June Linkfest, part II

Yesterday we looked at the week that was. Today, we preview the week that will be.

You may notice that the Sunday edition tends to be heavy on the prospective questions: That is by design. We try to review the issues and events that will matter in the coming days and weeks — what sectors are worth scrutinizing, what stocks could see action. Part I, on the other hand, looks more at what already happened and why.

Q1 earnings season is all but over, and the coming week is light on economic releases: On Monday, we get Factory Orders, Tuesday sees Same Store Sales and ISM Non-Mfg Survey.  Productivity and Costs data comes out Wednesday, and Thursday is the May Retail Sales report. Consensus (according to Dow Jones) is for a 2.5% increase in same-store sales. That’s in between last month’s abysmal 2% decline and last year’s strong 4.5% gain. On Friday, we get the release of April’s trade balance. According to Bloomberg, a consensus predicts a sleight narrowing of the deficit.      

One of the bigger conferences this week is the American Society of Clinical Oncology (the full list of topics of the 43rd ASCO Annual Meeting begins on page 9) — news from the conference has the potential to drive certain biotech and big pharma stock prices.

This week will see a plenty of international activity: On Tuesday morning, U.S. Fed Chairman Ben Bernanke will conference with ECB President Jean-Claude Trichet and Bank of Japan Governor Toshihiko
Fukui at a monetary conference. The European Central Bank (ECB) announces a rate decision on Wednesday (a 1/4 point increase is expected), while the Bank of England (BOE) announcement is on Thursday; with the U.K. Economy
expanding faster (2.9%) than most economists forecast, another rate hike might be in the offing — if not June, than August.

Also on this week’s agenda: The Group of Eight summit begins Wednesday. President Bush is expected to meet extensively with France’s new President, Nicolas Sarkozy for their first formal talks. And, the President will privately meet with Russian President Vladimir Putin.

One other note: While you were sleeping, the FBI broke up a plot to bomb fuel lines at JFK.

Last, Scooter" Libby gets sentenced this week in the CIA leak case. Regardless, many expect him to be pardoned after the November 2008 elections are over (I have no opinion on this one!). 

Let’s get clicking:


Benchmark yield seen barreling through 5% soon: Recent strong data reports and soaring global economic growth
have made it harder for investors to believe that a Fed rate cut is in
the works — even if the U.S. housing sector continues to struggle and
some analysts think that the labor market is not as strong as U.S.
statistics show it to be."If you take out the U.S., global growth is around 5% and you have rate
tightening by the European Central and the Bank of England." (Marketwatch)

• A TheStreet.com smackdown:

Several Factors Point to End of Rally
Rally Isn’t Quite Finished Yet

*Equity analysts facing new quant challenge: Wall Street equity analysts have had their share of problems in recent years, from regulatory heat to budget cuts to a loss of star power and prestige. Now, with the growth of quantitative
analysis, some are facing a worse possible fate: being supplanted by computers. At an increasing number of Wall Street investment banks, hedge funds and elsewhere, computers are churning out investment analyses culled from enormous pools of data. (Reuters)  *This is probably my most significant link of the day.

Coattail caveats:
This notion of coattail investing becomes infinitely more difficult in the world of hedge funds. The challenges are at least two-fold. First hedge funds in all likelihood have a shorter time horizon than most mutual funds. Therefore by the time data is released publicly it may be stale, i.e. the hedge fund may have already exited said position.

Real & Private Fixed Investment

Charting the Bull’s Next Move:  Yes, the technical analysts — those folks who scrutinize price charts and trading volume in search of clues as to which market, industry group or stock is poised to generate outsize returns or tank — are no more ready to return to the irrational exuberance of a decade ago than their counterparts, the fundamental analysts. Both camps, it seems, are united in a wary acceptance of the market’s recent gains. (Barron’s)

Burgeoning Treasury Yields Loom Over Stocks: While stock investors have welcomed signs of a stable, growing economy lately, they also have shrugged off a potentially troublesome byproduct: higher Treasury yields. Because those yields are the basis to price various forms of debt, including mortgages and corporate loans, a sustained rise can signal rough going ahead in key parts of the economy. Also, as Treasury yields rise, bonds and other debt securities become more attractive as an investment, and could draw buyers away from the stock market. (Wall Street Journal)

Quirky link of the dayIt’s an all-star performance: The use of astrological charting in the financial world may seem  unconventional but, according to this article, it is a much more commonly-used device than you might expect. (FT)

