Sometimes, the numbers don’t tell the full story: For the week, the Dow lost "only" 52 points — about 1/2 a percent — while the SPX gave up 5 and the Nazz lost 16. Funny, it seemed a lot worse Thursday and Friday, as several economic releases suggested a much sharper deceleration than consensus.
The Fed stayed on Pause, Oracle reported good numbers, and — ex 20 cent a share Labor expenses — Fed Ex maintained guidance for 2007. Oh, and I heard something or other about a hedge fund blowing up.
This week, we have some housing data, Durable Goods, GDP and Personal Income to look forward to. While we wait, here is the weekend linkfest:
ECONOMY
• I can sum up the economy, market sentiment, and the late week shift in trading in just 2 words: Whither Goldilocks?;
• There’s too much Amaranth stuff out there, so here is a quick overview: Dealbreaker does a full round up of all the coverage; Jeff Matthews explains how the fund was related to LTCM; I place blame squarely where it belongs: on investors who encourage excessive risk-taking.
• Economists Debate if Fed Is Done Raising Rates; Caroline Baum observes the Bond Market is Gearing Up for Rate Cut;
• For a while, it seemed Chrysler was in a separate league from Ford
and GM: Lots of surprise hit cars, profitible for 12 straight quarters.
Is this Strike Three for US automakers? Is Chrysler now’s going down the tubes, also?• The Illusory World of Economic Forecasting;
• Greg Ip looks at How Stock Options Muddle The Relationship Among Wages,Corporate Profits and Inflation;
• And I was this close: Billionaires only for Forbes’ list of US super-rich;
• What is the message of commodity-price volatility? (From Copper to Capital)
• Some good news: Falling Gas Prices Help Low End Consumer;
• Businessweek succumbs: The Gloomy Side of the Street; The Philly Fed Business Survey is here
• Personal bankruptcy numbers are steadily rising again
• Will the G-7 get replaced with the G-2? (US and China)
• This can’t be good: Spy Agencies Say Iraq War Worsens Terror Threat;
INVESTING & TRADING
• Bad Puns aplenty as HP tried to put the pretexting scandal behind it: Dunn Is Finally Done; I heard Hurd is Now Chairman;
• Question: Why did none of the ginormous energy bets made by Amaranth have any regulatory scrutiny?
Answer: The Enron Loophole• Have a look at the Internal Strength of the Market
• John Dorfman says Nine of 20 Largest Stocks Earn My `Buy’ Rating
• Do you know what is Alpha betting is?
• Amaranth was loaded up on SPACs;
• What Does Wal-Mart’s Prescription Drug Plan Mean?
• Are you familiar with the 75 Day VIX Rule?
• John Hussman points out two pet peeves of ours: Weak breadth and poor volume in A House Built on Sand;
• Doug Kass on what happens When Short Sellers Are Targeted; Meanwhile, John Dorfman (him again?) has a Short-Selling Contest
• Who is Federated Investors’ Steven Lehman, and why is he so nervous?
• Fleck advises us to Beware markets with no reason to rally;
• The only plausible conclusions that can be drawn from the crackup of
Amaranth, et al, are that 1) they didn’t know the risks they were
taking, or 2) they knew and didn’t care. Either way, Henry Blodget says
its Risky Business;
HOUSINGAs interest rates and gasoline prices come down, I would expect to see some mild improvement in real estate sales; Even the new house across the street from me finally sold — after being on the market for a year, it sold for a 18.9% discount from the original price.
• No surprise them that Homebuilders Index Falls to lowest level since 1991
• This is rather Interesting: Contrarians Moving Into U.S. Housing Stocks
• "It is a difficult environment right now, and we expect it to continue to be very difficult on the revenue side for everybody in the industry, and there will be continuing concerns across the industry for a time to come" — WaMu’s COO, speaking at Bank of America 36th Annual Investment Conference in San Francisco;
• Misery quotient: Just how much are borrowers with option ARMs going to suffer? Its no surprise that High-Cost Loans are on The Rise;
• Home Price Appreciation Slackens;
• A young real estate speculator overextends himself, blogs all about it, and then realizes what a giant mistake it was: I am Facing Foreclosure.com;
Psychology and Sentiment
• What is Wealth? (part II)
• The Cumulative NYSE TICK: A Valuable Measure of Short-Term Sentiment
• NYT Technology (and former Macworld) columnist David Pogue looks at the news headlines from 1995-97 about Apple; Yet more proof that financial media can be bad for your wealth.
• U.S. to create ‘virtual fence’ for borders
Technology and Science
• Philanthropy Smackdown: Its the Google Boys vs. Gates for the World Charity Championship.
