You might have thought with the 3 day weekend behind them, traders would be well rested, and ready to go.
If you are looking for a trend to follow, forget about it.
By the numbers, not a whole lot seemed to happen: Gold was the biggest winner, gaining 4.6%. Coomodity futures (+4.1%) and Crude Oil (+3.5%) were close behind. Gold is now up 39% for the past year, still trailing Crude’s 62% gain over the past 52 weeks.
Emerging markets tacked on 1.5%, while European, Global and REIT stocks were all marginally positive (+0.8%). The Dow and the S&P500 just edged into the green (0.3% and 0.2%). The Nasdaq slipped 0.8%, while the Russell lost 0.9%.
Barron’s Trader column noted the divergence amongst markets:
Two roads diverge in the markets: Commodities blazed ever higher last week, led by oil prices pushing $100 a barrel, seemingly oblivious to potentially tempered consumption in a slowing economy. But stocks seem only too aware of that possibility and continued to drift. It wasn’t the divergence. The spread between corporate bond yields and benchmark 10-year Treasuries recently widened to about three percentage points, near the widest since the Depression and a sign bond investors are increasingly worried about corporate defaults.
In contrast, stocks are just 13.6% off their record, and seem less panicked. You might see stocks as being poised somewhere between the commodity market’s gusto and the bond market’s qualms. A conservative middle road between two extremes is rarely the road less traveled, and that’s where investors huddled as they waited for answers to the big question: Which market is right?
That sounds about right.
A busy week is ahead, with quite a few economic releases of importance. Monday is Existing Home Sales, always an amusing mix of data and NAR spin. Tuesday we get Same Store Sales, Producer Price Index and Consumer Confidence. Wednesday we learn Durable Goods Orders and New Home Sales. Thursday we get the big one: GDP (1st revision). FInally on Friday, Personal Income and Outlays data is released, as is UM Consumer Sentiment.
The Street.com’s Nat Worden describes the coming week as a potential "Horror Show" soundtrack: Track One is falling home sales. Track Two is inflation. Track Three is a manufacturing slowdown. Track Four is flagging economic growth and job losses, and Track Five is the consumer spending drop. All these tunes will play over a drumbeat of retail earnings reports, where the outlook is not upbeat. (And some people say I’m too dour!)
We’ll aslo find out if the Ambac (ABK) deal is for real, and the specifics are. And, we still have more earnings reports to plow through, including a bevy of retailers: Home Depot (HD), Lowe’s (LOW), Target (TGT), Sears Holdings (SHLD), Macy’s (M) and Nordstrom (JWN).
Enough Ben Steinery! On with the linkfest:
INVESTING & TRADING
• This, in a crux, is where the differences lie:
• Three of the Nasdaq Four Horseman Are Limping:
Apple (AAPL), Google (GOOG) and Baidu (BIDU) — three of the NASDAQ
FOUR HORSEMAN — have been coming up gimpy since issuing timing sell
signals (triggered at much higher levels several weeks ago).
• Ambac Rescue Deal Nears Final Go-Ahead: A deal to pump roughly $3 billion into bond insurer Ambac Financial Group Inc. could be completed as soon as Monday or Tuesday, if credit-rating concerns sign off on the arrangement, according to people familiar with the matter. (WSJ) but…
• Not so fast: Dutch Boy, Finger and Dam, Inc. The effort is all about appearances instead of reality, i.e. preserving the AAA rating for the monolines so that banks’ own portfolios of insured securities can still be used at elevated prices for regulatory capital purposes. In today’s virtual reality banking it’s the nameplate fictitious AAA that matters, instead of the factual reality that exists in the marketplace. In other words, if a CDO has a AAA rating, a bank can still employ mark-to-model methods and calculate a very high virtual price for its balance sheet, instead of having to use a lower factual price (i.e. what someone will pay for it right now). (Sudden Debt)
• Is the Heyday of Hedge Funds Over? (naked capitalism)
• Equity Trades Defy Economy as Wall Street Transformers Abound:
The biggest surprise on Wall Street this year is proving to be the
record $16.3 trillion of shares traded in the U.S. as stocks show no
sign of rebounding from the first bear market since 2002 and the
economy teeters on the brink of a recession. (Bloomberg)
• 50 Years of Market Swings (Fortune)
• The Bankers’ Bailout: Since the onset of the subprime crisis last summer, the White House has repeatedly rejected the notion of a government bailout, either for homeowners facing foreclosure or for the banks and mortgage companies that made the now souring loans. "There’s no bailout with government money, none whatsoever," Treasury Secretary Hank Paulson emphasized. But even as the administration has stuck to its laissez-faire stance in public, behind the scenes a covert bailout has been under way, with a number of public and quasi-public agencies quietly dispensing vast sums to financial institutions saddled with worthless or near worthless mortgage securities. All the while, homeowners at the heart of the problem have been left largely to their own woes. The rescue operation brings to mind John Kenneth Galbraith’s dictum that in the United States, the only respectable form of socialism is socialism for the rich. (Portfolio) robust discussion of this here
• More Pain for Fannie (FNM) and Freddie (FMC) ? (WSJ Marketbeat)
• Sleepless in MuniLand: Interview With David Kotok f you don’t understand the risk, don’t take it. What we do in our shop is map all of the possible worst case scenarios, map the options in each Muni issue. If at the end of that process you can’t get that down so that the risk is very clear, then the message is stay away. There was a period of a couple of years when we lagged the performance of other bond advisers who picked up an extra few basis points by taking this CDO crap. Now they are giving it all back in spades. (Institutional Risk Analyst)
• Forbes vs Peter Schiff: Kinda weird, and, if you ask me, petty smackdown of Peter Schiff by Forbes. I have no dog in this fight, but the whole thing strikes me as petty.
