September Linkfest Week-in-Preview

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

With the medics attending to Goldilocks — she was mauled after getting caught eating someone else’s  porridge — this week will be dominated by rate speculation. With a dearth of economic releases and no major earnings reports, the Fed moves Front and Center. Will they or won’t they before September 18th? Quarter point? Half point? Discount window cut?

Further complicating things are the many Fed speakers lined up: Fed Chairman Ben Bernanke is due to speaks Tuesday (subject: global imbalances).  Fed Governor Frederic Mishkin speaks that Monday after the close about the economic outlook. Numerous non-voters also speak this week: Atlanta President Dennis Lockhart, San Francisco President Janet Yellen, Dallas President Richard Fisher.

Across the pond, ECB President Jean-Claude Trichet speaks to the European Parliament on the subprime mortgage crisis; both Bernanke and Trichet meet up at a Bank of International Settlements conference.

Also on the agenda: Gen. Petraeus presents his report to Congress on the "surge." (I assumed this was a written report, but that turns out not to be the case).

Tuesday — the sixth anniversary of the Sept. 11, 2001 terror attacks, and its the first time the anniversay has fallen on a Tuesday since "9/11." My own recollections of that day can be found here.

Enough chatter: We have links to get to this week!


Hey, Big Spenders: Will the rich save the economy?  For the last several years, personal consumption has accounted for
about 70 percent of gross domestic product. This decade, Americans’
preternatural ability to spend has rested on the following legs: 1) the
strong housing market, which allowed people to tap into home equity; 2)
cheap and plentiful credit for people at every rung of the economic
ladder; and 3) job growth.  (Slate)

In the Green Marathon, Which Stocks Will Be the Winners?  High oil prices, cheap credit and government subsidies have been a boon for companies that promise to make more efficient use of energy or produce it from renewable sources. But it’s unlikely that the investment climate for alternative energy will always be this favorable. If it shifts, some businesses will surely falter. (New York Times)

Yahoo! Finance introduces Community Sentiment: Fascinating concept I came across on Yahoo Finance — Community
Sentiment. The site wants to look at increases in message board content
to identify when sentiment has shifted. This has the potential to be a very interesting tool — albeit with a lot of caveats.

You Don’t Suck at Picking Stocks

Profits of Doom
When financial markets are as volatile as they are right now, wit
stock and bond prices plummeting and soaring in a manic-depressive
fashion, it’s natural for the media to seek out gurus an  insiders to
make some sense of the chaos. But in times of crisis it can b  hard to
find any insights that aren’t tinged with bias and self-interest. The
result is that the picture we’re getting of the market—and of the
economy as a whole—may reflect what people want to happen as much as it
reflect  what is actually happening (New Yorker)

Is China quietly dumping US Treasuries?: A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable. Data released by the New York Federal Reserve shows that foreign central banks have cut their stash of US Treasuries by $48bn since late July, with falls of $32bn in the last two weeks alone. (UK Telegraph)

Credibility of financial blogs is questionable  Go figure . . .  

Jeremy Grantham: Danger: Steep drop ahead  Credit crises have always been painful and unpredictable. The current one is particularly hair-raising because it’s occurring amid the first truly global bubble in asset pricing. It is also accompanied by a plethora of new and ingenious financial instruments. These are designed overtly to spread risk around and to sell fee-bearing products that are in great demand. Inadvertently (to be generous), they have been constructed to hide risk and confuse buyers.How this credit crisis works out and what price we end up paying has to be largely unknowable, depending as it does on hundreds of interlocking and often novel factors and how they in turn affect animal spirits. In the end it is, of course, the management of animal spirits that makes and breaks credit crises.  (Fortune)   

History teaches that financial crises do finish – eventually:
Sometimes historical perspective is needed to shrink the events of the
present into their proper context. The current crisis is about as
unprecedented as the passage of the seasons. See also Don’t write off lure of US assets (FT)

Market-timing editors more bearish, which is a bullish sign (Marketwatch)

