The last official week of the summer begins Monday. Expect light trading volumes, as many traders take a vacation week or an extra long Labor Day Weekend. Almost there!
Earnings reports are light, with few noteworthy conference calls on the calendar. Mortgage biggie Freddie Mac before the bell Thursday, and after the close, we hear from Dell. They are expected to go over their restated earnings.
The Federal Reserve has their Economic Symposium in Jackson Hole, Wyoming. The keynote speech is by Fed Chairman Ben Bernanke on "Housing and Monetary Policy." No word on whether the Fed will be discussing the credit crunch.
Speaking of the credit markets, the WSJ quotes Jack Ablin of Harris Private Bank as to what we can hope for this week: "No news is good news on that front." That sounds just about right.
There are quite a few notable economic reports this week:
-Monday, we hear from the ever optimistic National Association of Realtors (NAR) on U.S. home resales for July. (June was down 11.4% year-over-year)
-Tuesday, we hear from the Conference Board on the consumer confidence index. Last month, the index surprisingly jumped to 112.6 in July from 105.3 in June. Consensus Forecast for August 07 is for a slip back down towards 105.0.
-The release of the August 7 FOMC Minutes, Tuesday 2:00 pm is likely a non-issue, as events have overtaken whatever was said way back then (was it only 3 weeks ago? seems like forever ago!).
-Thursday, we get Q2 GDP (1st revision). This is already old news, and uness this second report of the quarter’s economic activity its radically different from the July 27th advance report, it is most likely a non-event.
-On Friday, we get personal income and consumption. Last quarter, spending weakness was in durables and motor vehicles.
-NPAM and Factory orders are also Friday.
-Finally, University of Michigan’s Consumer sentiment
An unusually number of positive forecasts in today’s week in preview alone is cause for celebration. Once again, linkfest time!
INVESTING & TRADING
• Cash-Rich Tech Companies Can Sidestep Credit Crunch: With the consumer representing more than half of total semiconductor consumption, the possibility that suddenly house-poor people will just stop buying does give pause. But even as Countrywide Finance, among others, was wobbling last week, there was plenty of evidence that tech companies that can take market share away from entrenched incumbents can still do very well. (Barron’s)
• The conventional wisdom is that the Fed will cut, and it will be
good for equities. A few columns challenge both the expectation and the
–Five Reasons: Why the Fed Won’t Cut Rates
–Rate cuts won’t cure ailing market (MSN MoneyCentral)
–Falling Rates, Rising Stocks? (BusinessWeek)
–Fed Rate Cuts Are a Possibility, Not a Certainty (Bloomberg)
–Fed rate cut? Don’t bank on it (CNNMoney.com)
• Yale professor Robert Shiller gives us A Psychology Lesson From the Markets: Rising prices encourage investors to expect more price increases, and their optimism feeds back into even more increases, again and again in a vicious circle. As the boom continues, there is less fear of borrowing heavily, or of lending heavily. In this situation, lower lending standards seem perfectly appropriate — and even a fair way to permit everyone to prosper. (New York Times)
• Degunker: A biotech best known for failure may have invented the most powerful cholesterol drug ever. (Forbes)
• Start-up sees 1,000 "brains" on one microchip: Tilera Corp, a Silicon Valley semiconductor
start-up, is launching a single microchip with 64 processing units, or cores,
in a technological jump generations ahead of the
• Eco-Capitalists Save Mother Nature By Charging for Her Services: The eco-capitalists are coming, and they aren’t wielding Thoreauvian
platitudes about the sanctity of nature. Their jargon is far less
lyrical: ecological assets, environmental markets, ecosystem services,
natural capital. For these guys, biofuels and long-lasting lightbulbs
are fine but they’re nothing more than a short-term play. The real
money is in nascent markets indexed to the health of Mother Nature.
• Slate looks at Who isn’t getting paid next January?
