Stocks Falling into Final Hour on Lingering Economic Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs, Retail longs and Computer longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is very negative today as the advance/decline line is substantially lower, most sectors are falling and volume is above average. Investor anxiety is high. For the first time in many months, the U.S. dollar is trading as though at least a tradable bottom may be in place and oil/gold are trading toppy. It is also interesting to note that the Bombay Bullion Association said yesterday that gold imports into India, the world's largest consumer of the metal, plunged 50% in October from a year earlier. The October-December period is historically the busiest season in India for jewelry sales. Gold is around session lows falling $27 per ounce, to $788 per ounce. It is down $60 per ounce in a week. For several years, gold bugs have made the argument that its rise was indicative of mounting worries over inflation. The CPI rose to a modestly above-average 3.5% year over year in October vs. a 2.8% rise the prior month. The U.S. Dollar Index is 0.3% higher today but is still not far off its recent lows. I have said for some time and continue to believe that the rise in gold has been mainly a function of the historic speculation for the commodity by investment funds related to perceptions over emerging market demand. I continue to believe the secular trend of disinflation remains firmly in tact and that it will reassert itself during the next meaningful global slowdown. While I may take some profits in my iShares Lehman 20+ Year Treasury Bond (TLT) long over the coming weeks, the position remains a core long, and I will add back to it on any significant uptick in interest rates from current levels. Reuters is reporting that Cisco Systems (CSCO) CEO Chambers is saying that he is comfortable with prior estimates. He also said, while there are risks, he see a soft landing for the U.S. economy and a very strong global economy. I continue to see no evidence of the impending recession that investors are pricing into many stocks at current levels. The forward P/E on the S&P 500 is now 15.8, down from 16.1 at the beginning of the year. If the multiple on the S&P 500 were to contract again this year, it would mark the fourth consecutive year of contraction, a feat which has only been done two other times since 1905. I expect US stocks to trade mixed-lower into the close from current levels on lingering economic worries.