Inside the Black Box of Google:
At its core, Google remains a search engine. And its search pages, blue
hyperlinks set against a bland, white background, have made it the most
visited, most profitable and arguably the most powerful company on the
Internet. Google is the homework helper, navigator and yellow pages for
half a billion users, able to find the most improbable needles in the
world’s largest haystack of information in just the blink of an eye.
(New York Times)

New rules altering brokerage relationships:
It’s time to sit down and have a nice long talk with your financial
adviser, especially if she works at a bank or brokerage firm. It’s
likely that you’ll soon have to change — or at least define more
carefully — the way your account is set up, so it pays to know what
you’re facing. Investors who get their financial advice through
so-called "fee-based" accounts are most likely to be affected. (Reuters)


The Wall of worry continues to build:

Suprise! You are making less than your dad did!: Report reveals that American men in their 30s earn less than their
fathers did, as family income growth decelerates. American men in their
30s are earning less than their father’s generation did, challenging a
long-held belief that each generation will be better off than the one
that preceded it, according to a new study published Friday. The
report, the first in an ongoing 18-month study on economic mobility in
the United States, also revealed that the income growth of the median
American household is declining. (CNNMoney)

The Return of NILF

Rules ‘hiding’ trillions in U.S. debt: The federal government recorded a $1.3
trillion loss last year — far more than the official $248 billion
deficit — when corporate-style accounting standards are used, a USA
TODAY analysis shows. The loss reflects a continued deterioration
in the finances of Social Security and government retirement programs
for civil servants and military personnel. The loss — equal to $11,434
per household — is more than Americans paid in income taxes in 2006. Total liability is $516,348 per U.S. household. (USA Today)

The Steakhouse Index Their stocks are down. Should we worry about the rest of the economy?  (Slate)

Death Pool in Detroit:
Anyone who has spent any time in Detroit recently will tell you it is
by all apparent indications a dying city. Crumbling buildings,
widespread decay and a population in flight make for a depressing
landscape. Detroit’s fortunes have always been tied intimately to the
fortunes of the U.S. auto industry. So it’s hardly surprising that a
look at Ford’s (F) and General Motors’ (GM) balance sheets will show
just as much decay and devastation as a trip through Detroit’s worst
slums. The only real question is: Which automaker will declare
bankruptcy first?

Bernanke Pulled in Different Directions by Economy:
Federal Reserve Chairman Ben S. Bernanke is pulled in opposite
directions by worries over inflation and housing, leaving him little
choice other than to keep interest rates unchanged. Fed officials said
they still expect a pickup in the
economy this year and view inflation as their main concern,
minutes of their May 9 meeting showed yesterday. They listed
several caveats, including the risk that the housing recession
may "weigh heavily” on growth. (Bloomberg)


How Long Can the Fed Fight a Lagging Variable?  (PIMCO)



Skyscraper Prices Might Start Returning to Earth: After an unprecedented boom that saw values of
skyscrapers and other commercial real-estate properties double and even
triple in price, there are signs that investors and lenders are turning
cautious. The Wall Street Journal asks "Is the buying frenzy nearing its peak?" (free)

Some More Housing Charts

Subprime Fiasco Exposes Manipulation by Mortgage Brokerages: After years of easy profits, a chain reaction of delinquency, default and
foreclosure has ripped through the subprime mortgage industry, which originated
$722 billion of loans last year. Since the beginning of 2006, more than 50 U.S.
mortgage companies have put themselves up for sale, closed or declared
bankruptcy, according to data compiled by Bloomberg…Brokers are merely the first link in a chain stretching from mortgage
companies, which originate loans; to wholesale lenders, which bundle them
together; to Wall Street banks, which package the bundles into securities; and
finally to commercial banks, hedge funds and pension funds, which buy these
investments. (Bloomberg)    

Speed of subprime bust surprises lenders:
The subprime mortgage meltdown has been a shock to industry insiders,
but now they say it’s hitting harder and faster than expected – even to
those who predicted the crisis in the first place. (CNN Money)


More Murdoch Malefaction  "Having accepted Rupert Murdoch’s invitation to sit down with him and
his kin to discuss the possible sale of Dow Jones & Co., the
Bancroft family should come to the meeting with a bundle of impolite
questions to ask the mogul about his plans for the Wall Street Journal. The
rotten old bastard intends to charm them all with his lies, as he has
his previous marks. To cancel his spell, I suggest that every Bancroft
purchase a copy of Marilyn Nissenson’s new book, The Lady Upstairs: Dorothy Schiff and the New York Post, and read the section about how Murdoch acquired Schiff’s newspaper." (Slate)

