Another week in the can. This one was a near mirror image of last weeks: The Dow and the Dollar were up, Gold and Oil were down.
We started the week ugly, had an explosive rally Tuesday, gave 2/3rds back Wed/Thu, and finished on a marginally positive note.
This was a week of cut forecasts by some big firms — Fed Ex (FDX) JC Penny (JCP) and Starbucks (SBUX) amongst them. We had more Credit crunch, weak Retail, Inflation data, Fed speechifying, and lots of gyrations in the corporate boardrooms.
By the numbers, the winners and losers were as follows: US indices were marginal gainers, with the Dow, SPX and NDX up 1%, 0.3% and 0.4% respectively.
Global, Europeans and Emerging stocks were off in turn by 1.3%, 1.3% and 2.5%.
REITs were marginally positive; the greenback also gained 100 bps on the week. Crude oil took a 1.3% shave, while Gold got a 5.6% haircut.
Barron’s Trader column had this to say:
"A recent survey by Merrill Lynch indicates that just 12% of global money managers believe a global recession is likely over the coming year. Merrill strategist Karen Olney says that this raises the issue of "whether investors have placed too much emphasis on ‘decoupling,’" the belief that U.S. economic weakness won’t spill over into the global economy."
(On the word Decoupling, try to guess who wrote this sentence: "Decoupling, which sounds like a polite word for a post-coital split, has become an oft-used part of the market’s lexicon." The only hint you will get is that tit wasn’t me).
I am starting a new campaign: Let’s replace the phrase "Tom Foolery" with "Ben Steinery."
As in "Enough Ben Steinery! On with the linkfest."
INVESTING & TRADING
• U.S. Stocks Post First Weekly Gain This Month: Stocks posted their first weekly gain this month after investors speculated that the worst of Wall Street’s mortgage losses have been disclosed and Wal-Mart Stores Inc. boosted its earnings forecast.Financial stocks rebounded from two weeks of declines after Goldman Sachs Group Inc., the biggest U.S. securities firm by market value, said it’s not planning a significant writedown. Wal-Mart surged the most since March 2003 after the world’s largest retailer lured customers with discounts. (Bloomberg)
• Fannie Mae’s fuzzy math Investors might want to take a closer look at Fannie Mae’s latest earnings report. Lost in the unsurprising news of the mortgage lender’s heavy losses was a critical change in the way the company discloses its bad loans — a move that could mask that credit losses that are rising above levels that the company predicted just three months ago. Without the change in disclosure, an important yardstick for credit losses that Fannie Mae provides to investors would have looked much worse than it did in financials filed last week. Fannie Mae’s potentially misleading disclosure comes at a crucial time for the company. (Fortune) Our FNM sell call is here.
• The Best of Financial Bloggery (free Barron’s)
• Buffett: Tax my kin, please: Warren Buffett has said it before and he’s likely to say it again to Congress on Wednesday: He thinks the heirs of the wealthy should be taxed on their inheritance. Buffett, one of the world’s richest men and now its biggest philanthropist, has been an outspoken critic of efforts to repeal the estate tax and is scheduled to testify at a Senate Finance Committee hearing on how current law affects estate tax planning. (CNN Money)
• Buying What Berkshire Buys Based on Filings Provides Buffett-Sized Returns — Buying whatever billionaire Warren Buffett bought, often months after his share purchases, delivered twice the return of the Standard & Poor’s 500 Index during the past three decades. (Bloomberg)
• New Survey of Active Managers: The NAAIM That Trend Survey of Adviser Sentiment
