Its deja vu all over again: It seems that way too often, the hope of "the Fed’s finally finished" raises expectations of a pause. We saw that on Wednesday, the best one day performance since 2003. Alas, it was all given back by Friday. These short covering/one-day wonders must be becoming quite tiresome to those poor souls who believe in them.
No matter: The economy is terrific, there is no inflation, earnings are great, Iraq is a democracy, oil prices are dropping and peace is due any minute in the Middle East. Oops, my bad; That must have been some incumbent’s press release.
Back in real world, there are real concerns which need to be digested. Its a rainy weekend in NY, and that means an extra long survey of many of them in our weekly linkfest:
• Are we placing too much blame on Bernanke? After all, he merely inherited a bad economic set up. Slowing growth, rising
inflation, high energy costs, a real estate dependent economy, and the
longstanding problem of excess liquidity — none of these rest at the
feet of the present Fed Chair. In reality, they are the result of what
Tim Iacono charitably describes as The Mess That Greenspan Made.• The most egregious Fed Chair critic is Kentucky Sen. Jim Bunning (R). He called Bernanke an "amateur" and "blasted the former Princeton University professor for unnerving markets with his anti-inflation rhetoric." Perhaps the Junior Senator from Kentucky needs to be reminded of his own record: in his rookie season with the Detroit Tigers, he hurled a lamentable 6.35 ERA.
• The WSJ’s Greg Ip, whom I have criticized in the past for being too trusting of government statements and news releases, has the scales removed from his eyes in Fed Reality Check
• Was Wednesday anything more than a Sucker Bet? so far, that seems to be the case.
• Real Estate moved front and center this week:
-The Fed Chair mentioned in his prepared remarks that the slowdown in Housing was "orderly."
-Barron’s Alan Abelson quotes D.R. Horton CEO Don Tomnitz as saying Housing downturns are "longer and deeper than we’ve imagined" in Eyes Wide Shut (If no Barrons’, go here)
-The NYT exhorts us to "Keep Eyes Fixed on Your Variable-Rate Mortgage" (They were kind enough to provide me with this interest only national map from their print edition);
– The latest Headache For Homeowners: Inflated Appraisals
-These are the best places to live in America;• The Middle East is causing all manner of consternation. The Op/Ed pages of American newspapers are rife with fascinating and thoughtful analyses — (I am aware that this may quite possibly be the first time that sentence has ever been written).
In the WSJ, Middle East Scholar Fouad Ajami writes Lebanon is Hostage to Hezbollah via Iran and Syria. In the New York Times Ted Koppel (Yes, THAT Ted Koppel) addresses the question Are the Israelis over-reacting in Lebanon?:
"Perhaps they simply perceive their enemies’ intentions with greater clarity than most. It is not the Lebanese who make the Israelis nervous, nor even Hezbollah. It is the puppet-masters in Tehran capitalizing on every opportunity that democratic reform presents. In the Palestinian territories, in Lebanon, in Egypt, should President Hosni Mubarak be so incautious as to hold a free election, it is the Islamists who benefit the most."
In the Washington Post, George Will writes the Weekly Standard — "voice of a spectacularly misnamed radicalism, "neoconservatism" — is "so untethered from reality as to defy caricature." The Cato Institute concurs. Is National Review next? Some people are surprisingly thrilled about the situation — it means the Rapture is nearly here.
As to the financial repurcussions, consider these possibilities:
-Bank of Israel: Markets Will Project a Change for the Worse in Israel’s Security and Geopolitical Situation (pdf)
– Morgan Stanley: The ‘latest’ tension is another twist in the endless cycle of shocks in the Middle East
-Businessweek: The Mideast’s Economic Fallout
-Bloomberg: Israel Stocks Rise Most in a Week on Optimism Conflict Near End
• With all eyes on the Middle East, you may have missed this: Has China’s Yuan Tinkering Changed the Global Economy? (it was the anniversary of the unpegging)
• Some interesting ideas came forth this week from the world of INVESTING:
Random Walk and Outperforming Fund Managers (or whats left of the efficient market hypothesis)
The Market is Wired Differently From Human Brains
Citigroup’s Geo-Political Risk calculator
Want to Buy Stocks Making 52 Week Lows? (Don’t)
In case you missed it, Warren Buffett on Charlie Rose
"We Now Return You to Our Previously Scheduled Microsoft Bashing"
Fleckenstein says: The bear market is back
Speaking of Big Cap Tech Disasters: Dell
What Can Male Traders Learn from Successful Women…And Vice Versa
The trading doc advises Making friends with market emotions;
• Option Options Options!:
Study Finds Backdating of Options Widespread: More than 2,000 companies appear to have used backdated stock options; Fortune’s Adam Lashinsky drew the early bead in Options gone wild!