•  Records: Senators who OK’d war didn’t read key report (CNN)

California says no to coal, but world disagrees: California took its final step toward weaning itself off coal last week,
while the rest of the nation — and the world — continued going resolutely in
the opposite direction, one that environmentalists say bodes ill for the fight
against global warming. (San Francisco Chronicle)

Hmmmm, minty anti-freeze! Q&A: Why China Tops the FDA Import Refusal List: The discovery of the chemical melamine in U.S. pet and livestock food earlier
this spring has triggered a wider FDA investigation into the possible
contamination of food imports from China. The tainted pet food is blamed for
killing cats and dogs in the United States, and has been traced to two Chinese
manufacturers who added the chemical — used to make plastics and sterilize
swimming pools — to wheat and rice products to make them appear protein-rich. (NPR) See also Toxic Toothpaste Made in China Is Found in U.S.

Global Debate Is Just Heating Up: Suddenly, it seems, everyone is talking about global warming. A big
worry for diplomats gathering to discuss the issue this coming week at
a meeting in Germany of the Group of Eight leading nations is that
their countries may actually have to do something about it. (Wall Street Journal)


• The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business looks like an interesting if wonkish economic history. Bloomberg’s Caroline Baum book review is here.

• The German imitation of YouTube: WebNews.de

• Which leads me to this video clip from the South African
jungle. It is utterly fascinating — I personally guarantee you have never seen
anything like this before
: Battle at Kruger: Lions, Buffalo, Crocodile — Totally, amazing.


The media question on my mind: Who will win the prize that is the WSJ/Dow Jones? Murdoch is clearly the front runner, I previously suggested Yahoo!, others have said Microsoft, GE, NYT and the Washington Post Group.

Any suggestions who will emerge victorious?  Send your ideas for who is most likely to will win — and who SHOULD win — here.

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. RMX commented on Jun 3

    So in a post that includes
    • Suprise! You are making less than your dad did!:,
    you think the fact that
    • *Equity analysts facing new quant challenge:
    is probably your most significant link of the day?

    Sorry Barry but I’d have to take issue with that one. Usually, I take these think tank reports with a few grains of salt since the originators tend to be biased to one side or the other of the political spectrum and the results usually reflect what one would expect to hear from a particular side. This one, however, appears to be fairly nonpartisan and confirms what many have suspected for some time. In a nutshell, children doing better than their parents is the so-called American Dream. Very sad.

  2. V L commented on Jun 3

    Unpopular factual truth about global warming. (You can laugh but this is true)

    Myth: Gas-guzzling vehicles and America’s coal-fired power plants are the main source of “greenhouse-gases”.

    Truth: Rapidly growing third world countries population is the major source of “greenhouse-gases”. They produce more “greenhouse-gas” emissions than the emissions caused by transportation.

    Carbon dioxide is the end product in all living organisms that obtain energy by burning food (carbohydrates, amino acids, fats). According to USDA study, an average person’s respiration generates approximately 450 liters of carbon dioxide per day. (Because the process is 24/7/365, the cumulative amount of CO2 generated by one human is greater than by an average car [because the car does not run 24/7/365])

    As a result, rapidly growing human population produces more and more of carbon dioxide. (450 liters by each human a day)

  3. RMX commented on Jun 3

    Lets see…a couple links about rising Treasury yields too. So with yields rising, the debate is typically framed as an argument between the proponents of inflation (or stagflation) and the proponents of a strengthening economy. But we hear about “supply and demand” a hundred times a day in the MSM as a big reason for the seemingly irrational rise in equities. Could it be that the fear of foreign CBs and SWFs diversifying into other asset classes and possibly having less appetite for Treasury debt have anything to do with it?

  4. RMX commented on Jun 3

    V L,
    What is it with you and global warming and terrorists? When you were a kid, were you frightened by a Muslim climatologist or something?

  5. V L commented on Jun 3

    “were you frightened by a Muslim climatologist or something”


    No, I used to work in One World Trade Center building and Muslim jihadists killed two of my best friends on September 11, 2001.

    I have no problems with climatologists (Muslim or not Muslim) but I have a problem with dumb politicians using global warming for political reasons.

