Now that was a helluva week: Major indices notched their best gains since the Iraq war began four years ago. Thank the Fed, for dropping their language that indicates a willingness to tighten rates. The Russell gained 3.9%, while the Dow tacked on more than 470 points, for a better than +3% gain; The S&P added nearly 50 points (+3.5%), while the Nasdaq grabbed 82 points (+3.5%). The indices have all returned to positive territory on a YTD basis.
But the biggest winners of the week were European stocks (+4.7%), Emerging Markets (+4.6%) — and Crude oil, which rose 4.5%. The big loser? The US Dollar — it fell half a percent, and is down 3.5% for the past year. US Treasuries also fared poorly.
The question of the day is simply this: does this mark the end of the correction which began on February 27th, or does something more wicked this way come? Good arguments can be made for both the bull and bear cases.
Perhaps we can garner a hint from our weekly roundup of major news items, in this, the first linkfest of Spring!
INVESTING & TRADING
• The Patient’s Improving, For Now: Stocks raced to their
biggest one-day gain this year once the Fed statement hit the tape. The
broad rally lifted all sectors, with financial stocks leading the way.
Cash flow into U.S. mutual funds eventually topped $2.2 billion on the
week — the first time since July 2005, according to Banc of America
Securities, that domestic-equity funds hauled in more cash than their
overseas counterparts. (Barron’s) If no Barron’s, go here
• China to Create Huge Fund To Invest Part of Reserves: China will soon create one of the world’s largest investment funds, with ramifications for global stock, bond and commodities markets and for how the United States finances its budget deficits. (Associated Press)
• Yet another Exchange trading SNAFU? Nasdaq Composite Surged After Now-Canceled Trades: The Nasdaq Composite Index twice
jumped more than 7 points in a few seconds today because now-
canceled trades in shares of Donegal Group Inc. sent the stock
surging more than 11,000 percent. (Bloomberg)
• After Sell-Off, Chinese Stocks Back at a Record: After a huge sell-off here just a few weeks ago that helped set off a drop in global financial markets, China’s stock market has rebounded and rose to a record Wednesday. Many investors say the sell-off on Feb. 27, when the Shanghai composite index plunged 8.8 percent, was simply a temporary setback in a galloping bull market (NYTimes)
• The blogosphere erupts over Blackstone’s IPO filing
• The usually mellow Jim Jubak gets stressed over Why the debt bubble hasn’t burst — yet (MSN)
• Merrill Restricts Research Access to Guard Intellectual Capital Merrill Lynch & Co., the third-
biggest U.S. securities firm by market value, is restricting
access to its research reports after some stock picks appeared on
outside Web sites within seconds of their release. Merrill needs “to regain control of our distribution
channels in order to preserve and protect our hard-earned
intellectual capital,” Candace Browning, New York-based
Merrill’s global head of research, wrote in a memo to clients
today. Like the music industry’s battle with file-sharing
services, research is "in the throes of being Napsterized.”
Merrill’s letter to clients is here: Obituaries for Sell Side Research are Premature
• NYSE Margin Hits All Time Record (But I’m not sure exactly what this means)
• For a Europe remade, a celebration in uncertainty: What began in limited fashion in 1957 as a drive to remove tariff barriers and to free commercial exchange has ended by banishing war from Europe, enriching it beyond measure, and producing what Michnik called "the first revolution that has been absolutely positive." (IHT)
• Watch your online accounts! We’ve warned about these scams previously, but here’s yet another twist: Russian Criminals Targeting U.S. 401ks and Online Traders
• Our own Paul Kedrosky points to this financial SEC Filing
from activist fund Chapman Capital, that contained some unusual and colorful language! Moral: Its bad form to file SEC docs telling a 9% S/H to go, um, well, read the SEC filing.
One theory: the knives came out ONLY after the market cracked. This is not so much about Cramer as it is about a major shift in
sentiment, as the hostility is coming through once the markets looked
vulnerable. Fascinating, and truly revealing: Brouhaha over the Booyah: Timing Reveals All.
• Bull or Bear?