Unraveling the Subprime Mess: With Congress returning today from summer recess, the nation’s political machinery will turn in earnest on the subprime-mortgage meltdown, specifically on who might be to blame. One likely target: credit-rating firms. Already, the wheels are in motion. The President’s Working Group on Financial Markets is looking into what role the ratings firms played. The Securities and Exchange Commission has opened more than a dozen related investigations and has begun notifying firms that it will soon start a series of onsite examinations. (free Wall Street Journal)

Scholars Link Success of Firms To Lives of CEOs  (Wall Street Journal)


The Wall of worry continues to build:

U.S. business travelers have become virtual paupers the minute they set foot outside the country.  (Portfolio)   

First Houses, Then Jobs: The credit crunch that first hit home now is reaching the workplace. News Friday that U.S. payrolls fell for the first time in four years in August makes all but certain that the Federal Open Market Committee will cut its federal-funds target rate at its Sept. 18 meeting, if not before. The main question will not be whether to lower the overnight money rate, but whether to do so by a quarter- or a half-point, from the official target of 5.25%. (Barron’s)

Bernanke, the Fed and 2008:
Until financial markets went haywire last month, the Sept. 18 meeting
of Federal Reserve policy makers was shaping up to be pretty routine.
The Fed, after all, has not changed its benchmark interest rate in more
than a year, and there was no reason to think that the coming session
was going to be any different. It sure looks different now. The latest
blow came on Friday with an estimate from the Labor Department that the
economy actually lost jobs last month, ending a four-year string of
uninterrupted gains in employment. But even before that dismal report,
most people on Wall Street had been clamoring for the Fed to cut rates
significantly to help ease the credit crunch. (New York Times)  See also Plosser Says Fed Rate Cut Not Always Needed to Soothe Markets

Countrywide May Fire as Many as 12,000 as Mortgage Demand Wanes:
Countrywide Financial Corp. (CFC), the biggest U.S. mortgage company,
plans to cut its workforce by 10,000 to 12,000 in the largest round of
firings since the industry’s contraction began last year.New U.S. home
loans probably will drop 25 percent in 2008 from this year’s levels,
forcing the company to eliminate as much as 20 percent of its staff,
Calabasas, California-based Countrywide said in a statement yesterday.
(Bloomberg)  See also Dollar Falls to Lowest in a Month Versus Euro Amid Job Losses   



Homeownership Reached Apotheosis in 21st Century: Homeownership has long been considered a desirable goal. Put a person in a home of his own, the thinking goes, and he starts to care about the quality of local education, maintaining a drug- and crime-free neighborhood, and the appearance of his property and the block on which he lives. (See Summers, Lawrence: "In the history of the world, no one ever washed a rented car.”)  Once the government decided homeownership was in the public interest, it went about making it more affordable. Mortgage interest and real estate taxes are deductible. The first $250,000 of profit ($500,000 for a married couple) from the sale of a home you’ve lived in for at least two years is exempt from capital gains taxes. (Bloomberg)

What People Can Do If Foreclosure Looms: More and more borrowers, many with adjustable-rate loans, are finding themselves in Mr. Wilt’s shoes. Nearly one in five subprime borrowers, or those with poor credit, were 60 days or more past due on payments in June, according to First American LoanPerformance. But the problem is spreading to other homeowners: Also in June, 1.24% of second mortgages for so-called prime borrowers, those with better credit, were 60 days or more late, up from 0.54% in the same month last year. And some 4% Alt-A borrowers, who fall between subprime and prime borrowers, were 60 days or more past due in June, up from 1.25% in the same month last year. (Real Estate Journal)   See also New Mortgage Foreclosures Set Record

Why California housing matters: Affordability ultimately hits the economy: Stephen Levy is worried about the health of the housing market in California. Even if you haven’t heard of him or are simply tired of hearing about anything having to do with housing, Levy is a man who should be listened to. As senior economist at the Center for Continuing Study of the California Economy in Palo Alto, Calif., which he co-founded more than 35 years ago, Levy has seen more than his share of cycles. This cycle doesn’t look like it is going to end well, he says. His reasoning is deceptively simple: "There’s a limit to what people can afford." When the coastal areas of the state were reporting home prices that seemed unrealistically high in the late 1990s, Levy was among those who thought prices throughout the state, on average, could go even higher. (Marketwatch)


Iraq War Veterans are using
the web to protest their treatment at the hands of the VA and Pentagon.
The way war vets are treated is a national embarrassment . . .

