Yesterday, we looked at the week that was. Today, we preview the week that will be.
We have a light week queued up, punctuated by several important events.
Monday brings ISM Mfg Index, and on Tuesday, its Weekly Retail Store Sales. Wednesday is Factory Orders and ISM Non-Mfg Survey. Wednesday also brings two Housing related data points: MBA Purchase Applications, and Pending Home Sales Index.
But most of the bigger action this week will be jobs related: Starting Wednesday, we get the Challenger Job-Cut Report, the increasingly interesting ADP Employment Report, along with Productivity and Costs. Thursday is Monster Employment Index, and then Friday we get the mack daddy of lagging indicators, the Employment Situation (NFP). As always, we will dissect these numbers as they roll out.
Waiting for the Fed: After last week’s gabfest, we have a lighter calendar of Fed speechifying this week: On Monday, Boston Fed President Eric Rosengren discusses subprime mortgages, and San Francisco
President Janet Yellen speaks about the economy and
monetary policy. After that, we go into lockdown, as the Fed goes radio silent for the week before their December 11th meeting.
Fed funds futures are now pricing in a 100% chance of a 25-basis-point rate cut on Dec. 11, but less than 50% odds of a 50-basis point rate cut. (On Thursday, we get both the BOE and ECB announcements).
"Comments from Fed Chairman Ben Bernanke and Vice Chairman Donald Kohn convinced the markets that policy makers were on their side and planning to cut rates. But Bruce Bittles, chief investment strategist at Robert W Baird, warned: "Nothing has really been resolved and, given the run we’ve seen in the last few days, we’ve developed a bit of an overbought condition."
Kevin Kruszenski, director of equity trading at KeyBanc Capital Markets, considers the stock-market’s rally this week a "trading bounce," or knee-jerk reaction to a "correction," with most of the buying coming for technical, rather than fundamental, reasons. "The key now is we’re going to have to make new highs for this to be sustained; otherwise we could be moving sideways into the New Year."
That makes lots of good sense to me.
Enough Ben Steinery! On with the linkfest:
INVESTING & TRADING
• Don Hayes is Über-Bullish: Back in the Bull Ring:
DON’T EXPECT CONVENTIONAL WISDOM from longtime market seer Don Hays.
But count on his contrarian bent and uncommon skill in determining the
direction of the stock market to make you money. For close to 40 years,
Hays has been helping investors get the best read on important trends
and subtle shifts in the economy and the market, through a variety of
technical gauges he monitors at his Nashville, Tenn.-based Hays
Advisory Group. After a brief spell of caution in mid-October, Hays
turned 100% bullish a few weeks ago and hasn’t looked back. (Barron’s) His stock picks? Cisco (CSCO), Bucyrus (BUCY), Coca-Cola (KO), General Cable (BGC), EMC, and Nvidia (NVDA)
• Big rally doesn’t mean all is well: When you’re worried that a scary-looking stranger on the street might slug you in the face, that’s probably an irrational fear. When you’re worried that a serial killer who’s got you by the throat might murder again, you’ve got every reason to be concerned. Many investors often find themselves in the first category, blindly dumping stocks at the slightest provocation, as they did in July 2006, just before a rapid 25% run-up in prices. In retrospect, anyone can see that was dumb. But investors who have dumped stocks lately have some pretty persuasive facts on their side, starting with the mother of all rationales: Earnings stink and probably will deteriorate more over the next six months than the consensus considers likely. (MSN)
• Contrarians Make a Case for Gains in the Recent Turmoil: DON’T be too upset by the stock market’s recent decline. It may have been painful, but it’s probably just a stumble by a bull market that still has room to run. That, at least, is the message that comes from contrarian analysis of investor sentiment — an approach to market timing that relies on the propensity of the average investor to get the market’s near-term direction dead wrong most of the time. (New York Times)
• The Next Dominos: Junk Bond And Counterparty Risk: The severity of the subprime
debacle may be only a prologue to the main act, a tragedy on the grand stage in
the corporate credit markets. Over the past decade, the exponential growth of
credit derivatives has created unprecedented amounts of financial leverage on
corporate credit. Similar to the growth of subprime mortgages, the rapid rise
of credit products required ideal economic conditions and disconnected the
assessors of risk from those bearing it.
• Is it Time to Buy Financials Yet? THE BOND MARKET is certainly signaling that all’s not well. The London Interbank Offered Rate — or Libor — is what banks charge each other to borrow money. Last week marked the first time that a bank could borrow one-month money through the turn of the year. The rate on one-month Libor jumped from 4.82% Wednesday to 5.22% Thursday. Such stress hasn’t been seen since 2000, when investors were worried about Y2K, and the Fed had to provide massive infusions of liquidity. (Barron’s)
• Goldman Turns Wary On Tech Sector; Cuts Estimates, Targets For Dozens Of Stocks: Barron’s Eric Savitz assembles a laundry list of Tech stocks which Goldman flips negative on. Also, our advice on how to handle these downgrades (Hint: it involves not panicking)
• Here come the Sovereign Funds — A stake in Citi is just the start: So you’re lousy with petrocash or other export-driven windfalls, and itching to put your depreciating dollars to work. Where to start? Here’s Fortune’s handy tip sheet: Do look for an iconic property. It’s no mistake that when Abu Dhabi’s investment fund took a big stake in a U.S. company this week, it chose as its target perhaps the world’s best-known financial institution: Citigroup .