–Investors Turn More Bearish on U.S., Merrill
Says: Investors in March were the most
bearish on U.S. equities in seven months on mounting pessimism
about the outlook for earnings growth, a Merrill Lynch & Co.
survey showed. Cash levels also reached the highest since August.
trends are encouraging: The stock market is now 3% above its March 5 low, as judged by the Dow Jones Wilshire 5000 index. But few advisers are celebrating. This leads contrarians to suspect that the top has not yet been seen.
• Margin debt relative to market capitalization is the highest since the 1920s.
A ton of very interesting real estate related stories this week, as Subprime and Alt A loans dominated the early week, and Hosuing Starts, Permits and Existing Home Sales the latter:
• The Subprime Loan Machine: The rise and fall of the subprime market has been told as a story of
a flood of Wall Street money and the desire of Americans desperate to
be part of a housing boom. But it was the little-noticed tool of
automated underwriting software that made that boom possible. (NYT)
• Housing starts rebound but permits fall: Housing starts rebounded from a nine-year low in February, according to the
latest government reading on the battered home-building industry, but ongoing
weakness led builders to pull back on plans for more housing. (CNNMoney)
• Home-Sales Surge May Not Reflect Subprime Woes: The latest data reflect completions of home sales in February that
resulted from purchase agreements that were mostly signed in December
and early January, when unusually warm weather in the Northeast may
have enticed more people to shop for homes. (free WSJ)
• Regulators Scrutinized In Mortgage Meltdown: The well-publicized woes in the business of subprime mortgages — a surge in foreclosures, turmoil in the stock market — are raising a big question: Are regulators partly to blame? (free WSJ)
• Caroline Baum seethes: Government Is ‘Here to Help’ Subprime Borrowers: Congress is making noises about doing something to help homeowners who can’t
meet their mortgage payments hold on to their slice of the American Dream. . . As a sideshow, our elected representatives will probably spank regulators for
not doing more to curb deceptive lending practices and hang executives of
subprime lenders out to dry for presiding over the boom-bust cycle. While lawmakers’ intentions may be noble, it’s a pretty safe bet that, left
to their own devices, they will muck things up even more. (Bloomberg)
• Stricter loans seen draining new-home demand:
The trouble in the mortgage market could spread beyond the subprime
sector with tighter lending standards cutting demand for new homes by
as much as 15% and further squeezing home-builder profits, according to
an analyst following the industry. (MarketWatch)
• ‘Liar loans’: Mortgage woes beyond subprime: Subprime mortgages have been generating a lot of attention, and
worry, among investors, economists and regulators, but those loans may
be only part of the threat posed to the housing market by risky lending. Some
experts in the field are now concerned about the so-called Alt. A
mortgage loan market, which has grown even faster than the market for
subprime mortgage loans to borrowers with less than top credit. (CNNMoney)
• What are the Impact of Interest Rates on Equities?: Just looking at the numbers (no causal analysis) yields some interesting data points.
• Meanwhile, Not All Rate Cuts Are Created Equal
• 4 ways in which Bush may have doomed his own tax cuts: Conservative columnist James Pethokoukis notes "If Bush’s primary domestic legacy does disappear, he really only has himself ultimately to blame . . . consider these four ways in which the president has inadvertently planted the seeds for the demise of his own fiscal policies (U.S.News & World Report)
• Baghdad: Mapping the violence (BBC)
• Two Who Got It Right: Scott Ritter in Conversation with Robert Scheer: The former U.N. weapons inspector, who was scorned for saying there were no WMD in Iraq, speaks with Robert Scheer about American ignorance, the lies that led us to war, Iran’s nuclear program and more (transcript here); See also New doubts over Iraq intelligence (BBC)
• My National Security Letter Gag Order: It is the policy of The Washington Post not to publish anonymous pieces. In this case, an exception has been made because the author — who would have preferred to be named — is legally prohibited from disclosing his or her identity in connection with receipt of a national security letter. The Post confirmed the legitimacy of this submission by verifying it with the author’s attorney and by reviewing publicly available court documents.
