That was a helluva surprising year, to say the least: The Market sold off mid-year, but rallied back harder than many people (me included) anticipated; By just about any measure, 2006 was a much stronger year than most had forecast. By the numbers, the Russell 2000 surged 17%, just edging out the Dow’s gain of 16.3%. The Standard & Poor’s 500 lifted 13.6%, while Nasdaq Comp was the laggard, gaining "just" 9.5%.
Oil gained exactly one penny over 2006 — but it sure didn’t feel that way. Natural gas plummeted -44% for the year. Gold was a winner, up 23%, but the yellow stuff couldn’t keep up with either Copper (+41%) or Silver (+46%). The US Dollar, measured by the J.P. Morgan Dollar Index, lost about 4%. Overseas markets were also up big, with most outperforming the U.S. Indices.
Let’s take a look a the key stories gone by — and those that will matter in 07: Its the last linkfest of 2006!:
INVESTING & TRADING
• "LET’S DISPENSE WITH THE SUSPENSE. We already know what 2007 will mean for the stock market: Because it is the third year of a presidential term, the market will be up dramatically, as has been the case in such years. But because it’s a year ending in "7" that is not the second year of a presidential term, 2007 will not be as good as typical third years of the election cycle. And let’s not forget that because it’s a "7" year that’s also the fifth year of a bull market, we’ll see a late-year crash, a la 1937 and ’87." So said Mike Santoli, with tongue planted firmly in cheek, in this week’s Barron’s Trader column;
• How the Bulls Stole Wall Street (WSJ)
• Floyd Norris asks: Does the S.E.C. Know What It Is Doing?
• Given the underperformance of the Nasdaq, its no surprise we witnessed a Nasdaq Trend Break
• Why did so many IPOs list in London and Hong Kong? For the same reason Willie Sutton robbed banks: Its where the money is: The Big Apple’s glory days have passed
• There are tons of year end reviews and previews:
Year End Review & Preview Marketwatch
2006 Revisited: Spanning the Globe Marketbeat
Markets Scorecard 2006 WSJ (free)
What to Watch for in 2007 WSJ (free)
10 stocks that could outperform in 2007 (Marketwatch)• And since it is that time of year: Seven Pointers for Parsing Predictions (Real Money)
• Here’s a surprise NONE forecasted: Securities Fraud Lawsuits Fall to 10-Year Low in 2006
• So many Wall St. Bonuses, So Few Ferraris: If you can find a 599, then grab one (highly recommend) otherwise, you may have to make do with a mere 430 (don’t look so glum, the spyder is a fun ride)
• Its been a very long time since we saw a S&P 500 2% Correction?
• Does your financial advisor add value? A seminal study this year suggests most do not…
• S&P’s Sam Stovall Says History Supports a Continued Bull Market (video)
• The WSJ looks at Bosses’ Pay: How Stock Options Became Part of the Problem
• Take a look at this 4-year chart for the dollar Ouch!
• Doubling Down on Emerging Markets (Barron’s)
• The Telegraph (UK) asks: M&A bankers enjoy the boom, but is the bubble about to burst?
• Good advice for the New Year: Resolve to Save More, Cut Debt
• Tips for Donating Your Used Junk (note the timely tax factor)
• Finally, under personal finance, the reporters of the WSJ’s Strategies for SavingTime and Money;
ECONOMY
This week, the Wall of Worry eased back a bit:
• Mark Hulbert asks: Is the Market signaling recession? Taking all the recent information assimilated by the financial markets together, the message is that an economic downturn may be on tap.
• Mike Darda of MKM Partners Sees Economy Growing at About 3% in 2007 (video)
• Growth or recession in 2007?
• Top economists answer 10 burning economic questions
• ATA Truck Tonnage Index Plummeted 3.6 percent in November (lots of comments andhere discussion )
• This is intriguing: Does Consumer Price Index overstate food inflation? Consider the Impact of Big-Box Stores on Retail Food Prices
HOUSING
• John Mauldin took the weekend off, so he used a commentary I had written for the office as a guest piece: Real Estate and the Post-Crash Economy. It is a long analysis that attempts to put the real estate boom into some context: how it developed, whats gone right and wrong, and what could happen going forward.
• TheStreet.com’s Marek Fuchs asks "Is there Too Much Housing Hope?"
• Good news for bargain hunters: Distressed Real-Estate: Priced to Sell in 2007
• Well, which is it?:
– End of Housing Slump Seems to Be Drawing Near
• All this leads to the question: Will the Housing market stabilize in 2007?
