The big winners were Gold (+3.3%) Oil (+2.9%) and Emerging Market stocks (+2.6%) as the dollar dropped 1.1%. Over the past 52 weeks, they are up 32.2, 57.2, and 36.6% respectively.
US Treasuries of all durations were up modestly.
This week’s losers were REITs (-2.1%), the Russell (-1.8%) and the aforementioned greenback. The S&P, Dow and Nasdaq all lost less than a percent on the week.
Earnings and GDP expectations for Q4 are shrinking, while hope still lives that the worst of the credit crunch is behind us. This looks to be the first fourth-quarter decline in the major indices since 2000, with the Standard & Poor’s 500 Index declining 3.2% QTD.
Barron’s Trader column noted:
"Against this backdrop, market sentiment has become a curious mix between what is said and what is done. For all the chatter about a looming recession, most traders are still reluctant to bet against the market — not when cash-rich foreign buyers are hovering with the intensity of hawks browsing for mice.
The latest Merrill Lynch survey of global money managers shows 80% who deem double-digit earnings growth "unlikely" next year, and 74% who believe we’re in the late stage of this business expansion. Yet the Nasdaq Composite Index is up 11% this year. And analysts still expect profits to grow 14.7% in 2008 — in part as the second half meets easier comparisons."
Monday brings us Existing Home Sales, Friday is Non-Farm Payroll, with a few other economic releases in between — including the December 11 FOMC minutes.
Enough Ben Steinery! On with the linkfest:
INVESTING & TRADING
• U.S. Stocks Decline, Poised for Worst Fourth Quarter Since 2000: U.S. stocks fell and were poised for their first fourth-quarter decline since 2000 after government reports on durable goods and unemployment reinforced speculation the housing-market collapse will push the economy into recession. Lower-than-forecast orders for durable goods in November and an unexpected rise in jobless claims last week added to evidence that the housing slump is spreading to the broader economy. The Standard & Poor’s 500 Index has declined 3.2 percent since the end of September, paring its 2007 advance to 4.2 percent. (Bloomberg)
• What do Elections Mean for Stocks?: Since 1950, stocks have risen in the last seven months of the year in 13 of 14 presidential election years, according to the Stock Trader’s Almanac. See also Bespoke’s look at PRESIDENTIAL ELECTION CYCLE DATA
• No end in sight for soaring art market: Art is hot. Despite turmoil in the financial markets, there are no signs that the art market is softening. The fall auction season in New York saw robust prices across most categories, with postwar and contemporary works in particular going through the roof. It seemed like a new record was being shattered every time an art auction was held. Over the last five years, wealthy buyers from Russia, China, India and the Middle East have greatly helped fuel the art market. (Associated Press)
• Don’t Bet the Farm: All bubbles have catalysts, real or perceived. The tech-stock boom was driven by the belief that technology was changing both our lives and investment realities. And the residential-realty boom was driven by faith that interest rates would stay very low and that the baby boomers’ wealth would keep the new, second- and vacation-home markets robust for decades. (Barron’s)
• Investors With Appetite For Risk Have Loads Of Options to Ponder: For adventurous investors, there may be deals hiding in the rubble of this year’s market turmoil. Opportunities are cropping up in beaten-down sectors such as financial stocks, high-quality municipal bonds and even risky high-yield, or "junk," bonds. Even "closed-end" mutual funds — a niche corner of the investment world that usually doesn’t see much action — may be worth a closer look. (Wall Street Journal)
• Gold to Pass Record in 2008 on Inflation, Survey Says: Gold will rise to a record in 2008, increasing for an unprecedented eighth consecutive year, as investors seek protection from accelerating inflation, metals analysts say. Gold will probably average $800 an ounce, compared with $696 this year, according to the median estimate of 37 traders, analysts and investors surveyed by Bloomberg News. Gold has gained 30 percent to $827.20 an ounce in London this year, its best year since 1979, when the Iranian revolution crippled crude- oil exports and U.S. inflation surpassed 13 percent. SEE ALSO Gold Bulls Eye $1,000 Bullion
• The WSJ looks ahead to 2008:
• Bonded by Buffet: As Berkshire Hathaway (BRK) quietly moves into the business of municipal bond insurance, rivals and bond issuers question the outcome. For Warren Buffett, timing is everything. And with credit markets tightening, prices likely to rise, and longstanding competitors on the ropes, it may be the perfect time for the überinvestor to move into the business of offering bond insurance for cities, states, and government bodies (BusinessWeek) see also The Beauty of Broken Moats
• John M. Berry says "Subprime Losses Are Exaggerated by Some" As the U.S. savings and loan crisis worsened in the 1980s, analysts tried to top each other’s estimates of the debacle’s cost to the federal government. Much the same thing is happening now with losses linked to subprime mortgages, with figures of $300 billion to $400 billion being bandied about. A more realistic amount is probably half or less than those exaggerated projections — say $150 billion. That’s hardly chicken feed, though not nearly enough to sink the U.S. economy. (Bloomberg)