Storm worm botnet more powerful than top supercomputers:
The Storm worm botnet has grown so massive and far-reaching that it
easily overpowers the world’s top supercomputers.That’s the latest word
from security researchers who are tracking the burgeoning network of
Microsoft Windows machines that have been compromised by the virulent
Storm worm, which has pounded the Internet non-stop for the past three
months.  (ITNews)      

Why I Don’t "Do" Social Networking Sites

How to write a perfect email: Email, not the web, is the most-used Internet application by transaction volume. It’s also the most misused. Since it’s such an important and often overlooked component of our online lives, I’m going to step away from preaching about the web for a moment and focus on simple steps to make your email discussions more effective. (Wired)

Art of Office: Using Microsoft Office to create art. Fascinating. 

New Way to Count Listeners Shakes Up Radio (WSJ)   


Radio Nowhere: The new Springsteen album, Magic, is out on October 2. The Video of the first single is Radio Nowhere.   

• Can humans count before they can speak? That’s one of the many fascinating discussion in The Number Sense: How the Mind Creates Mathematics You can read the NYTimes Book Review here; the Times Book Review also posted the first chapter here.

Are America’s Rich Falling Behind The Super-Rich? Hysterical video, via the Onion


That’s all from the Northeast, where the hazy and humid days of summer are still making themselves felt.


Got a comment, suggestion, link idea? Or do you just have
something on your mind?
The linkfest loves to get email!  If you’ve got something to say, then by all means please do.


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What's been said:

Discussions found on the web:
  1. Jessica commented on Sep 9

    “Plosser Says Fed Rate Cut Not Always Needed to Soothe Markets”

    Hello! Is anybody home? US Nonfarm Payroll has been trending down since 2006, take your head out from the sand and look around. Moreover, employment trends have always lagged the economy.

    Cramer was right; the Fed is in denial and knows nothing, astronomical level of incompetence.

    Soothing markets? What planet did Plosser come from? We are talking about people losing jobs and homes. We are talking about a recession but the guy has no clue. (Thanks god he is not a voting member this year.)

    How about thousands of Americans losing their homes? How about the three consecutive months of sharply trending down employment numbers, the average for the last three months is only 44K (We need 150K just to keep up with our population growth), it was negative 4K last month?

    Is it a “moral hazard” to ensure that Americans have jobs and not homeless?

    Plosser is an idiot.

  2. whipsaw commented on Sep 9

    As usual, an interesting collection of links, BR. And the one to the Portfolio article may actually put some dough in my pocket (I will not explain why, to do so would only reward slackers).

    The next couple of weeks should be pretty interesting. I fully expect most economic news to be bad, but anticipate the markets ultimately rising nonetheless.

    Lately, I’ve noticed that while everybody here has some opinion about the direction of the economy which usually governs their opinion of the direction of the markets, there have been very few posts that offer any specific suggestions about trading/investing ideas. I am not talking about touts, I mean some indication that the people who have strong (indeed, religious) opinions about macro things actually have money in play and a plan for what to do with it. Maybe it’s just me, but it seems like most of the regular posters now (vs. 12-18 months ago) sound like they either have the luxury of never having to decide what to do with money they don’t have or have already made the mistake of buying physical gold and are hoping for calamity to justify that decision.

    My own posture has been 90% govt bonds (via ETFs, I don’t think we little guys have another practical choice) and 10% alternating between cash and calls since February. I sold off my SPY calls for a small loss early last week because I didn’t like the exposure to financials and my QQQQ calls were stopped out at breakeven Friday while I was on vacation during the meltdown- but TLT was a very good place to be then, so that’s okay.

