May Linkfest (Part 2)

You gotta have Street Sense. If you don’t have any, then you wish you did — or at least wish you bet on the 9-2 favorite yesterday, ’cause he won the
133rd running of the Kentucky Derby,  moving past 19 other horses  in a terrific come from behind victory. While Wall Street fave Liquidity failed to show, the Street breathed a sigh of release that Storm in May also failed to place.

Lets have a look a what news we might see in the coming week — cause we can all use as much "street sense" as we can get out
hands on.

Retail_chart
This week, there are several important economic releases, and of course, the May FOMC meeting: We get an early read of chain retail same store sales on Tuesday; the full Retail sales data for the month of April is released on Friday (consensus = 0.4% m-m gain).

Important inflation readings this week include Import and Export Prices on Thurday, and the Producer Price Index (PPI) on Friday (consensus for PPI is 0.7%).

The highlight of the week will be Wednesday’s FOMC announcement, when yet another "nothing done" is widely expected. That will cap a year of unchanged Fed rates. The statement and subsequent minutes will all be subject to the close scrutiny by Kremlinologists Fedologists.    

What else might color our world over the next 7 days? To find out, get clickin’!

INVESTING & TRADING

•  Want to Be Next Warren Buffett? The Line Forms in Nebraska: Last month, Warren Buffett posted the mother of all
help-wanted ads: a request for candidates to replace him as chief
investment officer of Berkshire Hathaway. Now, the résumés are flooding in — and the process is
turning out to be every bit as unconventional as the billionaire
investor himself. Among the 600 or so applicants so far: a Talmudic
scholar who picks stocks from home, a Canadian economist with an
intense yoga practice and even a four-year-old. (free Wall Street Journal)

Twelve Unusual Items Affecting the Markets Now: Great round up from Real Money’s Dave Merkel.

HAL 9000-Style Machines, Kubrick’s Fantasy, Outwit Traders:
As finance Ph.D.s, mathematicians and other computer-loving disciples
of quantitative analysis challenge traditional traders and money
managers, Kearns and a small band of AI scientists have set out to
build the ultimate money machine. (Bloomberg)

• Sell in May? It depends on the Seasonal Timing Strategy   

Are Investors "Double Counting" share buybacks?:
In recent weeks, investors have been enthralled with the idea that
stocks are being supported not only by earnings surprises, but also by
heavy repurchases, as if these are two separate effects.As I’ve noted
before, repurchases are already reflected in the calculation of the
S&P 500 index and index fundamentals such as earnings and dividend
figures. To assume that repurchases are a separate source of “return to
investors” is double counting.

How High Will Gas Prices Rise This Summer?  Gasoline prices, already flirting with $3 a gallon, could move
even higher during the summer driving season. It all depends on refineries,
weather and drivers’ tolerance for expensive fuel. (free Wall Street Journal)

Is Hedge Fund Borrowing Propping Up the Dollar and Stock Market?    

• Sentiment Reading:  No Satisfaction: Why What, You Have Is Never Enough: As a country, we are richer than ever. Yet surveys show that
Americans are no happier than they were 30 years ago. The key problem: We aren’t
very good at figuring out what will make us happy. (free Wall Street Journal)

• AAII survey still in bullish territory.

What to Do When Rupert Calls? As they confront their continuing financial challenges, the Bancrofts can sit around and pray that a deep-pocketed white knight emerges — Warren E. Buffett, Bill Gates or The Washington Post are said by insiders to be favored choices — but it’s hard to think that even if such potential suitors did buy it they would seriously invest in the business the way Mr. Murdoch claims he would. It could result in just another holding pattern. (New York Times)

Goliaths Gain Momentum on Davids: The giants are finally staging a comeback. The question is
whether it will last.For months, Wall Street professionals have been recommending
big-company stocks as a safe bet in a slow-growing economy, only to be proven
wrong as small stocks surged ahead. Now, after the Dow Jones Industrial Average’s run this month to
records and its first close above 13000, gains for blue-chip industrials this
year are equal to those of the small-stock Russell 2000 index. Both are up 5.3%.
But for just this month, the industrial average is up 6.2%, compared with 3.6%
for the Russell. (free Wall Street Journal)  See also, The Year of the Large Caps? This Time, Don’t Laugh

 


ECONOMY

The Wall of worry continues to build:

Auto Sales and the continuing "Slow Motion Slowdown"

Bernanke Is Wrong on Inflation, Interest Rates, Goldman, Merrill, UBS Say:  Federal Reserve Chairman Ben S.
Bernanke’s assertion that interest rates may need to increase to
curb inflation is wrong. That’s what Goldman Sachs Group Inc.,
Merrill Lynch & Co. and UBS AG are saying. While Bernanke warned last month that the odds of worsening
inflation have increased, chief economists at the three firms say
the worst housing slump in a decade may drive the U.S. economy
into a recession and stifle consumer prices. Their chief
economists say the Fed will cut its target for overnight loans
between banks at least three times this year. (Bloomberg)         