• Dividends, Buybacks Feel the Squeeze: In the past few years, U.S. companies have been passing out a lot of cash in the form of share repurchases and dividends. And financial companies have been among the most generous. Companies in the Standard & Poor’s 500-stock index repurchased nearly $450 billion in stock through the first three quarters of this year, according to S&P — up from $430 billion for all of 2006 and $350 billion for 2005. But those financial firms are likely to be stingier in 2008. (Wall Street Journal)
• Subprime’s Hidden Cost Is Shrinking Leverage: In this season of stock taking, the picture past and future for financial markets is far from pretty. The reason? Subprime. If you didn’t know what subprime meant at the start of the year, it was hard to avoid its meaning by year end.The big question now is what will the subprime crisis and ensuing credit crunch cost. (Bloomberg)
The Wall of worry continues to build:
• Recession battle:
Greg Mankiw on How to Avoid Recession? Let the Fed Work (NYT)
Nouriel Roubini says The Latest Macro News Strongly Signal Recession Ahead (RGE)
• Crisis may make 1929 look a ‘walk in the park’ Twenty billion dollars here, $20bn there, and a lush half-trillion from the European Central Bank at give-away rates for Christmas. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meagre or fleeting effects. As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world’s central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions (UK Telegraph)
• Financial Crises of the Future: Will future crises look more like those of the 1990s or of the 1890s? Was the Argentine crisis of 2001 a harbinger of a return to self-contained crises? And if international spillovers remain possible, are there implications for global governance in the area of financial markets? To shed light on these questions, it is useful to analyze the historical record. (IMF)
• How Wal-Mart stole Christmas: For nearly a decade, Wal-Mart Stores Inc. has been outperformed by Target Corp. when it mattered the most – at holiday shopping time.Maybe not this year.Although the final sales results aren’t in yet, analysts are confident that Wal-Mart has finally trumped its closest competitor in the 2007 holiday sales race. (CNN/Money)
• Plasma Screens are increasingly being found in the bargain bin: see this 50" Panasonic 1080p at $1749 as an example.
• FeeDisclosure.com: FeeDisclosure has developed a (patent pending) online portal to breakdown complicated real estate vendor fees. The FeeDisclosure system exposes the excessive transaction fees commonly referred to as "junk fees" by providing consumers with the knowledge to make informed decisions about real estate and mortgage transaction closing costs.
• Vultures wait for repricing: The vultures are circling.In an abrupt reversal, the commercial property industry that started 2007 giddy about its prospects enters 2008 facing falling property values, a seized-up credit market and concerns a slowing economy could dampen future leasing and rental rates.While only several months ago investors expected to sell and resell office buildings at escalating prices regardless of their financial performance, vulture investment funds are raising money to pounce on bargains when lenders start unloading real estate that owners can’t afford to hold. (Chicago Tribune)
• Defaults moving beyond sub-prime: Thought the mortgage meltdown was just a sub-prime affair? Think again. There’s another time bomb waiting to explode, experts say: risky loans made to people with good credit. So-called pay-option adjustable-rate mortgages, or option ARMs, were the easiest and most profitable home loans for lenders and brokers to make for much of this decade. Last year, they accounted for about 9% of the volume of all mortgages made in the U.S. and were especially popular in California, Florida and Nevada — states where home prices rose the most during the housing boom and are now falling most sharply. (L.A.Times)
• Officials Falling Behind on Mortgage Fraud Cases: The number of mortgage fraud cases has grown so fast that government agencies that investigate and prosecute them cannot keep up, lenders and law enforcement officials have said. (NYT)
• How they got housing wrong: Before you put much hope in forecasts for a 2008 rebound in the battered housing market, consider this: A year ago at this time many top economists were looking for that recovery to begin in 2007.Instead, the year saw historic declines in nearly every measure of housing strength and home building, and left a trail of predictions from some of the nation’s top economists that look – at best – foolish. (CNN/Money)
• The Making of a Mortgage CDO (WSJ Interactive)
• Mortgage applications fall to lowest in a year: U.S. mortgage applications sank last week to the lowest level since the end of last year despite falling borrowing costs, an industry trade group said on Thursday. The Mortgage Bankers Association’s seasonally adjusted mortgage application index fell 7.6 percent in the week ended December 21 to 603.8 — its lowest reading since falling to 575.6 in the December 29, 2006 week. (Reuters)
• Iraq suicide attacks on the rise: Although overall violence in Iraq has dropped to levels not seen on a sustained basis since the summer of 2005, suicide bombings appear to be making a comeback, according to figures released Saturday by the top U.S. commander in Iraq. Responsibility for such attacks typically is claimed by the Sunni militant group Al Qaeda in Iraq, which Gen. David H. Petraeus said remained the greatest threat in the country. (L.A.Times)
• Tired of all the crap coming from the candidates on the campaign trail? Fact check ’em! Go to the Annenberg Public Policy Center of the University of Pennsylvania’s Factcheck.org.
