Good Weekend. This was another one for the record books, with Tuesday’s moonshot bringing many indices back over their January highs. And this was despite a universe of issues, ranging from Real Estate slowing, Oil over $75, Copper over $3, and Gold almost $650. That’s before we get to Iran, or the visit from China’s premiere.
Its enough to turn you into an indexer — buy ’em and forget about it.
Ahhh, but there are way too many interesting things going on for that right now. And since the April showers are doing their thing, keeping us indoors and in front of our screens, let’s have a look at some interesting items from around the web: That’s right kids, its linkfest time!
• The big move up on Tuesday was certainly Fed related: weak Producer Price Index, a dovish speech by Janet Yellen, and then the March 27-28 FOMC Minutes lit a three stage moonshot, as a Fed halt became "baked into the cake."
• Tuesday’s rally arrived just in time; Before that 200 point launch, many indices – especially Nasdaq ad NDX — were below the year’s first weeks’ highs. Not so for the Russell 2000 or the Dow Transports, both of which continue to astound; The overall performance of the S&P 500 has been unusually reliant on the Energy Sector;
This could have been called the week of commodities:
• Gold broke through $600 barrier (now what?); Copper and Zinc are so pricey that a penny is now costs 1.4 cents to make. While Commodity price rally is extended by rising speculation, the fundamentals are still supportive longer term; My favorite Gold chart comes from RM contributor John Roque: The Dow Jones/Gold Relative Ratio implies a lto more upside for the yellow metal;
• This week, I looked at Just how much further can commodities run?
Speaking of which, why are Oil prices so high? There’s lots of
arguments about geopolitics and speculators, but consider this statistic: The WSJ reports there will
soon be over one Billion cars on the planet (free WSJ podcast); Thats a compelling and astonishing data point. Consider this: An increasing percentage of those billion cars may very well be Hybrids — and even as Ford posted their biggest loss in 4 years, their new small SUV, the Escape — a Hybrid Electric — is a big hit.
• China’s President Hu first visit to the US was a watershed event — but it failed to produce a "Nixon Moment on Currency;"
• Inflation data seems to fluctuate from day to day. After the benign PPI data, came uglier CPI data: that Spike in inflation revived likelihood of Fed raising rates; No surprise that the 10-Year Note’s Yield Rose past 5%, the highest since June 2002; Indeed, the biggest risks to the Fed’s forecast are Inflation or a housing collapse;
• Yeah, there’s no getting away from the housing market: Real estate insiders have gone bearish — in blogs! But the shift began a while ago, and now with inventories growing and houses sitting unsold longer, Housing is now a buyer’s market. You can see the sales data (PDF) for Median Sales Price of Existing Single-Family Homes for Metropolitan Areas via the National Association of Realtors. Note also Builder Confidence declined In April . . . and this chart from BCA research shows why: the Housing Market Index fell off a cliff.
Here’s a daunting stat: With Las Vegas one of the country’s fastest growing regions, 61.3% of Nevadans have an exotic mortgage; Indeed, New Types of Mortgages are Surging in Popularity (WSJ $ only); That creates a whole new set of problems:
Mortgage Scams. The Real Estate Jorunal teaches you "How to Fight Back If You’ve Been Swindled;" One final issue: Carole Baum points out that Banks may have greater exposure to mortgages than many realize;
• I cannot help but notice lots of late cycle anecdotal evidence, along with signs of excess speculation:
– Bulletin Board volume share volume expanded by nearly 40% over the volume record set in February;
– Online Trading Activity is up 44% (also: 2nd tier Brokerage IPOs)
– The return of the Margin Loans (if no WSJ, go here)
– My personal favorite is the Hemline theory & Short Shorts;
All this implies a degree of complacency that is worrisome to me. Hence, the battle between the Wall of Worry on one side, and the "What, Me Worry?" crowd on the other;
• Frederic Mishkin, a Columbia Economist, appears to be on the short list to fill Roger Ferguson’s seat on the Fed Board; Mishkin specifically notes the Yield Curve between the ten-year Treasury note and the three-month Treasury bill is a valuable forecasting tool in predicting recessions two to six quarters ahead;
• It turns out that Warming Arctic Is Taking a Toll;
• A Citigroup analyst Richard Gardner has heard the whining: He cuts Dell to a Sell, advises them to work on customer support: ""In our view, it would be preferable for Dell to reduce margins, and even near-term growth, rather than destroy 20 years of brand equity," Gardner wrote."
• Let’s delve into some personal finance issues:
– How to Become a Millionaire: A surprisingly simple formula: Spend less than you earn. Save and invest regularly. Make financial security a priority.
–Survival of the Richest: Forget the efficient market hypothesis, and consider the Adaptive Markets Hypothesis;
– Richard Russell on the Power of Compounding: Rich Man, Poor Man;
– With Tax day is behind us, Henry Blodget explains how your mutual funds are raising your IRS bill.
• Your tax dollars at work: The TSA keeps flagging new "Terrorists" — Homeward-Bound Marines with gun powder traces on them; (Duh!)
• Dave Sifry looks at the State of the Blogosphere; 75,000 new weblogs created every day, and the blogosphere continues to double every 6 months;
• An interesting new Stock Market Blog I came across this week was Stock Market Crash! Net — an academic look at historical market crashes and their characteristics. Meanwhile, you zig zag fans can check out the Optical Illusion blog;
• The creator of the hit TV series "Lost" will direct the next Star Trek movie (that’s #11);
• The Music industry surrenders to Apple; They pass on raising prices for digital downloads, and won’t charge more for hit songs. Kiss variable pricing goodbye– for now; She loves you — eh. The Beatles catalog belatedly set to go digital; Thank the litigation between Apple Corps versus Apple Computer; As a big Beatles fan, I can only wonder what took Yoko so long.
• While my ukulele gently weeps. Be sure to stick around until the Uke solo.
(See how all of this ties together?)
• Barton Biggs’ Hedgehogging took some nasty hits from reviewers for its "purple prose" and "cheap literary devices" (its a fictional account based on his experience). I think thats a mite bit harsh, and must admit to enjoying it.
• MP3s spinning this week: A few songs off of Death Cab for Cutie’s Plans — particularly the infectious Crooked Teeth and the pop tune Soul Meets Body; Also getting major podplay: Chuck Prophet’s No Other Love — genre busting greasy blues — if you can picture a more soulful Beck, you’ll get what he sounds like;
• The cult series Coupling (the BBC version) has been keeping me and Mrs. Cult-of-the-Bear laughing all week (check out Season 1 or Season 2) — its the closest you can get to the sharp writing and clever plots of Seinfeld.