Labor Market Slowdown May Have Arrived:
April’s tepid gain could signal the beginning of a weak patch for the
labor market, in which job creation decelerates, unemployment rises and
wage gains moderate. It may also help explain a question that has been
puzzling economists. Janet Yellen, president of the Federal Reserve
Bank of San Francisco, this past week framed it this way: "If the
economy is even more lackluster than before, why is the labor market
still going gangbusters?"  (free Wall Street Journal)

Does It Even Matter if the U.S. Has a Cold? As the domestic growth rate has declined sharply in recent quarters,
the rest of the world is growing rapidly. India is blowing the door off
its hinges. China’s economy is expanding at a double-digit pace. The seemingly countervailing trends — deceleration in America, full
speed ahead abroad — have led some economists to wonder whether the
United States and the rest of the global economy are going their
separate ways. Some even suggest — shudder — that changes in the global
economy have made the United States a less-central player. (New York Times)

• A Dash of Insight provides two excellent primers about the NFP report and the Birth Death adjustment.

Stagflation on the Horizon as Dollar Hits New Low: The value of the dollar sank to a record low against the euro on Friday on the
back of poor U.S. economic growth numbers combined with evidence that
inflationary pressure in the U.S. economy continues to build (Resource Investor)  See also The Bush-Dollar Curve — Obscure economic indicator: Does the dollar fall when the president is unpopular?   

Consumer Spending Sluggish:
Consumer spending rose at the
slowest rate in five months in March while construction activity
managed only a tiny gain, weighed down by further weakness in housing.
The Commerce Department reported that consumer spending on
all items was up 0.3 percent last month, the slowest increase since a
similar rise in October.



HOUSING

•  Homes: Big drop in speculation:
After years of big increases in the buying of real estate for
investing, speculators fled many housing markets last year.Second-home
sales dropped from 40 percent of all home sales to just 36 percent,
according to a report released Monday by the National Association of
Realtors (NAR). That happened despite a rise in vacation-home
purchases, one of the
two components of second-home sales. These were actually up 4.7 percent
during the year to a record 1.07 million units. But a
precipitous decline in investment-home sales, they fell 28.9 percent in
2006 to 1.65 million units, led to the overall drop in second-home
sales. (CNN Money)

Rents Peak in Housing Glut; New York Escapes Decline:
The glut of U.S. properties for sale is about to hit the rental market.
A record number of homeowners who can’t sell condominiums and houses
are competing for tenants with the country’s biggest apartment owners
led by Chicago-based Equity Residential, said Jack McCabe, the founder
of Deerfield Beach, Florida-based McCabe Research & Consulting LLC.
Metropolitan New York, where demand for housing exceeds supply, may be
the only place where rents increase, albeit at a slower pace, he said.
(Bloomberg)

Fighting to Keep the Roof: If you’re a financially troubled borrower, there are a few steps you
should consider before contacting your mortgage company, especially if
you have not missed a payment. Think about refinancing or taking out a
home-equity loan, if you have equity in the property. (Washington Post)

Build It, And Pray They Come:
Amid the worst slump in housing sales in more than a decade, a new book
by architecture professor Witold Rybczynski helps shed light on the way
developers really work. (Newsweek)


TECHNOLOGY & SCIENCE

Patently obvious: In a unanimous opinion, the justices ruled that the patent in question
was invalid because designing a gas pedal in such a way was an
"obvious" thing to do, at least to the average gas pedal designer, and
therefore not really an invention. What’s more, Justice Anthony
Kennedy, writing for the court, argued that the current patent regime
threatened to stifle the sort of creativity that the Founding Fathers
had originally created the system to foster. (Boston Globe)   See also, Top U.S. Court Clears Way for More Patent Challenges (Bloomberg)

According to Einstein, we’ve got a little over 4 years

The wrath of Ballzilla:  Why Microsoft CEO Steve Ballmer can’t stop bashing Google:
Last month Steve Ballmer, Microsoft’s notoriously bombastic CEO, set
bloggers blabbing again when he went on an anti-Google tirade that was
shrill even for him. In a speech at Stanford’s business school, he
derided many of Google’s forays beyond search and advertising as "cute"
stunts produced by a "random collection of people doing their own
thing." He also blurted out to the audience that Google was "insane"
for trying to grow its headcount so fast. (Fortune)  See also Microsoft admits Vista failure

Material for an Architectural Revolution

• Slate’s special issue on the brain: Mind Science and the state of Neuro-Culture



MUSIC BOOKS MOVIES TV FUN!