• The Airport Security Follies: A pilot explains why "Six years after the terrorist attacks of 2001, airport security remains a theater of the absurd. The changes put in place following the September 11th catastrophe have been drastic, and largely of two kinds: those practical and effective, and those irrational, wasteful and pointless." (Jetlagged)
• The fight over emissions standards: Environmental activists and sympathetic public officials were naturally upset by the decision in Washington the other day to reject California’s "clean car" law. No surprise there. After all, more than dozen other states, including Colorado, supported California’s effort to tighten emission rules for new motor vehicles with the intent to cut greenhouse gas emissions. What has proponents of the California standard really fuming, though, is news that Environmental Protection Agency chief Stephen Johnson made his ruling against the advice of EPA’s career staff. (Rocky Mountain News) Gee, whatever happened to States Rights?
TECHNOLOGY & SCIENCE
• Remember The Milk for Gmail is a Firefox extension that allows you to manage your tasks in Gmail (complete, postpone, and edit tasks), add new tasks (and connect them with your emails, contacts, and Google Calendar events), automatically add tasks for starred messages or specific labels, and much more! (GOOG)
• Ted Talks: Of all the distractions, entertainment, and discussions that the inter-tubes provided in 2007, I think my favorite discovery was the Ted Talks. It consistently provides the most curious, thought-provoking, surprising sets of ideas found anywhere on the web.
• The Death of High Fidelity: Why do Record labels ask the mastering engineers to crank up the sound levels so high that even the soft parts sound loud? Over the past decade and a half, a revolution in recording technology has changed the way albums are produced, mixed and mastered — almost always for the worse. Engineers do that by applying dynamic range compression, which reduces the difference between the loudest and softest sounds in a song. Says one producer: "I think most everything is mastered a little too loud. The industry decided that it’s a volume contest." (Rolling Stone) See also Overcompression
• Stanford’s nanowire battery holds 10 times the charge of existing ones: Stanford researchers have found a way to use silicon nanowires to reinvent the rechargeable lithium-ion batteries that power laptops, iPods, video cameras, cell phones, and countless other devices.The new version, developed through research led by Yi Cui, assistant professor of materials science and engineering, produces 10 times the amount of electricity of existing lithium-ion, known as Li-ion, batteries. A laptop that now runs on battery for two hours could operate for 20 hours, a boon to ocean-hopping business travelers.
• Will The iPod Kill Blockbuster? Forget the cavernous big box stores that laid waste to the retail landscape a decade ago. Apple (AAPL) Chief Executive Steve Jobs’ tiny iPod has turned his company into a category killer for the digital era–first wiping out music stores and now, potentially, the corner video store.Starting in mid-January, the Cupertino, Calif., computer and gadget maker will take on Blockbuster (BBI) and Netflix (NFLX) by renting movies from Fox on its iTunes digital media store, according to a report first published in the Financial Times earlier this week. (Forbes) Also, Why Apple Needs Movie Rentals
MUSIC BOOKS MOVIES TV FUN!
• A Different Kind of Music List: Best of 2007: Following our successful outings the past three years, I’m at it again. Here’s our Different Kind of Top 10 Music List for 2007
• Oscar Peterson has been recording and performing for over half a century. He passed away Christmas Eve ’07 at the age of 82. Peterson may be the single most recorded piano player — ever.
• My favorite t-shirt from The Shirt Project
• From 1943 to 1945, director Frank ("It’s a Wonderful Life") Capra, Theodor "Dr. Seuss" Geisel, and most of the geniuses behind Bugs Bunny’s best cartoons teamed up to make a series of animated, instructional shorts for the Army: Private Snafu.
That’s all from the last weekend linkfest of the year — we wish you and your families a happy, healthy, and successful 2008!
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