    Does anyone have any useful trading ideas over the next month or so? I have no idea of where we are in the mythical ‘business cycle’ but large cap tech seems to be greatly loved and has a good chart, so my inclination is to lean that way while retaining a heavy position in treasuries. I will not short this market, it is too likely that Bernanke and Paulson are going to tamper as the economy falls away. Plus, we are soon going to start hearing aobut “performance anxiety” as the fund managers begin to worry about their bonuses (or perhaps just keeping their jobs) and the odds are very good that we will see new highs prior to the end of the year.

    What happens after that, I don’t know, but election years are election years, so….


  3. Winston Munn commented on Sep 9

    Jessica wrote: “What planet did Plosser come from? We are talking about people losing jobs and homes. We are talking about a recession but the guy has no clue. (Thanks god he is not a voting member this year.)”

    I’ll address your remarks and/or questions one-by-one.
    1) What planet did Plosser come from?
    His driver’s license shows a home planet of Reasonableness located in the Common Sense Galaxy.
    2) We are talking about people losing jobs and homes.
    Hedge Fund managers and loan originators are technically classified as parasites, not people. People are losing their homes for the same reasons they lose cars, trucks, boats, mistresses, and time shares in Tampa – they couldn’t afford them but did not let that stop them from buying them anywar, and those who made the loans on these deals were too greedy for their fees to say no to the absurdity.

    3) We are talking about a recession but the guy has no clue.

    Did we abolish the business cycle? Wow, I didn’t see that bit of news. Or is it simply that recessions are passe’?

    Although I wasn’t paying attention, I bet Plosser was – and I also bet he has more than a clue.

  4. David commented on Sep 9

    Goldilocks not way!, this is more like Hansel and Gretel, were the cannibalistic witch (Kudlow) with his enticing candy of Fed rate cuts; “Come in! Come in, you’ve nothing to fear”, we only to find a oven of inflation.

    “Fair is foul, and foul is fair:
    Hover through the fog and filthy air” William Shakespeare

  5. Winston Munn commented on Sep 9

    It has now been revealed that the surprising strength in “back to school” sales figures was mislabeled and should have been credited to the “back to the damned resume’ and interview routine” sales figures.

    On a positive note, Target and WalMart are both hiring.

  6. MTHood commented on Sep 9

    Winston Munn reply to Jessica: Well played.

    She dealt you a strong hand, but nonetheless, nicely done.

  7. John F. commented on Sep 9

    “The way war vets are treated is a national embarrassment . . .”

    Couldn’t agree more. One aspect of that embarrassment is how they’re used as props for peoples’ political agendas. We should actively seek out and listen to the voices of ALL soldiers who put everything on the line for us–not just the ones selected by one Berkeley journalist.

  8. John F. commented on Sep 9

    Sorry, I forgot to make the plug:

    Supporting America’s military in their time of need, we provide “a home away from home” that enables family members to be close to a loved one at the most stressful time — during hospitalization for an illness, disease or injury.

    A Phenomenal organization. Please give it a look.

  9. TexasHippie commented on Sep 9

    John F. – we’ve heard the filtered and sanitized voices of our soldiers from the neocon perspective for a very long time, so don’t get your panties in a wad if someone from Berkeley looks for a different angle.

  10. Vivien Hartley commented on Sep 10

    Was it a “moral hazard” for the Fed to create the environment for the housing bubble to form? When will the Fed acknowledge that they have created the bubble? Plosser is a disgusting hypocrite.

  11. Pool Shark commented on Sep 10

    “Was it a “moral hazard” for the Fed to create the environment for the housing bubble to form? When will the Fed acknowledge that they have created the bubble? Plosser is a disgusting hypocrite.”

    Though the fed is surely responsible for excessively loose credit; the mere fact that a sumptuous buffet has been set doesn’t make it wise for the diners to gorge themselves to the point of illness.

    I have little pity for those who borrowed more than they could afford to repay.