• Another fabulous British retro female vocalist: Amy Winehouse. Imagine a cross between a jazz chanteuse and a 60s soul singer.

• Kevin James, Adam Sandler as straight Firemen who get married to each other: I Now Pronounce You Chuck and Larry (If the film is remotely as funny as the trailer, it will be hysterical!)

How your Mouse / Pointer really works

Predictions of the Year 2000 from The Ladies Home Journal of December 1900

In case you were sleeping late Saturday night, at three minutes and four
seconds after 2 AM on the 6th of May this year — that would be today — the time and date will
be
:

02:03:04 05/06/07.

Don’t worry if you slept through it. The same thing happens this afternoon.   

Enjoy the gorgeous weekend — Spring has at long last sprung!

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What's been said:

Discussions found on the web:
  1. bc commented on May 6

    microsoft really gets to you huh? take a deep breath.

  2. cm commented on May 6

    “Gasoline prices, already flirting with $3 a gallon …”

    Huh? Last week on TV they announced the “national average” for Regular was 3.07. I have to take that on faith, but hereabouts Regular is firmly over 3.50. Maybe the chocolate rations have been increased overnight, but the local gas stations haven’t gotten the memo by appearances.

  3. Winston Munn commented on May 6

    Quote: “While Bernanke warned last month that the odds of worsening inflation have increased, chief economists at the three firms say the worst housing slump in a decade may drive the U.S. economy into a recession and stifle consumer prices.”

    Goldman Sachs Group Inc., Merrill Lynch & Co. and UBS AG – by the time these guys start begging for rate cuts the recession has already begun.

    Might want to mark it on your calenders for future reference – 2nd quarter, 2007.

    Now the only question is will this Fed repeat the same mistakes and chase the T-bill down, or will they have some big cajones and shrink the money supply?

    I’m betting the size of dried black beans.

    Bubble up, Garth.
    Bubble up, Wayne.
    Shhhwiiiiinggg.

  4. Winston Munn commented on May 6

    Rutters

    Washington, D.C.
    May 6, 2007

    In what is reported to be the largest leveraged buyout offer in history, the Blackstone Group has made a $2.3 trillion dollar offer to the U.S. government to buy the war in Iraq.

    Blackstone spokesmans, Bett R. Thenstelen, said, “It has every aspect Blackstone looks for in a war – gross mismanagement from the start, a massive reserve of potential, neglected profits, and a non-dollar backed economy that yields the advantages of the strengthening Euro.”

    The offer is being financed by Goldman Sachs with the provision that to take the war off the hands of the U.S., the Federal Reserve must cut interest rates. Sachs spokesman, Wego .T. Cashtibern, stated, “And with the added liquidity from this venture, the markets ought to be able to sustain their run for another week or two, maybe even three.”

    President Bush is reported to have told his aides, “That’s one way to get our ass out of the sling!”, while Vice-President Dick Cheney reportedly would approve of the deal as long as Haliburton retained its consulting status.

    A holdout was minority interest owner Richard Perle, who said, “When you put your whole life into meaningless rhetoric and delusion, it’s hard to give that up for just a few lousy trillion dollars.”

    The only remaining obstacle is Congress, but in a rare show of bipartisanship, Senate Leader Harry Reid said, “This is the best of both worlds – we Democrats will get what we want, out of the war, while the Republicans will get what they want, higher stock prices and less government regulation of wars.”

    Speaker of the House, Nancy Pelosi echoed the sentiment and stated, “It’s about time American corporations started doing their part in paying for this war instead of profiting from it.”

    The measure goes to a vote in the House on Tueday, while the Senate vote on their version of the bill of sale is scheduled for Thursday.

    The President is expected to sign the bill and stamp it sold.

  5. Philippe commented on May 7

    In an other major turn of events “Ali Burton” became the largest oil producer in Irak and all export billings made in euros.
    Goldman Sacks oil trading expertise is at last rewarded.

  6. SJ commented on May 7

    Re the ” According to Einstein, we’ve got a little over 4 years” link:

    David Byrne (Talking Heads, big suit guy) suspects that the honeybee die-off is a plot by genetically modified (GM) crop makers to prevent the spread of the GM genes by honeybees to people who haven’t paid for the GM seed. He worries that he might be a conspiracy nut.

    Byrne isn’t a nut, he’s just not well enough informed. He hasn’t heard about the GM crops that manufacture their own insecticide (see Appendix 2).

    Looks like the law of unintended consequences strikes again – it might be bye-bye to the US agriculture sector altogether. Bet that’ll help with the trade deficit.

Read this next.

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