Readers were warned of the adverse impact of Option Expensing 18 months ago;
A must read study: CEO total direct compensation at Tech100 firms is inversely correlated with performance — (PDF)
Last week, I noted how offended I was at the 9/11 option grants; Surprisingly, some defended the practice, so I advised them to form an "Apologist’s Fund" and to use their own dollars in a 9/11 Options Grantee Investment.
• The Investment Company Institute noted that Americans have over $14.5 trillion stashed away in retirement accounts. Sounds like a lot of money — until you Do the Math;
• How What Naïve Consumers Don’t Know Can Help You
Some interesting Tech and Science items:
Way cool: The Biomedical Image Awards 2006
PEW: Bloggers: A portrait of the internet’s new storytellers
7/19/2006Geek to Live: Top 10 free and cheap productivity tools
Cool Google maps mash up of the most popular books by city
Do you have Netflix Guilt?
A MySpace backlash has begun: The Register notes the social networking site’s advice to musicians, a huge provider of content: Sell more tdhirts shirts
• A week like this needs lots of Funny; we have it for you in spades:
Ask A Ninja Reviews "Pirates of the Caribbean" (Not Safe For Work)
the laugh-out-loud funny Secret Diary of Steve Jobs, Aged 51 1/2
Brilliant mashup of the Monty Python’s "Knights of the Round Table", as performed in Star Trek
Chad Vader – Day Shift Manager (episode 1)
Judge: "Extremely Embarrassing" not the same as "Classified"
Daily Show on Ted Stevens and on Net Neutrality
And the astonishingly foul mouthed but incredibly funny edit of The Big F@#*^% Lebowski (Definitely NOT SAFE FOR WORK — it’s nothing but curses)
Regular readers know I’ve been a big fan of Entourage since day one. But HBO has also been running lots of older classic movies latetly: Animal House, North Dallas Forty, L.A. Confidential, 48 HRS, Houseboat, Field of Dreams — perfect for a rainy weekend. (And if you haven’t seen Monster-in-Law yet, do so — just for Wanda Sykes performance )
And that is all she wrote.
aug fed funds rates are pricing in a pause in AUG.
ODD.
“-These are the best places to live in America;”
Scottsdale was a great place to live 30-40 years ago when I grew up there. Now, not so much. Too big, too built up, and no desert around it left to speak of. I miss the desert, and it’s all dying thanks to overgrown grass and wildfires.
But, San Diego where I live now is no better anymore. It was great 20 years ago, now, too big, too built up, and no chaparral left to speak of. Is there any place in the U.S. that isn’t just simply destroyed by people yet? I’m SO sick of the damned McMansions, the huge roads everywhere and the SUVs.
christopherrobin:
How you figure? Still looks like a greater than 50% chance of 1/4 point
Why is it that private equity is more than happy to dumpster dive for all the “rubbish” the public markets have discarded?
And why is it that cash rich “dogs” are more than happy to repurchase massive tranches of their own equity?
I have no doubt that lot’s of LBO’s and MBO’s are coming soon to a corporate HQ near you.
Why all this activity: because many assets have become dirt cheap, bears in these here woods notwithstanding.
per donna:
“Is there any place in the U.S. that isn’t just simply destroyed by people yet?”
Lots of places, trouble is that it’s hard to make a living there. Your own Arizona looked pretty good to me as I travelled from LV to the Grand Canyon recently. But I feel your pain.
I grew up in Atlanta when almost anything 15 miles north of town was either farmland or horse pasture. Where I lived was nicknamed the Golden Ghetto and had one of the highest per capita incomes in the US at the time, altho I was not a Little Rich Kid. It got rapidly overbuilt, but on 1 acre lots and there was abundant wildlife as well as lots of buffer land owned by farmers who would not sell.
Eventually all of that went to hell of course and we wound up with the same mess that exists in most suburban US areas. Even so, I still see some deer now and again and once every few years, some horribly confused black bear makes it down from the mountains to cause great fear- I think that there is an ancestral home here that they still seek out on occasion.
I don’t know what to tell you except that the object is to be happy and if you are not, then it’s up to you to scout around for another place to live that suits you and can provide a living. There are probably some out there, but it kind of depends on what you do, how much you need to make, etc.
per adam:
“Why all this activity: because many assets have become dirt cheap, bears in these here woods notwithstanding.”
Nothing is cheap, all assets are grossly over-valued which is why they are falling now. The share buybacks are just a way of pumping up EPS while revenue declines; the LBO/MBO stuff is being engineered by crooks who don’t want anyone looking over their shoulders- good riddance from the market, bad news for their employees and the small fish shareholders who can’t get in on the looting.
Any list of the “best places to live” that includes Overland Park and Sugarland is a worthless list. What lifted Sugarland up into the top ten, a new Cold Stone Creamery? A “Super” Wal Mart? Alpharetta better get going on a new Petsmart and a couple more Starbucks if it wishes to make this list next year.
These places are plastic suburban wastelands – kidnap someone and drop them off in either place and all they would know is that they are in the suburbs.