Goldilocks has left the building.
That was the key takeaway of yesterday’s god-awful NFP report. The odds of recession ticked higher, as did the odds of a bigger than expected 25 bps Fed cut. (Goldies’ economists declared a 50bp cut "the most likely outcome")
The weak jobs data capped off what was an already tumultuous week. And as Friday’s trading made clear, reports of the death of volatility turned out to be premature.
Gold, Oil and US Treasuries gained, anything equity related got hit. By the numbers, Gold popped 4.1%, Crude oil added 3.6%. US Treasuries gained a solid 1.1%, as the dollar slipped 0.6%. Global stocks fell 1.1%. The Nasdaq lost 1.2%, the S&P500 1.4%, and the Dow gave up 1.8% on the week. The Russell2000, REITs and Europeans stocks gave up 2.2%, 2.6% and 2.8% respectively. Its hard to draw any conclusions as to what markets appear best situated to ride out a U.S. slow down from that list.
Barron’s Trader column observed:
"Traders had been hoping for a weak number — for job growth wan enough to spur the Federal Reserve to cut interest rates — and stingier economists were expecting 20,000 or 30,000 fewer new jobs than the 100,000 most had penciled in for August. But the negative number — and sharp downward revisions to June and July data — caught the Street off guard, and raised the specter that the credit crunch has triggered a broader and more insidious economic downturn.
Suddenly analysts are debating not whether the Federal Reserve will cut interest rates to prop up the economy, but how extensive those cuts will be."
My name is Barry, and this is what I clicked this week:
INVESTING & TRADING
• Bullishness by the numbers: Stock volume has triggered 3 rare technical events There is one aspect of the volume during the stock market’s recent rally that is quite bullish: On three of the past dozen trading sessions, stock market volume triggered a bullish technical signal known as a "Nine To One Up Day." This signal is based on the volume of all New York Stock Exchange-listed stocks that go up on a given day, expressed as a percentage of the total volume of all stocks that rose or fell on that day. On a day when rising stocks’ volume is the same as declining stocks’ volume, for example, this ratio would be exactly 50%. (Marketwatch)
• Bearishness by analysis: Nine Reasons the Feds Can’t Save Stocks Doug Kass questions the continued rise in equities (TheStreet.com)
• Deals Boom Fizzles: The global mergers-and-acquisition boom that began in 2003, the greatest deal frenzy in history, is winding down. (Wall Street Journal)
• Two side-by-side Bloomberg articles show why this market is so challenging:
–Cheapest Stocks in 12 Years Greet Investors After Summer Swoon:
U.S. investors are returning from summer vacation to the cheapest stock
market in almost 12 years, and some of the biggest fund managers say
they’re ready to load up on shares of technology, energy and industrial
–Recession Risk Rises as Consumers Feel Pain of Tighter Credit:
The pain from higher borrowing costs may be spreading as consumers and
businesses follow investors in shying away from risk, increasing the
odds of a recession.
• How Market Turmoil Waylaid the ‘Quants’ Quant strategies have been around for decades, but in recent years they have really come into their own, thanks in part to technology that has lowered the costs of their trading-intensive methods. Whereas investors like Warren Buffett and Peter Lynch defined an era of common-sense "value" investing in the 1980s — and swashbuckling hedge funds betting on everything from metals to the British pound typified the 1990s — quants have scaled the heights of the investing world in the past decade. See also Hedge Summer: Who Built Their Dollars (Wall Street Journal)
• Smart hedge funds that capitalise on dumb money:
“Dumb money” is a pejorative label commonly used to describe uninformed
or misguided investors. Unfortunately, this label applies to many hedge
fund investors who have poured money into hedge funds, with assets more
than doubling over the past five years to more than $1,500bn.If people
carefully considered the structural deficiencies of hedge funds before
investing, most would never invest. Hedge funds are not designed to
serve the best interests of investors. They are designed to serve the
best interests of hedge fund operators. (FT)
• For you Fast Money fans, Bolling on Bolling (the Admiral speaks!)