• Meanwhile, REITS — with their emphasis on commercial real estate — have avoided the residential woes: Housing Fall off Hasn’t Troubled REIT Funds
• Housing Developments Last Week and This Week
• They are still relatively low, but a Bankrate survey: Mortgage rates jump; Also New tax law tweaks home-buying math
• Good advice for the future: Making Your House Pay in Retirement
FEDERAL RESERVE
Its been quiet on the Fed front for a while (a little too quiet). Here’s what caught my eye this week:
• Is the Fed painted into a corner? Economists see Fed’s rate-hike pause lasting for another six months ; See also It’s the Fed vs. the markets as main event of 2007
• Econogeek! I love this monthly collection of charts published by the St. Louis Fed’s Monetary Trends
• Central Banks Will Give Less of the Same in 2007
• European Money-Supply Growth Is Fastest in 16 Years
RETAIL/SHOPPING
The post-mortem on Holiday shopping
• In general, Holiday Sales Fell Short; Data from the ICSC Retail Chain Sales was disappointing; So too was the wrap up from Master Card Advisors;
• An extensive look at The State of the Consumer, by the Numbers via Northern Trust;
• Which is the perfect lead in for Caroiline Baum: Christmas Is Over. Let the Sales Angst Begin!
• Wal-Mart Blames Short-Term Woes, But Some Expect Challenges to Remain; Meanwhile, their December sales were up 1.6% froma year ago (only fair, but better than expected).
Sentiment/Psychology
• Barron’s: "What strikes us about the current investment scene is how defensive, even delusional, the raging bulls are. And despite rolling in the long green by grace of the big market year, what a bunch of sore winners they are, insistent that everyone else is bearish and only they, brave souls, have the courage to be optimistic." (if no Barron’s go here)
• One of the more difficult aspects of transitioning from trader to strategist is reconciling the short term technical aspects of the
market with the longer term macro environment. Since
July, we have seen a decaying macro picture concurrent with a strong
market trend. If you follow both, it can make you schizoid.• Bullish Mood for ’07 Has Some People Feeling Bad
Energy
• Study: Iran faces crisis as its oil exports drop (no excuse for a nuclear program, though)
• uh-oh: U.S. Official Overseeing Oil Program Faces Inquiry (It may be considered bad form get paid as a consultant for oil companies hoping for contracts that you are overseeing)
• Chris Edmonds Says Oil Prices Could Spike to $80 in 2007 (Video)
Media
• How Much Should Be Shown of a Hanging? In the NYT, Network Executives Wonder and Wait. The Washington Post has partial video of the hanging. Meanwhile, you just know this will eventually show up on either YouTube or Rotten. (Much more below under War/Politics). Here’s a slightly skewed perspective on Saddam’s execution (NSFW).
UPDATE: Video footage is here.
• US funds the Taliban? Israel & Iran hold secret talks? The Top Ten Stories You Missed in 2006
• WSJ.com’s Best Read of 2006 (free)
• Dow Jones Chairman Peter Kann lists "10 current trends in the mass media that ought to disturb us". "Too many instant celebrities, too many two-day crises, too many ‘defining moments’ from people in search of instant history: The Power of the Press
Speaking of which: the WSJ OpEd continues not to get blogs (or a whole lot else): Journalists, Heal Thyselves
• Macaca, Menaissance, Herstory, Global Warming Denier: The Top Politically inCorrect Words for 2006
• The Best Sports Columns of 2006
• BBC: Photos of the year 2006
• 100 things we didn’t know last year
• War & Politics
"They said you was hung."
"And they was right."Thus ends the saga of Saddam Hussein: dictator, madman, tyrant, collector of miniature antique doll houses. News reports poured in from all over:
• The Associated Press assembled comments on Saddam’s execution from leaders from around the world — most of whom had a bigger problem with the Death Penalty as opposed to Saddam. In Iraq, the response was a mixture of Fear, indifference, jubilation over death; CNN also noted Iraqis react with joy, anger to Hussein death sentence; Iran rejoiced, Saddam’s supporters were bitter. The Voice of America’s report was here; The NYT’s obit is here: The Defiant Despot Oppressed Iraq for More Than 30 Years; The Washington Post’s is here Saddam Hussein Is Put to Death;
• Even with Saddam gone, Iraq remains an unfortunate quagmire. Josh Marshall’s Talking Points Memo gives a bleak view of what it means.
