Well, that was something. That seemed like the first full week with no holidays in I don’t recall how long. Volatility returned with a vengeance, as we saw some sizable rallies and selloffs; The Dow hit yet another all-time high, while the S&P500 hit a 52-week high. Transports went the other way, and Nasdaq continues to look punk. The Dow lost -0.62%, with the SPX down -0.58%. The Nasdaq gave up -0.65%.
Earnings came in pretty good — but is pretty good good enough? Barron’s notes that "the ratio of companies beating numbers to those disappointing is running well below that of recent quarters."
So far, various catalysts are offsetting: rising interest rates, declining earnings, versus falling energy prices, moderating inflation. Its worth noting that this bull market has now run longer than any market in history without at least a 10% correction.
No matter, we’s gots some clicking to do: On to the lumber yard!
INVESTING & TRADING
• Earnings Season Gets Underway: So far we’ve seen less
"earnings beats" than in prior quarters since the 2003 lows.
• Transports at Crossroads:
The Dow Jones industrial average slid Thursday but even after a
100-plus point drop it is less than 1% below its all-time closing high.
That is why it’s more concerning to some market watchers that the Dow
Jones transportation average, which fell 1.4% Thursday and is now 5.6%
below its all-time high set in May (TheStreet.com)
• Big Investors Take On Risk: More institutional investors are targeting emerging real-estate asset classes that typically offer better returns but more risk, according to a new survey. (free WSJ)
• We closely watch Bullish Sentiment and Asset Allocation Surveys. Each shows that investor confidence and asset allocations towards
equities are at bullish levels. Although these levels are
not at extremes yet, they are above historical means and need to be watched. They are at levels which suggest investor buying power is diminishing.
• New proposals from the SEC would reduce the number of investors
eligible to invest in hedge funds by about 88%, to just 1.29% of
American households: The New Definition of Rich (Frontline)
• And how do the very rich invest their wealth?: Domestic equities dominate, while alternative investments are falling from favor. (Fortune)
• The problem for investors is that even though stock-picking usually hurts returns, it’s extremely interesting and fun: Why the world’s greatest stock picker stopped picking stocks, and why you should, too (Slate)
• Goldman Sachs asks: How Solid are the BRICs?
• Stocks surge (there’s that word again). But so do gold and oil. Was the death of commodities exaggerated? Commodities’ obituary premature? (Marketwatch)
• Risky countries, safe companies: New ways to invest in developing nations. (Canada.com)
• Mike Santoli does yeoman’s work in video interviewing all of the members of Barron’s Roundtable, including Meryl Witmer, Mark Faber, Fred Hickey, Abbie Joseph Cohen, and all the rest. (Barron’s) (free)
• New ETF’s Get Short & Ultra Short (Video) (TheStreet.com)
• Since the beginning of December, Treasury note yields have soared as expectations of easing by the Federal Reserve have faded. As yields approached 5% last week, stocks hit a speed bump with the Dow Industrials suffering its biggest hit in two months on Thursday: Stocks Yield to Bonds’ Slide (Barron’s)
• Doug Cliggott of Dover Discusses U.S. Economy, Value of Drug Stocks (Video) (Bloomberg)
• Buy’ ratings become scarcer as U.S. stocks rise: Industry analysts are becoming increasingly cautious on U.S. stocks as the market advances, rather than jumping on the bandwagon as they did during the 1990s Internet bubble. (Bloomberg)
The Wall of worry continues to build:
• How does the BLS data compare with Your personal inflation rate? Substitutions and Hedonic Adjustments lead to underreported inflation.
• Time magazine asks the Global Question: Who Needs the U.S.?
• Caroline Baum says "There are reasons to be skeptical about strong
fourth-quarter growth and circumspect about the idea that the
housing bubble has deflated without any generalized economic or
financial distress." Fourth-Quarter Economic Figures Don’t Add Up. (Bloomberg)
• Hugh Moore of Guerite Advisors looks at Real Consumption versus NAHB Sentiment
• Falling Bonds, Rising Yields Bond prices in the US, Europe and Japan have been sliding since
December. At 4.11%, European 10-year government bond yields are at the
highest level since 7/6/06, while at 4.88%, US bond yields are at
their highest level since 8/15/06.