Bonuses at hedge funds and Wall Street firms are a topic of obsession
in the financial press—and in New York generally. (In 2005, New York
magazine neatly dissected how Goldman Sachs would divvy up a projected
$11 billion bonus pool.) Whether they come in the form of Goldman CEO
Lloyd Blankfein’s $53.4 million haul last December, or in the form of a
$1.7 billion payday for a top hedge-fund manager like James Simons of
Renaissance Technologies, bonuses are important economic leading
indicators for New York-area real estate brokers, art dealers, and gold
diggers of all types. The ritual reporting of bonuses provokes envy in
some (fellow graduates of MBA programs that are doing well, but not so
well), and self-loathing in many (Phi Beta Kappa grads who chose to go
into anthropology instead of finance).
• The Jury’s Still Out:
"RING THE BELLS, THE STOCK MARKET has bottomed! The capitulation of the
bulls last week was the flush heard around the world so all of the
excesses and problems have finally been cleaned out of the market.
Believe that and I’ve got a bridge to sell you." (Barron’s)
• SIVs, next shoe to drop in global credit crisis?
Wall Street should keep its eye on a little-known coterie of investment
companies run by European banks called "structured investment
vehicles," or SIVs, which are having a tough time raising short-term
• Shorting China:
China’s stock market has defied the law of gravity, pushing the
benchmark Shanghai Composite Index up 91% this year to its latest
record Friday — despite lofty valuations, rising interest rates and
global market tumult. When markets soar like China’s has, investors
gleefully bet on a crash by selling the market short. Others will try
to hedge their positions, giving up potential gains to limit their
losses. (Wall Street Journal)
• Indexes and the Calendar
This is a market that is prompting many concrete thinkers to utter the
great, immortal "if." What if the stock market is ready to advance?
What if the stock market is ready to retest recent lows? What if the
Federal Reserve actually lowers interest rates? What if, what if, what
The Wall of worry continues to build:
• Catching up with the Fed’s Thinking: Think your job is hard? Consider what the Fed is trying to do: restore investor psychology,fix seized up liquidity, and cushion the blows to a slowing economy, while simultaneously avoiding rekindling inflation, resurrecting the Greenspan Put (i.e., "Moral Hazard"), and preventing a meltdown in the US Dollar. Piece of cake! See also Mr. International, on Dallas Federal Reserve President Richard Fisher.
• U.S. and Asia unlinked? Hardly
So, Asia finally unshackled itself from the U.S. economy. Riiiight!
Just ask executives at Mitsubishi UFJ Financial Group. Shares in
Japan’s largest bank fell to a two-year low last week amid losses from
the U.S. mortgage crisis. Sumitomo Mitsui Financial Group also said it
had recorded losses in securities backed by subprime loans.After the
U.S. Federal Reserve Board cut its rate Friday, Asian markets have
largely rebounded this week.Arguments that Asia has decoupled from the
United States suddenly look, dare I say, rather subprime.
(International Herald Tribune/Bloomberg)
• AMERICAN CONSUMER LOOKS INTO THE ABYSS
Buckling under soaring debt payments and plunging home equity, how much
longer can the ‘fabled’ U.S. Shopper carry the weight of the economy?
(National Post) See also Save or Splurge ?