• How a Money Manager Battled New York Times (free WSJ)
• The Evolution of the Postmodern Caveman: In a world increasingly populated by emasculated metrosexuals, the
pop-culture caveman — he of the grunting, stupid, and brutish variety — is a
visceral reminder that man’s raw sexual urges can’t be completely sublimated (Esquire)
TECHNOLOGY & SCIENCE
• NBC and News Corp to Bypass YouTube
Ars Technica: "It’s official: NBC Universal and News
Corp have announced their plans to create a video sharing site of their
own. The joint venture will features both TV and movie shows in full
length, including episodes of ’24,’ ‘My Name is Earl,’ and movies like
‘Borat.’ The plan is to also syndicate content on other portals like
MSN, MySpace, and Yahoo! It’s unclear how YouTube’s previous deal with
NBC relates to this, but it’s clear that the major players are now
shunning YouTube." (See also NBC/News Corp take on the mighty YouTube)
• Three Music related stories that all look at the impact of technology on revenue and earnings:
– Sales of Music, Long in Decline, Plunge Sharply:
In a dramatic acceleration of the seven-year sales decline that has
battered the music industry, compact-disc sales for the first three
months of this year plunged 20% from a year earlier, the latest sign of
the seismic shift in the way consumers acquire music. (free WSJ)
– Classical Music: Economics meets the Long Tail Despite the slowdown, one genre is showing surprising growth, thanks to some clever marketing: Classical Music at Amazon.com.
– How Labels Are Preparing Their Strategy for iTunes With Deals Now Up: There’s an imminent shift in leverage between the content holders and
Apple, as the Big Four’s deals with iTunes Music Store
come up for renewal at the end of April.
• Kudos to Walt Mossberg for this: Congress Must Make Clear Copyright Laws To Protect Consumers
• Skype users beware: Trojan Roaming Skype Network
• Fascinating fight coming to a Federal Courthouse near you — Oracle Sues SAP, Alleging “Corporate Theft On A Grand Scale”: “Oracle brings this lawsuit after discovering that SAP is engaged in
systematic, illegal access to – and taking from – Oracle’s computerized
customer support systems. Through this scheme, SAP has stolen thousands
of proprietary, copyrighted software products and other confidential
materials that Oracle developed to service its own support customers.”
• How scientific language erodes public trust in science: Most people don’t realize this: When scientists call evolution a "theory", they’re using it as the highest possible compliment. To them, a theory is the most rock-solid type of scientific idea — an explanation of natural events that has been tested and retested and hasn’t yet failed. Of
MUSIC BOOKS MOVIES TV FUN!
• I just started Curtis Faith’s Way of the Turtle. The first five chapters are great; I’ll have a full update next week.
• Count Basie & Joe Williams:
The 1955 album that revived the careers of both Basie and Williams is
brilliant combination: Williams’s elegant style on blues and ballads is
a perfect complement to the Basie band’s brashness; one highlight, of
course, is "Every Day I Have the Blues," the Memphis Slim song that
became a Williams signature. A must hear for Jazz fans!
• I am not a fan of the young, modern, pop diva, but 20 year old Joss Stone blows the roof of the dump in this live clip.
• The 300 remains atop the box office, and my friends who are Frank Miller fans rave about it. I enjoyed his noir animated film Sin City, but The 300 is even more violent. . . And speaking of violence, Netflix just delivered The Departed
• Killed Cartoons: A website and a book, featuring cartoons that were killed by newspaper editors worried about offending "advertisers, the publisher’s golf partners, the publisher’s wife, the local police chief or the president of the United States, blacks, Asians, Hispanics, homophobes, gays, pro-choice advocates and anti-abortion protesters, Catholics, Jews, Muslims and Midwest grannies — especially Midwest grannies."
• The latest wave in the flood of Internet video: fake news. Press ‘Play’ for Satire
• Oh, great: A Reality Television show about celebrity impersonators
• Curious as to what a Bugatti Veyron looks like in top gear? — at say 250+ mph?
• Calvin and Hobbes Snowmen in Real Life frickin hysterical
• And I thought I was a watch junkie: Some fascinating reviews from the Watch Report
Its sunny and 55 degrees, and — dare I say it — Winter is over here in the Northeast, and Spring has finally sprung! Today has all the looks of a top-down kinda cruising afternoon — Enjoy whatever weather comes your way this weekend!