• Jim Rogers Goes Postal on Bernanke, Urges People to Sell U.S. Dollar Holdings: Rogers, who predicted the start of the global commodities rally in 1999, criticized Federal Reserve Chairman Ben S. Bernanke for comments on the currency before a congressional committee on Nov. 8. "He is a total fool," Rogers said. "He said Americans who buy only American goods are not affected if the value of the U.S. dollar goes down. I was terrified." Bernanke said the only effect of a weaker dollar on a typical American with their wealth in dollars, buying consumer goods in dollars, would be "their buying powers, it makes imported goods more expensive." Rogers said that’s not right. "If you only buy American products and the dollar goes down, the price of oil goes up, copper goes up, wheat goes up," he said. "That affects you. He doesn’t understand the economy as far as I can see." (Bloomberg)
• Rising Crude Oil Forcing Firms to Raise Prices A surprising list of non-energy companies seeing margin squeezes from higher crude prices
• How to Use a Micro Scope: Fitting small stocks into the big picture. Interview With Nancy Prial, Senior principal and small cap portfolio manager, Essex Investment Management
• We have a special Wall Street brokerage section this week:
–Wall Street playing with more funny money (Fortune)
–Lehman, Bear Stearns Are Ripe for European Offers: (Bloomberg)
• The "B Word" Returns: Backdoor Bailouts of Bankruptcy Candidates: THE "B" WORDS ARE BESETTING THE MARKETS, and they have nothing to do with Jerry Seinfeld. "Bankruptcy," or at least the perceived threat of it, sent shares of E*Trade Financial
tumbling 60% Monday. "Breaking the buck," or the potential of the
net-asset value of a money-market mutual fund to drop below $1.00 a
share, led Legg Mason to pump over $300 million into three of its money
funds — or more than 10 times what the comedian’s animated flick, "Bee
Movie," took in last weekend. This is clearly not about nothing, as
Seinfeld’s sitcom supposedly was about. A Citigroup analyst suggested
there was a 15%
probability that E*Trade could file for bankruptcy after the online
broker said it would book "significant writedowns" in its asset-backed
securities holdings. E*Trade had survived and prospered after the
dot-com collapse by plunging into banking and mortgages — to
participate in the ensuing bubble and, now, bust. (Barron’s)
• Bond Funds Are Victims of Timing: After successfully dodging the bond-market storm earlier this year, several big mutual funds thought the worst was over. It was a bad call, and now they’re feeling the pain.The result: Some funds with great long-term track records — including funds from Capital Research & Management’s American Funds, and Legg Mason Inc.’s Western Asset Management group — have taken significant hits in just the past month or so. Some that have long been top performers are now posting below-average returns and lagging behind the broad bond market by anywhere from one to nearly five percentage points, a huge gap for bond funds. (Wall Street Journal)
The Wall of worry continues to build:
• China’s industrial output slows: China’s industrial output growth slowed a little in October under
the weight of government policy curbs, but its tempo was still so high
that economists said a further rise in interest rates was just a matter
of time. Factories churned out 17.9 per cent more goods than a
year earlier, weaker than September’s 18.9 per cent pace of expansion
and undershooting forecasts of an 18.3 per cent rise. (Reuters)
• An Inflation 3-fer:
• Doctor the Dollar? Depends How Sick: The dollar has fallen 9.5% against major currencies
since Henry Paulson became Treasury secretary 16 months ago. His
response has been to repeat the mantra that a "strong dollar is in our
nation’s interest." What would it take to make Mr. Paulson and Federal
Reserve Chairman Ben Bernanke, who has seen the dollar fall 11% since
he took office in February 2006, respond to the dollar’s drop? And what
could they do? (Wall Street Journal) If no Journal, go here: How Sick the Dollar?