Other recent purchases by overseas investors have run along this same big-name theme. Deals this year include Dubai’s purchase of a nearly 5% interest in electronics giant Sony, Abu Dhabi’s acquisition of a 7.5% stake in the well-connected private equity outfit the Carlyle Group, and China’s $3 billion bet on wheeler-dealer Blackstone. (Fortune)
The Wall of worry continues to build:
• No Conspiracy Theory — Just Data: Our link doubting the 4.9% GDP data brought out the usual cabal theorists. The plain old Truth is actually worse than a conspiracy . . .
• U.S., Banks Near a Plan to Freeze Subprime Rates for Borrow: The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations. An accord could reassure investors and strapped homeowners, both of whom are anxious as interest rates on more than two million adjustable mortgages are scheduled to jump over the next two years. It could also give a boost to the Bush administration, which is facing criticism for inaction amid the recent housing turmoil. (free Wall Street Journal)
• Friday is Novembers NFP; The New York Times is of 2 minds about jobs:
• Financial Markets Anticipate Recessions Before They are Obvious: Two weeks ago, for the first time since the 2001-2002 downturn, our measures again signaled an oncoming U.S. recession. This signal is based on four general conditions. They are all well-known to be related to economic weakness (not the result of spurious data-mining), but they do not have great usefulness individually. They become powerful when they are unanimous — these conditions have always occurred together during or just prior to recessions, and they have only occurred together during or just prior to recessions. (Hussman)
• Bond Traders Reclaim Master of Universe: There was a time back in the 1980s
when bond traders were Masters of the Universe. The size and stature of the U.S. government bond market had
exploded along with the federal budget deficit. The Federal
Reserve’s inflation-fighting resolve and monetary-targeting
regime under Chairman Paul Volcker produced huge swings in
interest rates. Volatility acted as a magnet, attracting traders
to a market that had formerly been relegated to widows and
orphans. At the same time, the stock market had been going nowhere
from the late 1960s to the early 1980s. The go-go years were
still ahead… (Bloomberg)
• Compare & Contrast: A recent speech from an Australian Central Banker: Open Market Operations and Domestic Securities
• Payrolls data could be deciding factor for Fed: The economic data to be released in the next week will be crucial in the Federal Reserve’s decision in two weeks to cut interest rates again, and if so, by how much. Fed Chairman Ben Bernanke said flat out that the data will help him make up his mind at the Dec. 11 meeting. It’s not just any data that will be released in the coming week. The calendar includes the most closely watched, real-time indicators of economic growth — including the monthly payrolls report, the Institute for Supply Management index of manufacturing sentiment and the monthly sales reports from top retailers and automakers. (Marketwatch)
• The Next Credit Scandal by Fortune’s Peter Eavis.
• Dreaded `R’ Word Starts Tripping Off the Tongue: Everywhere you turn, recession is staring you in the face. The Sunday New York Times featured a story on the prospects
for recession on the front page of the Week in Review section.
The following day, the Wall Street Journal ran a recession
article on page one. (Bloomberg) See also Don’t look now: Here comes the recession (Fortune) and The Financial Fire Trucks Are Gathering (John Mauldin)
• The coming consumer crunch The long-awaited, long-feared
consumer crunch may finally be here. That might not mean an economy-wide
recession, but the pain for American households will be deep.