  12. Eclectic commented on Sep 10

    A word on ADP and objectivology:

    …If you’ll notice that the next red star and segment for BLS will be virtually flat when it’s plotted (ratio of decline will appear as negative 4/500 when graphed because the intervals of the Y axis are set to 500, and because X intervals are fixed to single months), then it has become evident that all the criticism that ADP suffered in the media was, as I predicted, as reasonable as being critical of algebra for its having an X and a Y.

    While we can’t see the future, it is clear from this graph that what we’d all anticipated eventually knowing may be beginning to be k-n-o-w-n, and that is that ADP appears to be giving a better early signal of a suspected decline in employment.

    I suspect the focus on ADP will grow in market importance, particularly for next month’s ADP release.

  13. michael schumacher commented on Sep 10

    Some hedgie buys more of a dying financial stock (BSC) and Intel “ups” guidance…

    Wow do I feel like piling it on this morning……NOT..

    Anyone else see the SPY juiced right before the open???

    It’s being piled on alright……..


  14. michael schumacher commented on Sep 10

    right about now is where I expect to see some “upgrades” thrown out the door. Especially over at BX……..

    CFC too…..B of A needs the help at this point…


  15. John F. commented on Sep 10


    Read it again: the Berkeley writer is entitled to highlight whatever he wants, and I’m not questioning any of the stories. Unlike you, apparently. And I won’t descend to the daily kos level of debate. Raise your game.

  16. wunsacon commented on Sep 10

    >> Couldn’t agree more. One aspect of that embarrassment is how they’re used as props for peoples’ political agendas. We should actively seek out and listen to the voices of ALL soldiers who put everything on the line for us–not just the ones selected by one Berkeley journalist.

    Besides one of the valid points you’re making, are we not also supposed to interpret this as a dig at the “librul media”?

    >> TexasHippie:
    >> Read it again: the Berkeley writer is entitled to highlight whatever he wants, and I’m not questioning any of the stories. Unlike you, apparently. And I won’t descend to the daily kos level of debate. Raise your game.

    Oh, we’re not supposed to, apparently. You certainly had me fooled…and, really, I’m still fooled.

    Getting back to this point:

    >> We should actively seek out and listen to the voices of ALL soldiers who put everything on the line for us

    It sounds good, at first. But, we don’t have time to seek out and listen to all soldiers. In fact, many of them might be great loggers but just not see the forest what it is. For instance, some conservative friends tell me that they read military blogs online about how the librul media doesn’t report all the great progress they’ve been making. Problem is: they said that in 2003, 2004, 2005, 2006, and 2007.

    (And, to be sure, my conservative friends are not reading the thoughts of the military veterans, retired/disgusted generals, angry, sometimes anonymous CIA analysts, etc. quoted by Berkeley reporters. My conservative friends rely on the right-wing media, which provides them with the pro-administration spin like TexasHippie said.)

  17. John F. commented on Sep 11


    Not a dig at the media, nor even at Berkeley, which holds many fond memories for me. I take your point, though, that it’s impossible to hear every story. It’s also difficult to avoid selection bias. Personally, I try to read every scrap of primary reporting on Iraq, every account of wounded veterans, and whatever else I have time for. This doesn’t make me an “objective” observer, but I think it’s impossible to argue that the writer in question hasn’t selected his stories to fit a political agenda.

    Here’s the problem: you seem to have convinced yourself that there’s no point listening to any veteran who doesn’t think the Iraq war is a useless enterprise. Why are they uniquely unable to see the forest? They’ve suffered the same injuries and trauma as the others. Can you really justify discounting their stories?


  18. wunsacon commented on Sep 11

    Close but not exactly. The bottom line is: I’ll listen *more* to people who’ve been right all along and less to people who’ve been wrong all along.

    I made darn accurate predictions about Iraq back in 2003, after reading 3-4 hours of news per night for 6 months. How? Specifically by discounting what other people had to say. Why shouldn’t I continue what works?

    Unless a speaker or author nailed it 4 years ago, they’ll have to overcome the discount.

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