That’s the briefest way to describe what was a painful week in the markets for many around the globe. Amid the global equity rout, U.S. stocks have their worst weekly fall in four years. Tuesday’s plunge wiped out all of 2007’s gains, and was followed by the deadest of dead cat bounces; Friday’s late selloff here was attributed to traders wanting to go home flat for the weekend. By the numbers, the Dow Industrials slid -4.22% while the S&P gave up -4.41%. The biggest losers of the bunch, the Nasdaq and the Russell 2000, regurgitated -5.85% and -6.2% respectively.
It wasn’t just equities, either. Also suffering along with Emerging and Domestic Markets were (in pain order) Small Caps, Gold, REITs, Commodity Futures, Corporate Junk Bonds, Emerging-market Bonds, and the US Dollar. The asset class winners: US Treasuries, Investment-grade Bonds, and Crude Oil.
The many factors that have propelled markets higher since the summer are showing decreasing efficacy. Like a magic spell that grows weaker with each incantation, chatter about liquidity, Fed rate cuts, how contained the Housing debacle is, and of course, the guaranteed soft landing are having less resonance with each repeated verse.
Its a quiet week for data: not a whole lot of earnings, and even fewer economic reports. The Monthly NFP is on Friday, and it may take on disproportionate importance — subsequent revisions notwithstanding — depending upon what else happens during the week.
To help you make sense of it all, we have gathered up some very instructive articles and commentary. By the time you get through this week’s linkfest, you will not only know what happend and why, but be in a much better position to deal with what comes next. That’s why I am here…this is what I do.
Pour yourself a cup of joe, stretch out your clickin’ hand, and get busy:
INVESTING & TRADING
• First up: This global interactive map of markets shows exactly how markets around the world progressed all week; Also, a graphical look at how various asset classes performed (Free WSJ)
• Market’s Fall May Augur a Waning Appetite for Risk Page 1 article — Talk about soft peddling a headline! (free WSJ)
• The first casualty of war is the truth; The same can be said for market corrections. Ever since global markets cracked, we heard all sorts of
bullshitbad dope. Here are the Top 10 Myths of Tuesday’s Correction
• Marc Faber on liquidity, the Yen, and Gold Meanwhile, Doug Kass was All In/leveraged short Monday; Barron’s cover story goes the other way: "Still Betting on the Bull"
• When financial markets fall, conventional wisdom says the little guy feels the pain while the rich emerge largely unscathed. This time may be different. (Free WSJ)
• Financial stocks make up one of the more important sectors in the broader market, and investors look to those names at times to gauge the overall health of equities. Right now, the sector has pulled back along with the rest of the market, and some analysts say it’s reaching critical levels — where further weakness could spell trouble for stocks
• Which leads us to: Goldman Sachs Group Inc., Merrill
Lynch & Co. and Morgan Stanley, which earned a record $24.5
billion in 2006, suddenly have become so speculative that their
own traders are valuing the three biggest securities firms as
barely more creditworthy than junk bonds: Goldman, Merrill Almost `Junk,’ Their Own Traders Say (Bloomberg)
• Indian Market Broke Before China:
Indian Markets have been softening since early February, giving up over
1,000 points from their Feb peak. They finally broke trend days before
the debacle hit in China.
• The usually chipper Jim Jubak asks Which market will blow up next? (MSN); Mark Hulbert reminds us that "One day’s sell-off does not a bear market make" (Marketwatch)
• The infamous December Low Indicator is now in play.
• Its not China, its the Economy (Stupid!) be sure to scroll down to the list of WSJ Headlines from Tuesday morning pre-open
• Almost overlooked in this week’s mayhem: Warren Buffett’s annual letter to Shareholders
• I drop the F-bomb on live CNBC Tuesday, and no one even notices
• What was the Correction’s Impact on Sentiment? (Barron’s) if no Barron’s, go here
• Dan Gross points out this classic magazine cover in Forbes: Boom Times on Charles Biderman’s Trimtabs which asks "Has the Bull Market Just Started?"
• During Tuesday’s trading, market internals were simply horrific. Just how bad? According to Jason Goepfert at Sentiment Trader the NYSE A/D was 451/2949 while the up/down volume was an astonishing 24,752,200/2,844,344,000 — that’s more than 100 shares traded down to each one up. The Nasdaq A/D ratio was 281/2832, while the up/down volume was 126,657,900/2,885,607,400. From a sentiment perspective, this typically doesn’t bode well for the future.