• Über Bearish commentary from Paul Craig Roberts, Assistant Secretary of the US Treasury for Economic Policy in the Reagan administration: Impending Destruction of the US Economy
• Home prices: Worst drop since ’70
The biggest plunge in new home prices in 37 years was not enough to
revive October sales, according to the government’s latest reading on
the battered housing and home building markets. The report showed that
the median price of a new home sold in October
plunged 13 percent from year-earlier levels to $217,800. It was the
most severe year-over-year drop since September 1970, when the median
price was only $22,600, or less than the cost of a typical new car
purchase today. (CNNMoney.com)
• One-Third of Subprime ARMs Overdue, New York Fed Says: One third of adjustable-rate subprime home loans in the U.S. were delinquent as of August, according to a study by the Federal Reserve Bank of New York.The study found that adjustable-rate subprime mortgages had the highest rate of delinquencies and foreclosures. Twelve percent of 26,642 such loans sampled were more than 60 days delinquent and 7 percent were in foreclosure, according to data released today. Another 13 percent were less than 60 days overdue.“It’s an astonishing number,” said Susan Wachter, professor of real estate at the University of Pennsylvania’s Wharton School in Philadelphia. "Prices are falling more than people expected. There is no sign of a bottom.” (Bloomberg)
• Foreclosure Filings Increase,But Default Notices Drop 9%: Foreclosure filings for October rose 2% from September and 94% from a year earlier, but foreclosure activity in general appears to have "leveled off" since peaking in August, a foreclosure-listing service said.According to RealtyTrac Inc., default notices for October dropped nearly 9% from a year ago. "Some of the efforts on the part of homeowners, lenders and advocacy groups to find alternatives to foreclosure may be starting to have an impact," said RealtyTrac Chief Executive James J. Saccacio. He added, however, that bank repossessions during the month jumped nearly 35% — "evidence that more homeowners who enter foreclosure are losing their homes."RealtyTrac, Irvine, Calif., said 224,451 foreclosure filings were reported in October, compared with 219,850 in September and 115,568 a year ago. Nationally, there was one filing for every 555 households during the latest month as credit pressures and tumbling home values continued to hurt homeowners. By contrast, there was one filing for every 566 households in September and one for every 1,001 households in October 2006. (free Wall Street Journal)
TECHNOLOGY & SCIENCE
• Interesting endorsements and criticisms of Amazon Reader Kindle
• Eye-Fi: The Eye-Fi Card is a
wireless memory card. It automatically uploads pictures from your
digital camera to your PC or Mac and to your favorite photo sharing,
printing, blogging or social networking site.
• ‘Guitar Hero III’ — Review: rocks with more of the same The good — and bad — news for "Guitar Hero" fans is that in the
latest game in the franchise, RedOctane didn’t mess much with the
formula that placed its predecessors among the hottest game sensations
of our time. (CNN)
• Sony PS3 Outsells Nintendo Wii in Japan:
Monthly sales of Sony’s PlayStation 3 in Japan topped the Nintendo Wii
for the first time since the gaming consoles debuted late last year,
according to a November survey. In the four weeks ending Nov. 25, Sony
Corp. sold 183,217 PS3s in Japan, while Nintendo Co. sold 159,193 Wii
consoles, market researcher Enterbrain reported Friday. The improved
sales of the PS3 follow price cuts in Japan and elsewhere. There have
been no price cuts on the Wii. (ASSOCIATED PRESS)
• Scholars use art to study climate change:
The vivid sunsets painted by J.M.W. Turner are revered for their use of
color and light and for their influence on the Impressionists. But
could they also help global warming experts track climate change? A
group of scientists has studied the colors in more than 500 paintings
of sunsets, including many of Turner’s 19th-century watercolors and
oils, in hopes of gaining insights into the cooling effects caused by
major volcanic eruptions. By better understanding past changes in
climate, they hope to improve computer models for future climate
change. (Associated Press)
• Google Reportedly Plans To Offer Online Storage Service:
Google is planning an online storage and backup service that would
essentially offer people a Web-based hard drive for accessing and
sharing information that resides in their home computers. (Information
• Pictures of water effects in computer games over the years (pretty wild)
• Why Stem Cells Are Still a Sticky Issue: Scientists in Japan and Wisconsin have independently figured out how to turn ordinary human-skin cells into something like pluripotent stem cells. The issue has been agony for many Republicans, torn between the majority of voters, eager for the benefits of this scientific advance, and the small but intense minority who believe that a clump of a few dozen cells floating in a petri dish has the same human rights as you or I. But any Republicans who think the stem-cell breakthrough gets them off the hook are going to end up very unhappy. This issue will not go away . . . (Time)
MUSIC BOOKS MOVIES TV FUN!
• Holiday Book Shopping Our 2nd go round looking at some interesting books that would make great gifts.
• In case you missed it: The Updated version of our Favorite Holiday CDs
• Fall Canceled After 3 Billion Seasons:
Fall, the long- running series of shorter days and cooler nights, was
canceled earlier this week after nearly 3 billion seasons on Earth,
sources reported Tuesday. The classic period of the year, which once
occupied a coveted slot between summer and winter, will be replaced by
new, stifling humidity levels, near- constant sunshine, and almost no
precipitation for months. "As much as we’d like to see it stay, fall will not be returning for another season," National Weather Service president John Hayes announced during a muggy press conference Nov. 6. "Fall had a great run, but sadly, times have changed." (The Onion)
• terrific Michael Lewis article: The Kick Is Up and It’s … A Career Killer "There is still some faint resistance to the notion that a kicker could
ever really do anything great. Brett Favre can throw 10 more
game-ending interceptions and fans will still cherish his moments of
glory. Reggie Bush may fumble away a championship and still end up
being known for the best things he ever does. Even offensive linemen
whose names no one remembers are permitted to end their days basking in
the reflected glory of having been on the field. Kickers alone are
required to make their own cases."
• Another wicked cool Sony commercial (video)
That’s all from what the NorthEast, where winter has finally arrived — Snow is on the ground ! — but many of the tress still have leaves on them — thats just plain strange.
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