• Interesting connections between Presidents Gerald Ford and George W. Bush: Ford Aides Shape Bush Tenure
• Bloomberg: US has the World’s `Worst’ Visa System; It Scares Business Away
• For the first time, more troops disapprove of the president’s handling of the war than approve of it.(Barely 1/3 of service members approve) Poll: More troops unhappy with Bush’s course in Iraq
• Wired Magazine: The Bush Era Draws to a Close
Technology & Science• Debate: Is ‘Web 2.0’ Another Bubble?
• Walt Mossberg’s video on High Def DVRs (see also The HDTV Dilemma: Pay for TiVo’s Recorder Or Settle for Cable’s?)
• This one goes straight into the WTF file: HOW OLD IS THE GRAND CANYON? PARK SERVICE WON’T SAY — Orders to Cater to Creationists Makes National Park Agnostic on Geology.
• That didn’t take long: Security Flaws Are Detected in Microsoft’s Vista
• Business 2.0: How to Succeed in 2007
• Founder of Wikipedia plans search engine to rival Google
• Ever wonder why you can’t get iPods at a discount?
• Giant plant-eating dinosaur unearthed (The biggest ever?)
• Via kottke comes this list of free addictive little web games (WARNING: these are giant time sucks)
• ABC’s Top 5 YouTube videos of the year
Music Books Movies TV Fun!• RIP James Brown, Godfather of Soul: Some of his more important recordings are discussed here; My friend Rob tells the story of how JB saved his bacon in grade school in Reflections on James Brown (very amusing!)
• Oh Holy Night New Orleans Style Fabulous version from NBC’s Studio 60
• The extended weekend will give me time to get to Ken Fisher’s The Only Three Questions That Count: Investing by Knowing What Others Don’t
• We previously noted John Hodgman‘s book The Areas of My Expertise. The entire book is now available for free at the iTunes Music Store (amusing as all hell).
• The Mega-Meta-list: The one page that aggregates all of 2006 lists
• If you plan on having a drink (or 3) on New Year’s Eve, consider these suggestions:
-The Wines that earned the coveted Delicious!’ rating from the WSJ in 2006 (free)
– The Most Expensive Champagnes 2006
– The [Your Name Here]-Tini
– The Wine Spectator’s Top 100 for 2006• Take a Quiz: A Year to Remember (pop up)
• The NYPost, in their inimitable way, note that the DVD-ISASTERFORMAT HAS PEAKED – THAT’S BAD NEWS FOR STUDIOS
• Performers who Take the Stage at Midnight: Some of history’s landmark live performances took place on past Dec. 31sts, but midnight can also be a letdown.
• Pitchfork: Top 50 Albums of 2006
That’s all from what remains a very temperate weekend in
the NorthEast, where no white Christmas, New Years, or President’s Day appears to be in the forercast!
Have a safe and happy New Year’s Eve, and a prosperous and healthy New Year’s !
Somebody brought up a good point though – because of the decline in the dollar you could have done just as well by putting your money in a foreign bank account (or high grade debt if you prefer).
It’s hard for me to get excited about a ~15% rise in US stocks when so many alternatives have done so much better.
I tend to think more globally, so adjusting for inflation and dollar devaluation, US stocks are essentially flat in my book.
As for the housing market in 2007, my view is there are deals to be found and I do not think we have hit the bottom yet..
I’d just like to point out, once again, that the rapid increase in foreclosures we’re seeing now (another 4% MoM 68% YoY rise in November) is absolutely inconsistent with any sort of bottom forming in housing.
Historically speaking, foreclosures are the real lifeblood of housing busts. I’m still trying to locate some data that shows a housing market that bottomed or began to recover during a period of rapidly increasing foreclosures.
Anybody claiming housing has bottomed should be asked to do the same.
Barry,
Even Warren Buffet would tell you there is too much speculation (and manipulation) in the markets (his primary reason for not holding onto his actual silver).
This is why he has been weighing heavily into foreign currencies for the first time. Maybe enlighten us on what no one seems to be focusing on. The currencies that fared best for 2006.
As we ring in this new year, I want to pay homage to that extraordinary invester par excellence Warren Buffet. What a record of performance, one of the all time greats, no question about it! But more importantly, he is a good man. Lived in the same modest house in Omaha, Nebraska with the same wife and same set of children most of his adult life. And what he did this year just blew me away, donating and DELEGATING 85% of his wealth to the Bill Gates Foundation. As a human being, he surpassed his superb life’s record in the business world. God bless him and God bless America! And Happy New Year everyone!