• A British angst fest:
–Brace yourself for the insolvency crunch: Be very careful. Interest rates in Europe and Asia are that much higher
now, with delayed effects starting to bite hard. Japan’s economy has
stalled to 0.1pc growth in Q2; the euro-zone has slowed to 0.3pc; and
China’s refusal to import (by currency manipulation) makes it a drain
on world demand. Above all, the credit bubble that perpetuated the
rally of the last eighteen months beyond its natural life has
definitively burst. (Telegraph)
–The next financial crisis starts here: Washington
is deserted in August, so demands for a political response to the
financial-market debacle have been muted. Rest assured, this will
change. The problem will not be dealt with by next month – things could
easily get worse before they get better – and some appealing suspects
are just asking for a regulatory beating. Enron and the other corporate
scandals begat Sarbanes-Oxley. What will the subprime mortgage meltdown
bring forth? (FT)
• Fed study: Rediscounting under Aggregate Risk with Moral Hazard (pdf
• Inflation Risks Vanish in Financial Market Haze:
It took a fair amount of kicking and screaming from financial markets
last week to prod the Federal Reserve into action. But act it did,
cutting the discount rate by 0.5 percentage point to 5.75 percent
before the New York Stock Exchange opened Friday.The unexpected action
had an immediate and positive impact on global stock markets, which
reversed earlier losses. It took some of the bloom off the three-month
Treasury bill, whose rate had tumbled more than 100 basis points in the
span of a week. (Bloomberg) See also ECB Signals Rate Increase Is Still Likely
• RM’s Dave Merkel gives us a mini linkfest in Thoughts on the Real Estate Markets
• Truth-in-Lending Disclosure Failure Leads to Mortgage becoming "UnSecured" What happens when lender fails to comply with the TILA rules? The borrowers are allowed to RESCIND THE LOANS AND VOID THE MORTGAGES ON THEIR HOMES. The mortgage lender is then just another unsecured creditor,
who must get in line behind everyone else who may have filed a lien on
the property. Who ever files first (Credit card, auto finance, doctors,
etc.) has first priority. That makes the mortgage loan itself
unsecuritized — and worth a lot less — due to the increased risk of
loss of collateral.
• Doug Kass and Bob Toll have an interesting chat towards the end of the Toll Brothers Conf Call (Call it negative reality and positive hopes)
• The New York Times reports Drop Foreseen in Median Price of U.S. Homes: The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950. (Really?!? Who ever could have seen THAT coming?) also, Condo Troubles Further Squeeze Property Lenders
• U.S. Foreclosures Rise Sharply in July: Foreclosure filings rose 9 percent from June to July and surged 93
percent over the same period last year, with Nevada, Georgia and
Michigan accounting for the highest foreclosure rates nationwide, a
research firm said Tuesday. (AP)
• Home prices boosting U.S. household debt: Kohn
– Rising home prices and innovations in the financial sector are the
two biggest factors in the spike in U.S. household debt and the related
decline in savings, Federal Reserve Vice Chairman Donald Kohn wrote in
a research paper presented Sunday. (Marketwatch)
• duh: Realtors See Drop in Ranks (AP)
TECHNOLOGY & SCIENCE
• I am simply astounded at how much Digital Cameras have dropped in price. For almost half of what I paid two years ago, cameras today have much more features and much higher resolution.
• The World According to …Mark Cuban: The internet is "dead and boring," Cuban says in an interview with Portfolio.com.
"We have reached the point of diminishing returns with today’s
internet. The speed of broadband to your home won’t increase much more
in the next five years than it has in the last five years. That is not
enough to work as a platform for new levels of applications that will
require much, much higher levels of bandwidth."
• A torn rotator cuff, shorn cartlidge, and other wear & tear has me looking at Voice Recognition Software (Its not the years, its the miles). Any suggestions from readers as to what’s better or worse?
• If There’s a High-Definition TV in Your Future, Wait Till After the Holidays: Isn’t this true about every tech gadget? (New York Times)
• Sun Microsystems changes ticker to JAVA:
It’s not as dramatic, or as expensive, as changing the company name,
but Sun Microsystems is trying to send a message by switching its stock
ticker symbol from the unpronounceable but historically significant
SUNW to the snappier JAVA, the now ubiquitous software that Sun
introduced 12 years ago.
• A freak storm upends over 3000 trees in Chicago: History, memories uprooted as trees fall (Chicago Tribune)
MUSIC BOOKS MOVIES TV FUN!
• Off the record:
In recent years, the economics of pop music have been upended. The
market for CDs has collapsed, and not even the rise of legal
downloading can offset the damage to record companies. Meanwhile,
demand for live performances has rocketed.
There is a story doing the
rounds in the US that says a lot about the state of the music business.
It concerns a young rock band who decided to stop selling their CDs at
concerts. Selling CDs has, for many years, been a good way for an act
to reclaim the margin that would otherwise have been snaffled by a
retailer. But it made no sense to this band once they discovered that
by selling CDs for $10 they were cannibalising sales of their $20
Enjoy the rest of your weekend!