• Goldman Sees Subprime Cutting $2 Trillion in Lending: The slump in global credit markets
may force banks, brokerages and hedge funds to cut lending by $2
trillion and trigger a "substantial recession” in the U.S.,
according to Goldman Sachs Group. Losses related to record home foreclosures using a "back-
of-the-envelope” calculation may be as high as $400 billion for
financial companies, Jan Hatzius, chief U.S. economist at
Goldman in New York wrote in a report dated yesterday. The
effects may be amplified tenfold as companies that borrowed to
finance their investments scale back lending, the report said. (Bloomberg)
• Retail Sales Gains Slowed in October, Suggesting Caution Ahead of Holidays: U.S. retail sales growth slowed as expected during October, a sign
consumers were showing caution on the approach to the holidays and an
indication the overall economy would weaken at the end of the year. . . The retail-sales report illustrates where Americans
are spending their money. Consumer spending is a big part of the
economy. It makes up about 70% of gross domestic product, which is the
scoreboard for the economy. Unfortunately for the economy, analysts see consumer
spending slowing, perhaps for several quarters. (Wall Street Journal)
• OPEC blunder reveals divisions on eve of summit: A blunder by OPEC on Friday exposed a spat between Saudi Arabia and Iran about whether the oil exporters’ group should address the issue of the falling dollar at a rare summit of leaders this weekend.Saudi Arabia appeared to have prevailed and the dollar is not expected to be mentioned in a final declaration by leaders, but the incident highlighted differences at the heart of the group, which includes both US allies and foes. (Agence France-Presse)
• Airport tests reveal major security flaws: Federal investigators smuggled the components of liquid-based bombs past screeners in 19 airports nationwide in secret tests earlier this year, showing that a terrorist could thwart the latest U.S. security regulations (LA Times)
• Time for the White House to Rescue the Dollar? "Paulson is way too cautious; he’ll never do it," was the response of a recently departed Treasury Department official when I asked about the chances of Treasury Secretary Hank Paulson ordering up an old-fashioned currency intervention–the last one was in 2000–to reverse the tumbling dollar. (USNWR)
TECHNOLOGY & SCIENCE
• Leonid Meteor Shower Peaks (tonite!) The dazzling Leonid meteor shower will streak across the skies again on Saturday.The annual light show, which occurs in mid-November, will return this year with a maximum of about a dozen meteors an hour at around 11 p.m. EST. North American skywatchers will get an unusually clear view, as the moon will set early and leave a dark canvas for the illuminations to begin.
• Web Videos Stealing TV Viewers, and Marketers: WHY are fewer viewers watching the new fall television series? Perhaps because they are too busy watching video online. As broadband service becomes more available at home, the growing prevalence of video programming on the Internet is catching the attention of consumers — not to mention marketers and media companies. (New York Times)
• String theory fans take note: An Exceptionally Simple Theory of Everything is generating some nice buzz: Surfer dude stuns physicists with theory of everything
• Ten Videos to Change How You View the World (Lifehack)
• REMEMBER THIS: There is a 41-year-old woman, an administrative assistant from California known in the medical literature only as "AJ," who remembers almost every day of her life since age 11. There is an 85-year-old man, a retired lab technician called "EP," who remembers only his most recent thought. She might have the best memory in the world. He could very well have the worst. (National Geographic)
• Fox News Porn is
an odd collection of raunchy outtakes from the Fox "News" Network. The
site points up the hypocrisy of priggishly condemning raunchiness while
simultaneously reveling in it.
MUSIC BOOKS MOVIES TV FUN!
• Friday Night Soul: Sharon Jones is called the “Queen of Funk,” any fan of 1960s and 70s R&B, Soul, or Motown will find plenty to love about this disc: Sharon Jone’s is in turns, upbeat, smoky, slinky and soulful.
• Charlie Gasparino’s provides a blow-by-blow account of Dick Grasso’s rise and fall at the NYSE in “King of the Club: Richard Grasso and the Survival of the New York Stock Exchange.” NYT Review here: Rise and Fall at the Big Board
• Not The Daily Show, With Some Writer: Brilliant commentary from a Daily Show writer about the Writer’s Guild strike
• The TV Grid: a look at how production on many television shows stands
That’s all from what may very well the first real weekend of Autumn in
the NorthEast — brisk weather, beautiful foliage colors, falling leaves — only about a month late!
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