  6. RMX commented on Jun 4

    V L,
    I used to live in Middletown, NJ and was aquainted with a few of the several victims from that town although I could not claim them as close friends. Hope you find some peace.

    As far as global warming goes, I’m not sure how the issue can be addressed without political involvement but if you have any ideas, I’d be interested in hearing them. Or do you think its all bunk?

    I also have a problem with dumb politicians but it goes way beyond global warming.

  7. DavidB commented on Jun 4

    I seem to recall you had a bet with someone regarding treasury or bond yields and the 5% threshold.

    and regarding:
    Equity analysts facing new quant challenge

    Something tells me this will lead to the blind trading that will lead us to the dangerous end of the trading bell curve.

    When you have computers spitting out predictable results will it not be easy to predict what the computers will be picking? Knowing what the computers will pick will it not be easy for firms to push prices in the directions that cause computers to cherry pick those stocks? I don’t know but I just see that new found objectivity in the hard brains as a greater predictability risk than having soft brains around to step back and say, “Wait a minute!”

    Sure, you may make it up on volume but then the guy who has the key chart of quant variables and triggers will truly become the one eyed man in the land of the blind

    You may want to have a debate on this topic this week Barry. This may produce quite an interesting discussion

  8. ron commented on Jun 4

    Yahoo??? They are struggling enough on their own, they don’t need to acquire more problems.

  9. Mark commented on Jun 4

    Poor Scooter Libby. Well, we were certainly given enough warnings that George Bush’s Fascist Amerika would lead to political show trials.

  10. Greg0658 commented on Jun 4

    ? =
    Softbrain = human
    Hardbrain = chip

    DavidB – I hope the chart climb isn’t setting up a small investor cash out “just to be safe and get liguid” but that flood of “cash outs” I hope is slow and beneficially timely. Floods in todays engineered society, we’ve got spillways, retention ponds and valves for security sake. Use them wisely.

    VL – I wonder if thats what killed the dino’s? They flourished got fat & big, increased the air temp with their exhaust, ate all the vegitation that is the CO2 remover/recycler, then died releasing all that 98% water body fat into the atmosphere.

    Whats your stance on fixing this?

  11. TexasHippie commented on Jun 4

    Does Ritholtz Research & Analytics do any custom software for datamining and projections? … *grin* because I’m a software engineer that may have to move back to New Jersey soon for the wife’s return to graduate school!

    And yes, I’m looking forward to leaving this coal-powered high-emissions state.

  12. Brendan commented on Jun 7

    Thanks California for passing your problems on to the rest of us. Those of us in Arizona love that we can have all your pollution. I’m sure those nuclear electrons that you buy from us won’t get mixed with the coal fired ones on the transmission lines.

    I love government lip service. Just buying more electricity from other states, and picking and choosing which already established “clean” source it comes from (nuclear, hydro) accomplishes nothing. Now if California wants to boost our economy by putting up some solar arrays in the desert, I can support that; but if they’re just going to buy a bigger and bigger share of our nuclear, while Arizona builds more coal plants to make up for our decreasing share, that doesn’t accomplish anything. The same holds true for Oregon.


    Look up anthropogenic carbon and get back to us on why your sorry for making an absurd argument based on less than high-school level knowledge of chemistry. In 7th grade I learned that plants produce glucose from atmospheric carbon and we eat the plants and expel an equivalent amount of carbon, netting no additional carbon in the atmosphere (or oxygen or hydrogen for that matter). Perhaps you were asleep that day, but it turns out that it’s still true.

  13. Greg0658 commented on Jun 7

    Brendan – following up for VL

    Are you saying that a human consuming a plant has no CO2 consequence to the atmosphere?
    Are you saying the plant(s) removed the same amount of CO2 the human on consuming it puts back into the atmosphere? This statement presents Balance which I may question on hypothesis.

    One organism removes CO2 the other creates CO2. Therefor animals (and fire) feed plants. There is Balance as long as there is balance.

  14. L’Emmerdeur commented on Jun 8

    Barry, here’s an interesting item on Google’s business practices:


    I know the site itself isn’t exactly the WSJ, but if Google is willing to skew their search results so they can increase revenue, and they are willing to take a crap on a little-guy website for whatever reason, who is to say they won’t suppress sites that speak against them, competitors, etc.?

    I know I’m going to be using more than one search engine from now on.

Read this next.

Posted Under