• Euro Central Bank’s Trichet to Examine M3 Data `Very Carefully’: The ECB will raise the benchmark 3.5 percent interest rate in March, which would be the seventh increase since the end of 2005, partly to slow the flow of liquidity. The ECB yesterday said M3 growth, its preferred measure of money supply, surged 9.7 percent in December, more than double the rate it says risks fueling inflation. (Bloomberg)
Housing headlines sounded better, but are really still way below normal:
• Pile on! The NAR’s oft hallunicatory Chief Economist, David Lereah, was pilloried by pundits for his rosy assesment of Housing. The WSJ likened him to Baghdad Bob, while MV used the headline ""Existing-Home Sales Continuing to Stabilize In Terms of
Plummeting" I, of course, was far more reserved, noting only that Existing Home Sales Are Fantastic!
A free WSJ 3fer:
• Monthly New-Home Sales Rise, But Year Is Worst Since 1990 The number of homes sold rose 4.8% in December but demand for the whole year logged its biggest drop in 16 years. The median price for a new home rose to $235,000 last month from $232,200 in November but was lower than the year-earlier level of $238,600.
• Drop in Existing-Home Sales For 2006 Is Sharpest in 24 Years Resales fell 0.8% in December, capping off a year that marked the biggest decline since 1982. Sales for all of 2006 dropped by 8.4% from 2005.
• Housing Glut Gives Buyers Upper Hand: Amid a continuing oversupply of homes for sale in most of the country, consumers looking for a house should have plenty of choices and lots of bargaining power in the spring selling season — typically the busiest time of the year. Plus, use an interactive chart to view housing data from across the U.S.
• It turns out that Sales of new one-family houses in December 2006 were statistically no different than zero: Dissecting New Home Sales Data
• U.K. House Prices Rise to Record on Supply Shortage — that’s the key difference between the US and UK: Great Britain is an island, and they have run out of land.
• The latest Real Estate Scam? "Cash back at closing; Buy a new house, live rent free for 2 years!" See this Craig’s List posting for Phoenix
• Home Inventories Rise, Prices Fall: The quarterly survey of housing conditions in 28 major metropolitan areas by The Wall Street Journal (free) showed that the inventory of unsold homes at the end of 2006 was up substantially in nearly all of them from a year earlier.
• I’ll have a lot more on the Foreclosure issue soon, but menawhile, they continue to rise:
Tremors at the Door (NYT)
• Real Estate Speculators have become Accidental landlords
• Whitney Tilson on Applying Behavioral Finance to Value Investing
• The WSJ notes that fallout from the war in Iraq, which already has weakened President Bush among the general public and in Congress, now is causing problems with the group that has been his mainstay: social and economic conservatives Bush’s Conservative Base Frets, Key Issues Are Losing Focus (free)
• Attacking Iran: The market impact of a surprise Israeli strike on its nuclear facilities (pdf)
• Rumors circulating that Dick Cheney will step down as VP, allowing Condi Rice to take over — grooming her for a Presidential run (I don’t buy it)
• How to Take the New York Times Private:
If it’s a bad time to run a publicly held media company, perhaps it’s a
good time to run a privately held one. Should the Times take itself
private? And how could it do so?
Technology & Science
• The mating of Technology and Porn were column topics in both the WSJ and the NYT this week:
• These futuristic projects promise to make the world greener, while making entrepreneurs some green: 8 technologies to save the world
• Remapping the Universe: How multi-touch driven computer screen will change the way we work (Video)
• Eric Savitz looks at Microsoft’s earnings, and asks "What’s Going On With Xbox?
• Science news asks: Does sprawl make people fat? Could smart urban design keep people fit and trim?
• The state of technology: John Dvorak’s tech forecast for 2007
• Look to Mars for the truth on global warming
Music Books Movies TV Fun!
• I asked readers the question "What are the must own DVDs for home theater enthusiasts?" Many of the suggestions were quite astounding: DVD Question (comments still open for more suggestions)
• Prices drive sales: Not surprisingly, the Top 5 Amazon Music Sellers Are All Under $10
• Henry Blodget (yes, THAT Henry Blodget) has a new book out: The Wall Street Self-defense Manual: A Consumer’s Guide to Intelligent Investing. And, the reviews are surprsingly good (Henry Blodget, Big Pal of the Little Investor?)• Norah Jones has a new album, Not Too Late, coming out this week. You can stream the first single here, or watch a video here.
• Ricky Gervais Meets Larry David (The last 3 minutes are NSFW) Parts II-V are posted (utterly hysterical)
• Fun with XML: Pictaps is a web-toy that invites you to draw a stick-figure, and then creates a delightful, gigantic animation of your figure, multiplied into a cast of thousands, doing a joyful, Busby Berkeley show-number!
• I cannot imagine the patience it takes to create Stop Motion Animation: My Animated World
That’s all from the cold, icy snowy NorthEast. Memento is queued up in DVD, and 3 weeks worth of 24 awaits on the TiVo. Stay warm!