Stocks Lower into Final Hour on Weakness in Energy and Homebuilding Shares

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Retail longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is above average. Measures of investor anxiety are mixed. According to Hedge Fund Research, investors took a net $824 million out of hedge funds in the fourth quarter of last year. This is the first quarterly net withdrawal in over 10 years. Moreover, fund of funds had outflows of $2.1 billion, the second consecutive quarter of withdrawals. Fund of funds account for about 36% of total hedge fund assets. For the year, hedge fund inflows were $47 billion, down 36.1% from 2004. Fund of funds inflows were $9.5 billion for 2005, down 71.2% from the prior year. During the first three quarters of 2005, 484 or 5.7% of the total number of funds shut down, the largest number since HFR began tracking closings since 1996. Industry assets have still doubled since the stock market bubble burst in 2000 to $1.1 trillion. I expect US stocks to trade mixed into the close from current levels as rising long-term rates offsets lower energy prices.