• James Montier Dresdner Kleinwort (London) Fear and Greed Index got this one right
• Greenspan’s use of the "R" word was quite mild. Of all the things you can blame him for, this week’s action isn’t one of them
• Booming demand for energy and commodities by China and
other countries has contributed to the surge in their prices in
recent years, Bernanke said. (I’ll just file that one under "D" for "Duh") Bernanke Says Globalization May Push Inflation Higher (Also, Video)
• Rounding and the Impact of News: A Simple Test of Market Rationality (FRB Research)
• As expected, Fed members came out and offered a Soothing Fed Balm. What else would you expect them to say? The calming words are part of their job descriptions. Just imagine what would happen if a Fed Chair ever announced: "Holy $%&*! What the HELL is going on in these %$#@ markets? Geez, I hope no one has found out that inflation is just OUTTA CONTROL!" It’d make Tuesday look like a picnic…
• Fed Doesn’t See Subprime Mortgages as
Federal Reserve officials don’t expect mounting losses on subprime
adjustable-rate mortgages to lead to a credit crunch that could
significantly harm the U.S. economy (Bloomberg)
• Or not: Uh-oh. The housing bust is just beginning (Slate)
• Mortgage Defaults Spread,Snagging More Borrowers (Free WSJ)
• How big is Sub-Prime: 6% or 50% of the Mortgage Market?
• Drag From Housing Could Persist (free WSJ)
• New-Home Sales Plummet To Lowest Level in Four Years (Marketwatch); Also, Sales of vacation homes sink 37% in ’06
MEDIA, TECHNOLOGY & SCIENCE
• Market Events & the Blogosphere: I emailed two dozen top financial bloggers — all of them saw their traffic spike from 20-100% on Tuesday.
• Dow Jones glitch explained: After a Rough Morning, A Data Backup Jolts The Blue-Chip Average
• If you miss Saturday’s eclipse, you have to wait until 2018 to see one as good: Eclipse set to be ‘best in years’
• Joost: Bringing TV to the Web (Time)
• At the Oscars, Apple introduced Hello, their new iPhone commercial that generated pretty good buzz. Also: The iPhone Highlights The Difference Between Invention And Innovation
• Microsoft Vista Sales Slip; Also: Microsoft dead last in security test
• Spacecraft return Sun panoramas (See this for some awesome photos)
• Is XM-Sirius Good for Consumers?
• Antarctic ice melt reveals exotic creatures
• Wanna buy a simple new DVD player? You might as well try to buy a new rotary phone
MUSIC BOOKS MOVIES TV FUN!
• Weeks like this send you back to the basic primers for sonme guidance. Any of these 3 books will give you a broader perspective:
–Devil Takes the Hindmost
–Bull: A History of the Boom and Bust, 1982-2004
–The Go-Go Years: The Drama and Crashing Finale of Wall Street’s Bullish 60s.
• In all the mayhem this week, I overlooked our usual Friday Night Jazz session. Such are the casualties of market corrections. No matter, I have been listening to tunes a bit less mellow this week. With the recent death of my iPod (where I seek out my blood pressure lowering respites), I have no "special place" to go. Instead, I’ve been rockin out to How The West Was Won — an astonishing display of Rock and Roll mastery by (arguably) the finest Rock and Roll combo ever to take any stage anywhere: Led Zeppelin.
• Top Ten Signs You Have A Bad Stockbroker (via David Letterman)
• Dismally amusing! StandUp Economist’s 10 Principles of Macro-Economics
• Its too amusing to pass up: How To Shave The Modern Male
Well, at least the weather is nice this here on the Northeast! The Convertible comes out of the garage for some easy drivin’. Meanwhile, regardless of your market bias, we may see things get more complex over the next few months. Whatever you want to do in the coming days, please TRADE SMART.
Here’s one to add on subprime problems:
Bottom line: HSBC is going to take an 11 billion dollar chargeoff on their $14 billion HFC acqusition.
Can’t mention the tried and true books without also including “Extraordinary Popular Delusions and the Madness of Crowds” which preceded “Devil Take the Hindmost” by over a hundred years. Particularly relevant because two of the first scandals discussed (South Seas and Mississippi Land) were in their essence inflationary problems, in which the government was a key player in how things unfolded.
Gustave Le Bon’s “The Crowd” isn’t bad either.
barry you need to get a copyright on the term whackage™…
it’s great… lol
The infamous words of the ISM during the December 12 2000 period:
OVERALL ECONOMIC GROWTH TO CONTINUE IN 2001
Manufacturing Weakness Continues,
Capacity 82.2%, Capital Spending up 1.8%
Second Half of 2001 Predicts to be Stronger
Non-Manufacturing Continues Strong
Non-Manufacturing Forecast Revenue Growth of 6.9 %
Capacity Utilization of 87.4%
We are now in a credit crunch. Though, there is a lag when this begins to seriously effect the economy. My guess is this summer and worsens in 2008 into a solid recession.
“If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered”
Last Week’s Investment Returns
The Wall Street Journal has two good graphics on last week’s events (hat tip to Big Picture): A global market map and a chart of asset class returns.
who said those “infamous” words ac?
They have the ring of truth about them.
“Permit me to issue and control the money of a nation, and I care not who makes its laws!”
-Mayer Anselm Rothschild
….Our present money system is a debt of money system. Before a dollar can circulate, a debt must be created. Such a system assumes that you can borrow yourself out of debt.”
― Willis A. Overholser, LL.B – in History of Money in the United States.
hum – interesting – if leaders do matter?
The boom years of Clinton I, was it the Republican controlled Congress or Clinton that openned the Eastern world to the Western computer controlled engineered manufacturing process? Was this for WalMart’s benefit? Was Dollar General Al Gores baby?