Weekend Linkfest, Part 1

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Markets completed a fifth straight week of gains, and the Dow has now risen in 23 of the past 26 sessions. After such a run, the bourses are looking a bit tired and overdue for a rest, if not a 2% to 4% pullback. The levitation continues to astound, with traders shaking their heads and shorts getting squeezed painfully. With April now in the record books, U.S. markets have posted their best month since October 2002.

The merger party continued, with takeover news sparking the "old media" sector. Murdoch's News Corp.(NWS Quote) made a $5 billion bid for Dow Jones(DJ Quote), while Reuters(RTRSY Quote) said it received a bid from an unnamed suitor (reportedly Thomson(TOC Quote)). Elsewhere, there were rumors of a combination of Microsoft(MSFT Quote) and Yahoo!(YHOO Quote).

All these elements managed to drive the indices higher: The Dow gained 1.1% on the week, and has 13,500 within spitting distance. For the first time in more than six years, the S&P 500 left 1500 behind. It gained 0.8% on the week and is 1.4% from its all-time (March 2000) highs. The Nasdaq continued its gaining-but-lagging ways and was up 0.6% for the week. Also gaining but lagging: the Russell 2000. It rose 0.4% on the week.

Barron's Streetwise column notes the conflicting sentiment out there:

"Surveys that ask active pros what they think have showed steady if not extreme bullishness, and long-only fund managers are and have been 'all in,' with cash levels at stock funds reported last week to have fallen to a record low of 3.7%. One notable exception to this outburst of optimism: the latest Barron's Big Money poll, featured in last week's issue. The American Association of Individual Investors poll, on the other hand, dipped below 35% bulls last week, a level breached only nine times in the past 15 years -- and only once after the market posted a gain in the prior month. Clearly, the broad populace is fighting the market trend."

Fighting the trend, or absent altogether? Trading volumes at the online brokers have been rather anemic. I suspect that after the 2000-2003 crash, the masses have been more interested in real estate and commodities. Yet in the counterintuitive ways of the market, that may be perversely bullish.

Meanwhile, there were lots of fascinating stories out this past week. They are at the gate, and they are off, as our Kentucky Derby edition of the Linkfest begins. Pour yourself a cup of coffee cool mint julep, and get clicking!

INVESTING & TRADING

• Dow Theory Sends 'Buy' Signal as U.S. Transport Shares Advance: "The oldest gauge of U.S. transportation stocks reached a record last week, with a boost from Warren Buffett. For Keith Wirtz at Fifth Third Asset Management, it's a sign more gains are ahead for the overall market. Wirtz adheres to a 19th-century indicator developed by Wall Street Journal co-founder Charles Dow. When Dow Jones & Co.'s transportation and industrial averages set records at the same time -- as they did April 25 -- a healthy economy and rising market will follow, Dow's theory goes." (Bloomberg)

• Buying Panic?

• Every Old Bull Needs a Rest: "With each new high on the Dow Jones Industrial Average, some new bit of technical evidence surfaces to flash a warning. These warnings are not signals to sell, but rather a sign that the market is telling us to expect the long-awaited correction, even as benchmark Standard & Poor's 500 is within striking distance of its own all-time high of 1552.87.It is easy to dismiss this as the ravings of a perma-bear. But the evidence is spreading from one class of technical indicator to another. And taken together, this market is sporting the excesses we can forgive for a baby bull but not when the bull is this mature. (Barron's)

• IT WAS 40 YEARS AGO TODAY. Barron's looks back at how things were four decades ago, and it is quite fascinating: "Sgt. Pepper's Lonely Hearts Club Band," was released four decades ago next month, Bretton Woods system was beginning to buckle at the knees. The international monetary system, set up after World War II, fixed currencies' exchange rate against the dollar, which was in turn fixed in terms of gold, at $35 an ounce. Foreign governments were able to exchange dollars for gold at that fixed price under the rules of the game. In theory, the U.S. would be constrained from expanding money and credit to create inflation, as would the rest of the world."

