Index Close Change
Dow 9038.98 +116.03
S&P 500 986.24 +14.68
Nasdaq Composite 1634.65 +31.09
Nasdaq 100 1224.76 +26.19
Russell 2000 451.02 +7.15
Semiconductor Index (SOX) 394.04 +12.50
Bank Index 866.48 +15.90
Amex Gold Bugs Index 141.40 +0.21
Dow Transports 2556.40 +44.37
Dow Utilities 251.41 +2.40
NYSE advance-decline +1,806 +1,488
Nikkei 225 8557.86 -6.63
10-year Treasury Bond 3.29% -0.051

Editor's note: This column, which reflects market activity from the day before, originally appeared June 4 on To sign up for RealMoney, where you can read Bill Fleckenstein's commentary every day, please click here for a free trial.

Overnight, the markets were a snooze, but when the racetrack opened for business, stocks bolted out of the starting gate. Within the first couple hours, the Dow and the S&P were up 1%, and the Nasdaq was up 1.5%. Leading the charge were housing stocks, with SOX stocks in close pursuit and bank stocks not far behind. Once again, what goes on in these bigger-cap stocks is tame, relative to the moonshot moves in smaller-cap single-digit midgets. In any case, the early going was a bit of a frenzy as speculation operated full throttle.

Bulls in a Ka-Chinga Shop: The early-morning blast was just an appetizer for what was to come. After going sideways for the middle part of the day, the last hour or so saw another push higher, and the indices finished basically on the high of the day. In the speculative derby, I would say that housing stocks came in first, with many up 4% to 5%. The SOX placed second, up about 3%. Financials showed in third, about 2% higher (though it could be argued that the biotechs were in a photo finish with them). This, naturally, excludes the crazy goings-on in the small-stock department. All in all, it was just another wild day on chunky volume over the counter, where we hit almost 2.5 billion shares once again. What began with such trepidation in early March has now blossomed into full-fledged, wide-open, white-hot speculation.

Away from stocks, fixed income was slightly higher after yesterday's surge. The dollar was mixed, up against the euro and down against the yen. Gold was down 1%, while silver was down a penny.

Caution: Wide Unload: Turning to the news, two sets of stories in today's Wall Street Journal and New York Times make for some interesting juxtapositions. The first consists of the Journal's "Insider Selling Surges: Normal Market Jitters or Reliable Indicator?" and "FASB Fights Bill to Delay Rules on Stock Options." As the former story notes, insider selling has recently risen to its highest level in the last couple of years. Obviously, insiders are voting with their feet. Though I didn't look at the data, my guess is that the lion's share comes from exercised stock options.

Which brings us to the second Journal story, which chronicles how a couple of representatives from the state of California (surprise, surprise) are attempting to keep stock options expense-free. Specifically, they want to impose a three-year ban on rules proposed by the Financial Accounting Standards Board to expense options. According to the Journal, the FASB warned a congressional subcommittee that if lawmakers attempted to delay these rules, it would set a "dangerous precedent."

Rank Red Herring: Of course, Craig Barrett of Intel ( INTC) was there also, testifying on behalf of the status quo. He is, as I have noted in the past (most recently in my April 24 column ), the leader of the charge. His latest statement was so ludicrous, especially given what the big executives are doing, that I thought it's worth reprising: "Rank-and-file American workers will suffer the most from the mandatory expensing of stock options." Further, notes the Journal, he warned "lawmakers that U.S. jobs could move offshore to Asian countries that don't treat options as an expense."

The sheer arrogance of Craig Barrett almost defies comprehension. Here he is, saying that rank-and-file workers will suffer the most, when it's executives who are gaining the most. If Intel issued fewer stock options, it would likely have to pay its people more. If Intel had to expense options, it would expose the fact that the company is just making pennies, and then Barrett's options might not be worth that much. So it's the executives whose ox would be gored. The notion that jobs would move offshore because of this is complete nonsense. So, let's get our "victims" straight here.

Meanwhile, it's worth reprising a quote in the story from Paul Volcker, which, though obvious, bears repetition: "Lavish options awards to U.S. executives may have contributed to the recent spate of corporate accounting scandals." And the beat goes on. Lots of money has been lost, and lots of jobs have been lost, but the boys in charge are certainly working overtime to preserve the status quo.

Zero-Percent Forecasting: Now let's turn to the business section of the Times, for a look at the second pair of news stories: "Greenspan Is Upbeat on Economy and Stirs Hopes of More Rate Cuts" and "Chrysler Sees Sizable Loss for Quarter." What I am struck by is the widely held, fervent belief that the economy is getting ready to accelerate dramatically. Seeing these adjacent headlines, one might come to a different conclusion. Yesterday I noted Greenspan's comment about the "reversal" that occurred when the war ended. Well, if that happened, how come in the U.S., total car and light-truck sales were 1,573,342 this May, vs. 1,506,829 last May? That's all of a 0.6% uptick.

May was a good month, after the outcome of the war was no longer in doubt. Folks could still go out and buy cars with no money down and zero-percent financing. Given these incentives, if things were about to perk up, you'd think we'd be seeing a couple signs of it, ex the insanity in housing. (Of course, if there was any real demand, the incentives would be unnecessary to begin with, but that's another story.) Meanwhile, a rising stock market has the majority of people convinced that things are getting better. They've extrapolated a continued rally, based on the fact that stocks have gone up. It's a faulty assumption built on hope, and it only exposes people to more risk.
William Fleckenstein is the president of Fleckenstein Capital, which manages a hedge fund based in Seattle. Outside contributing columnists for and RealMoney, including Mr. Fleckenstein, may, from time to time, write about securities in which they have a position. In such cases, appropriate disclosure is made. At time of publication, Fleckenstein Capital was short Intel, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy, sell or hold any security. The views and opinions expressed in Mr. Fleckenstein's columns are his own and not necessarily those of While Mr. Fleckenstein cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to