• The Tao of Junk:
Economists make a big deal out of all the junk we import from China:
tainted pet food, lead-laced toys, and enough cheap plastic tchotchkes
to load up a landfill the size of Montana. And American industries are
clearly being drenched by the rising tide of Chinese imports, which
totaled $288 billion in 2006. But as imports from China loudly rise,
American exports to China are quietly rising at an even more rapid
pace. Would it surprise you to learn that a lot of those exports are
• Unsafe at Any Rating: CDO Speeds to CCC from AAA Watching the rating cuts trickle out of the derivatives forest is akin to searching for elephant dung on a path to try and work out how many pachyderms are in the jungle. There’s clearly a herd in there. And it’s probably much bigger than the ordure you have seen so far would suggest. Last week, Standard & Poor’s butchered the ratings on $3.2 billion of debt from structured investment vehicles spawned by Solent Capital Partners LLP in London and Avendis Group in Geneva. About $254 million was slashed from the top AAA grade to CCC+ and CCC — slides of 16 and 17 levels, triggered by their investments in mortgage-backed bonds. See also Ratings Firms’ Practices Get Rated
The Wall of worry continues to build:
• Fed May Cut to 5 Percent Without Promising More: If Federal Reserve officials cut their 5.25 percent target for the overnight lending rate when they meet on Sept. 18, it will be by only a quarter-percentage point with no promise of more to come.Officials have already disappointed many market participants by refusing to cut the target in response to turmoil in financial markets. And they will surely disappoint those hoping for a half-point cut at the next meeting of the Federal Open Market Committee. (Bloomberg)
• The Economist asks Does America need a recession?
But should a central bank always try to avoid recessions? Some
economists argue that this could create a much wider form of moral
hazard. If long periods of uninterrupted expansions lead people to
believe that the Fed can prevent any future recession, consumers,
firms, investors and borrowers will be encouraged to take bigger risks,
borrowing more and saving less. During the past quarter century the
American economy has been in recession for only 5% of the time,
compared with 22% of the previous 25 years. Partly this is due to
welcome structural changes that have made the economy more stable. But
what if it is due to repeated injections of adrenaline every time the
economy slows? (The Economist)
• Please, Not Another M.B.A. President:
Willard Mitt Romney knows that the urge to have someone run the country
like a business is a strong one in American politics. Periodically,
this yearning attaches itself to a nutty object of desire. Lee Iacocca
was one such love interest, talked up for the White House in the ’80s.
That he’s once again made the bestseller list, almost three decades
after the historic accomplishment of accepting a federal bailout for
Chrysler, tells us that we’ll adhere this yearning to any C.E.O. with
West Wing swagger. In the ’90s, Ross Perot got a fifth of the vote even
though he was, um, odd. Today, Michael Bloomberg has the virtue of
sanity, but his appeal is the same: He’s the executive who, as one
C.E.O. who wants a C.E.O. president tells me, “gets things done
… without all the bullshit.” (Portfolio)
• In Holland, Some See Model For U.S. Health-Care System: The Netherlands is using competition and a small dose of regulation to pursue what many in the U.S. hunger to achieve: health insurance for everyone, coupled with a tighter lid on costs. (WSJ)
• We knew Saddam had no WMD: Sidney Blumenthal writes: According to two former CIA officers, on Sept. 18, 2002, CIA director George Tenet briefed President Bush in the Oval Office on top-secret intelligence that Saddam Hussein did not have weapons of mass destruction, according to two former senior CIA officers. Bush dismissed as worthless this information from the Iraqi foreign minister, a member of Saddam’s inner circle, although it turned out to be accurate in every detail. Tenet never brought it up again. (Salon) See alsoUS terror law ‘unconstitutional’
• Web Editors Reveal Online Flops: After more than 10 years of newspapers slowly migrating to the Web, most have embraced the medium as their future, showing they can break news, provide audio and video extras, and give readers more space to react and rebut than ever before. Successes are many, ranging from exclusive online interviews to sourcing details that give readers more complete information than any daily could have provided just a few years ago. Even the Pulitzer Prizes are giving props to Web-based offerings (Editor & Publisher)
TECHNOLOGY & SCIENCE
• How to Dump a Cellphone Contract: (WSJ)
• By now, you know that Apple introduced a slew of new iPods and dropped the price ont he iPhone. Our forecasts for these changes — first made in January of this year — were surprisingly accurate: iPod Update
As to the brouhaha over the iPhone price drops, I find myself in total agreement with Michael Slavitch, who wrote: "Nobody forced anyone to buy an iPhone. The buyers weren’t buying
a phone, they were buying status and the envy of others. Every buyer
got the opportunity to show off their new toy, brag. The iPhone
provided a high quality narcissistic supply. Now that the price has
been sullied and the status is gone you can hear the sound of egos
deflating as that brief bubble of exclusivity popped. The dealer cut
the price of their junk."
• The 200 most successful websites on the web, ordered by category, proximity, success, popularity and perspective: Web Trend Map 2007 Version 2.0
MUSIC BOOKS MOVIES TV FUN!
• Call me
IshmaelOprah: I previously mentioned A Demon of Our Own Design in a linkfest a few weeks ago. I enjoyed the book a great deal, and just about finished it over the long Labor Day weekend. With the author’s permission, I posted the entire first chapter here, in text and PDF form. Enjoy!
• The 4th annual Pooch Plunge in Fort Collins, Colorado. A must see for dog lovers!
• Award winning online columnist Mark Morford prints his hate mail. Hilarity ensues.
That’s all from the Northeast, where it is definitely a top down kinda day . . .