• YouTube ModeIs Compromise Over Copyrights
• HOW to BECOME a GOOD THEORETICAL PHYSICIST
• This is pretty damned amazing: You can Google for special codes to hack into ATM machines (Googling for ATM Master Passwords); The video of CNN’s Report is here: Robber Tricks ATM machine;
• Fascinating discussion for you musically inclined quants: Just How Random Is the iPod’s Shuffle?
• Jon Markman has a good piece stating Why YouTube is ready for prime time;
• Want to know how and where VC money is s[pread out over the web? Then check out The Web VC Chart
MUSIC FILM TV BOOKS Fun!
• An unblinking look at the history of the MPAA film rating committee. It turns out that not only is the panel populated with low IQ sexual deviants, but they use the rating system as an unfair way to prevent independent films from competing against the majors. Then there are the comical changes directors must make to avoid an X rating: The MPAA had Scorsese "desaturates the colors during a shootout scene" in "Taxi Driver" because the MPAA feels that the darkened colors disguise the blood. Scorsese later said the changes ordered by the MPAA made the scene even more shocking.
• Oh, and there’s a blog too: This blog is not yet rated:
• Want to track the most popular videos on line? The viral video chart
• Wonder why Jackass 2 dominated box office sales this weekend? If this makes you laugh, you have your answer.
• How well do colloborative filters work for music: Actually, I Hate That Song.
• Why do Music CDs Fail to Compete on Price?
• Sculptor of Wall St. bull sues over copyright
• Michael Lewis reviews "The Accidental Investment Banker"
• This year’s MacArthur Fellows 2006 (Genius Grants)
• Dr. Suess Taxidermy (yes, that Dr. Suess)
Thats all this week, where like it or not, the season premiere of Depserate Housewives will somehow find its way onto my TiVo . . .
D.R. Horton slashing prices 30% at one development in Florida (at least one) to unload the inventory.
http://housingpanic.blogspot.com/2006/09/home-prices-never-fall-update-dr.html
Can there be any profit margin left?
If the week before last, was for the soft landing crowd, this week just ended, was for the hard landing crowd. What will the next week be, the depression crowd?
People take drugs for their depressions. Perhaps we should too. The firms with tight locks on essential non generic druat might be tough sledding. That is assuming that they do not have any massive bouts of litigation in front of them. Pfizer looks ok and then there is Dr. REddy over in India. Considering all the talk about Wal mart and it’s buy from the absolute least expensive provider it might be worth looking into. I do not have a postion in either.
I am looking for the sweet spot in my heart so that I will glide into the future rather than worry my way there. Jim Jubak has a good article on the different scenenerios that might happen in the near future.
Ok I am going to retype what I wrote that I could not past in to this:
Although hedge funds are unregulated perhaps it should be required that a pamphlet in very large type be given out that says if they do not mention the following then RUN!
The other thing that should be instituted is a penelty perhaps instituted by memebers of the hedge fund community that if someone makes a very imprudent bet thate there be rather severe penelties to discourage betting the ranch. I think memebers of one of the Mafias or the Yakuza could be kept on retainer for this purpose. Lets say action might be taken if a 35% loss in a certain amount of time is made. Anything beyond that might have ever escalating penelties fingers, arms , private parts etc. You get the idea.
I think most of us are looking for a market that matches what we thing will happen. This is a problem for our pride becomes a stumbling block in acheiving our intended results if we are wrong. I think that this is so common that the tendency to do this might be inherant in us. How many people marry with an idea of what their spouse should be like? Our rigidity and self delusion casues vast amounts of suffering.
I have noticed that the pound/euro/franc are moving up. s far as where moeny in the markets is going I suspect it will go to the fastest moving sectors that are percieved to have lasting value . Pharmacuticals, bio, some tech, food, financials (insurance) Perhaps all centered on value. With a layer of bets in gorwth too. I think that we should pay attention to the areas we are discussing as being likly to be hardest hit for eventually they will provide opportunity.
there has been a lot of talk about a housing crisis. it is not a housing crisis it is a paying crisis! There are enough houses. so how are we going to take advantage of it? I am not sure that this is covered by the adage “Buy when there is blood in the streets” Rather I think we have to wait for it to coagulate a bit.
Any one want to start a foreclosure fund along geographic lines?
Meanhwhile I still worry day by day and I am looking forward to the time when I only worry week by week.
Enjoy your life.
Condo prices near a cliff
By Susan Diesenhouse
Tribune staff reporter
Published September 23, 2006
So far the housing slump has been marked by slowing sales. Now there are signs that rapidly falling prices could be on the way.
Earlier this month a Chicago developer sold 150 condominiums in a two-hour lottery by discounting prices about 20 percent from what he would have asked last spring, an indication that industry observers say could signal widespread price reductions here and around the country.
For the first time in his 37 years as a developer, Nicholas S. Gouletas, chairman of Chicago-based American Invsco Corp., held a lottery to sell his condos, in this case 150 moderately priced residences in a 292-unit vintage high-rise at 182 W. Lake St. in the Loop.