• Rupert Murdoch's bid for Dow Jones was the talk of the town. I discuss one possiblity here: GE Rescues the first family of Dow Jones (the Bancrofts) and then does a big $20B GE/Dow Jones Spin Out.

• Andy Xie warns of China Crash: "Morgan Stanley former star economist Andy Xie warned of an imminent stock market crash in China -- but still hopes to raise money to invest in the country. Xie, who attracted a wide following while he was at Morgan Stanley because of his often contrarian views on China's economy and stock markets, also warned that the global boom in equities would be over by 2008 and that this would coincide with a worldwide recession. The recession would start from the United States and spiral down into Asia where exporters would be hit." (Reuters)

• The Baltic Dry Index made a new high, due to a combination of high commodity demand in Asia, and too few cargo ships.

• The Bespoke Investment Group notes there is a Bear Market in Analyst Sentiment.

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ECONOMY

The Wall of Worry continues to build:

• The government released the jobs report Friday, and despite big adjustments, it was very weak. April nonfarm payrolls grew by 88,000, and I don't believe even that weak number.

•VIDEO: Achuthan of the Economic Cycle Research Institute Says U.S. Economy 'Growing Healthy.' (Bloomberg)

• The Hedonism Index. "A 2005 Citigroup research note quantifies it rather precisely: The top 20% of American earners now account for between 37% and 70% of total consumption. That's quite a broad range, and like asset ownership, it is very disproportionate in numbers. You can clearly see the difference in spending patterns in the chart at right, showing the Merrill Lynch Lifestyle Index versus the Morgan Stanley Consumer Discretionary Index."

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HOUSING

• GDP ex Housing? Puh-leeze! Bloomberg's Caroline Baum puts the smackdown on an absurd, politically motivated line of analysis. (Don't mess with CB!)

• As Market Cools, Home Buyers Seek a Way Out: "In the latest fallout from the housing market's decline, disputes are breaking out between builders and buyers who signed contracts for new homes and condos when the market was hot -- and now want to get out of them." (free in The Wall Street Journal)

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TECHNOLOGY & SCIENCE

• How the Internet took over: "Twenty-five years ago the Internet as we now know it was in the process of being birthed by the National Science Foundation. Since then it's been an information explosion. From e-mail to eBay, communication and shopping have forever changed." (USA Today)

• Honeybee die-off threatens food supply.

• Looking for Life? Try Gliese 581c: "So when astronomers using the 141-inch telescope at the European Southern Observatory in Chile detected Gliese 581c, there was more relief than wonder: they had found the first 'habitable' planet. London bookies immediately lowered the odds on extraterrestrial life from 1,000-1 to 100-1." (Newsweek)

• If You Want to Know if Spot Loves You So, It's in His Tail. (The New York Times)

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MUSIC BOOKS MOVIES TV FUN!

• Weekend Jazz: Artie Shaw. Artie Shaw was cool. Not Elvis cool or Sinatra cool, but a darker, more subdued cool. (And that list of wives is unbelievable!)

• PHILIP K. DICK'S BIG HOLLYWOOD MOMENT. One of my favorite sci-fi authors, Philip K. Dick, is enjoying a surge in popularity some 25 years after his death. Opening this weekend is Next, starring Nicholas Cage. Philip K. Dick's official Web site is philipkdick.com, but I must give a shoutout to fan site Total Dick-Head.

• Lastly, this has to be the most intriguing headline of recent weeks: Why can't gay dwarves get married in Middle-earth?

The Kentucky Derby is tonight, and while it’s a wild open field, Wall Street's favorite has to be Liquidity -- leaving the gate at 30-to-1! (Those odds are about equal to the leverage on the Street.) Storm in May, not a Street fave, is blind in one eye. Insert your own ironic comments here.

Post time is 6:04 p.m. Enjoy the race and, if you live in the Northeast, the gorgeous weather!