets. Owners of scarce commodities have seen their returns rise prodigiously. People running businesses that can take advantage of globalisation to source labour less expensively and sell to larger markets have seen their incomes rise far faster than incomes generally. Certainly those in the financial sector in a position to benefit from the asset revaluations associated with globalisation have prospered."

It is the great economic middle throughout the world that seems to have been economically hurt the most. We may see some of this frustration show up tomorrow at the polls.

My Birthday.

It's my birthday!!!!-No posts this weekend. Don't forget election day Tuesday. As we say in Chicago-"Vote Early. Vote Often!"