Gouletas figures he still could make a 10 percent profit by cutting future carrying costs. He will avoid the expense of 2 1/2 years of mortgage interest payments, marketing, maintenance, insurance and taxes by not struggling to sell condos against the headwinds of a slowing housing market.
“We’re responding to a dramatically changed market,” said Gouletas, who plans to conduct lotteries to sell about 2,000 more units in nine other projects he is developing in Chicago, Las Vegas, Orlando and Boynton Beach, Fla. “Let’s admit it’s a buyer’s market and what they want is the best price they can get.”
Housing futures point to a decline of between 6-8% by next August in most major markets
Hey Barry-
I am really bothered by an aspect of the “reporting” I see on some of the housing bubble blogs out there. It’s this notion that the housing market is in free-fall. Here’s how HousingPanic.com describes it: “[the] house-of-cards-housing-ponzi-scheme is now tumbling down and tumbling down fast and hard”.
It’s just NOT the case right now. I went out to San Diego this weekend to try to shop for real estate. Not for investment reasons, I was looking for a beach house for personal use. And I could NOT GET A GOOD DEAL near the beach. No sellers were motivated to drop their prices below recent comparable sales. Sure, every broker I talked to said the NUMBER of sales had slowed, and priced had eased A BIT in the inland areas, but there was effectively no price easing near the beach- and very little sales volume there too.
I think some folks are calling the “tumbling down fast and hard” before it’s actually happening. It’s not happening yet, based on my experience. I would love for it to happen so I can buy that beach house at a bargain. But maybe there are just too many people with cash in their pockets like me.
Sherman,
Those are what are called ‘stubborn sellers’. They’ve been the reason why inventory is way up while prices have not decreased much. The pain will come when the market reaches a saturation point and the sellers blink. Then the freefall will begin.
Lynx – re Fleck’s comments (from his article of little substance):
“However, that doesn’t necessarily mean anything. In fact, I anticipate disappointment on the corporate (as well as macro) front, in the form of preannouncements. In addition, I believe that third-quarter earnings may miss expectations and that fourth-quarter guidance could be weak. It’s hard for me to see how stocks can just power their way through all of that.”
Well, he believes that – so what? This is a guy who is short from the market low in July (and still short I guess) and is out talking his position. I see the gloom and doom macro pic as well as anyone but the markets are not that simple and he should know that well – he’s been around. Sell low?
Here’s some support for Tamny’s column “From Copper to Capital”.
These guys go further and argue that the oil-price shocks of the 70s were the direct consequence of the abandonment of Bretton-Woods. They reinterpret what I always heard was “OPEC flexing its muscles for the first time” as a natural defensive response to rapidly declining dollar valuations.
http://www.independent.org/pdf/tir/tir_09_4_2_hammes.pdf
If the housing market does collapse, who is to say that the estimates of it coming back in 2008 are right? The Japanese housing bubble collapsed and the prices went down for 13 years straight. Given the runup of housing over the past 5 years, i wonder if its conceivable that prices could continue to fall for 5 or even possible 10 years.
I’m not saying the Japan scenario is likely. But is it really outlandish? Japanese real estate prices did rise a lot more than American prices and the bubble was much larger. However, there was much more personal savings in Japan that does not exist in the United States. If the real estate market deflates, how many people will go bankrupt? how many foreclosures will occur? what will all of this do to the banking system? what will happen to the dollar if 0% interest rates are required to get this thing moving again? I realize these questions are way ahead of the current situation and there is still a possibility that we could avoid recession but they still are interesting questions to ask.
Sherman,
I think the market segment you were looking at isn’t the best one by which to compare the rest of the market. A beach house is a luxury item, in a very niche market, which is likely to be a scarce commodity … forever. However, I do hope you search continues and you find a great deal.
The foreclosure statistics are a lagging indicator. From the time people get into financial trouble, to they time they are actually foreclosed upon, this process takes awhile.
Micro-economies which might be better indicators are middle-class to upper-middle class neighborhoods where all seems fine and dandy, but people are swimming in debt scraping by, not trying to become embarrassed in front of the Jone’s. When the for sale signs continue to go up, or it becomes in vogue to say “we’ve decided to cut back and give ‘quality’ gifts this year for Christmas” is when you will know things are about to get a lot more serious.
I think there are going to be a few waves to this real-estate recession. The first wave is what we are seeing now. Over extended people breaking under the weight of their debt. There will be another wave when condo-fire sales reach a fever pitch, and the builders/ investors are not able to break even or eek out any sort of happy ending. Then it will become a problem of the lenders, and then it will cascade into a full blown real-estate recession.
Barry, what do you make of the new currency carry-trade ETFS?
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