• Cool search engine: Financial Blog Search
• Michael Lewis wonders what happens if the Black-Scholes model is wrong—and we’re in bigger trouble than ever? Inside Wall Street’s Black Hole: The striking thing about the seemingly endless collapse of the subprime-mortgage market is how egalitarian it has been. It’s nearly impossible to draw a demographic line between the victims and the perps. Millions of ordinary people ignorant of high finance have lost billions of dollars, but so have the biggest names on Wall Street, and both groups made exactly the same bet: that real estate values would never fall. (Portfolio)
• % of Stocks on the NYSE > than 200 Day Moving Average: Relatively Bullish technical indicator
• 10-year government bond yields for 29 countries (Bespoke Invest)
• The Case for Gold (Barron’s)
• GMAC Barrels Downhill: More bad news from Motown: General Motors’ troubled GMAC financing subsidiary got a sharp bond-rating downgrade on Friday, with warnings of further cuts to come. (Forbes)
• Is this THE DECADE OF COMMODITIES ? (Financial Forecasting)
• How Goldman Pursues the Ultra-Wealthy (they hire Pulitzer-Winning journalists) Goldman calls itself an investment bank, but in its 2007 fiscal year, ended on Nov. 30, just 16 percent of its $46 billion in revenue came from advising on mergers and helping companies raise capital. Another 16 percent came from money management and brokerage, a segment that includes parts of private banking. A full two-thirds, or $31 billion, came from trading, making Goldman look more like a giant hedge fund than any kind of bank. That reliance on trading can be a liability when markets stumble and recession looms. (Bloomberg)
KKR Seeks to Restructure Debt, Reviving Credit-Crunch Worries: Even the good mortgages can’t find buyers these days. KKR Financial Holdings LLC, a specialty-finance company affiliated with buyout shop Kohlberg Kravis Roberts & Co., owns at least $3 billion of what it calls "high-credit quality" mortgages on its books via mortgage-backed securities. But as the company winds down its exposure to the mortgage business, it still can’t get a decent price for those loans. For the second time in four months, the company announced Tuesday that it negotiated another extension to further delay the repayment of commercial paper backed by those mortgages. (WSJ)
The Wall of worry continues to build:
• Economicindicators.gov to Stay Open: Thanks to everyone who complained to Sen. Schumer.
• Fed Cuts of a Different Variety The Federal Reserve cuts its economic forecast. (Thoughts from the Frontline)
• Inflating Our Way Into Recession For quite some time in these pages, we have been lamenting the mistaken belief amongst some on Wall Street that there was a free lunch to be had. Lowering interest rates, the Panglossians argued, would stimulate the economy, whose slowdown would prevent inflation. If that argument strikes you as both circular and contradictory, welcome to the club. That obvious flaw was apparently lost on its authors, who required a 2 X 4 across the skull to show them the error of their ways.
• Watch inflation now! Worries about 1970s-style stagflation have moved to the forefront to rival recession fears. Should the Fed be more worried about rising prices? (CNN/Money)
• Our Economic Dilemma Outgoing NABE chair Martin Feldstein writes a surprisingly blunt WSJ OpEd (short version & discussion here: Feldstein: Holy S*&#!) Recent Charlie Rose Conversation with Feldstein
• Understanding What Recessions Are: One of the misunderstandings about recessions is what actually happens in the real world. A recession is where economic growth stops, and you are left with flat to contracting sales. Note that economic activity does not grind to a halt — the year-over-year growth rate merely slips into the negative. This is often misstated, in some variation of "Gee, how it can it be a recession — I was out shopping and the stores were pretty crowded." Whenever you see that, the speaker is either technically misunderstanding what a recession is — or alternatively, is painfully long and hoping for the best.
• The FT’s Martin Wolf: America’s economy risks the mother of all meltdowns I think my pal Nouriel overstates these 12 steps — but its scary stuff indeed.
• A graphic look at Consumer Prices
• The Next Slum? The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today’s McMansions into tomorrow’s tenements. (Atlantic Monthly)
• Homeowners Losing Equity Lines: Several of the nation’s largest lenders, along with smaller ones,
are shutting off access to home equity lines in areas where home values
are declining. It’s an unusually aggressive move as the industry
grapples with fallout from the mortgage crisis that began unfolding
last year. Now that home prices have dropped in many parts of the
country, lenders are nervous that they may never collect the money that
they extended to borrowers. They are responding by freezing or lowering
the credit limits on home equity lines, leaving thousands of borrowers
in the lurch. (Washington Post) see also Card Sharks
• Two interesting and quirky Real Estate Sites:
• On Brink Of Bankruptcy? The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday. (NBC)
• More Households Are Falling Behind in Heating Bills: As families struggle with a combination of high heating costs and a shaky economy, utilities say more customer accounts are falling delinquent.Sierra Pacific Resources, which owns two utilities that serve Nevada, said it has seen a 50% increase in accounts that are more than 30 days late compared with a year ago. (free WSJ)
• UK housing market close to collapse, analyst says: Britain’s housing market is a “house of cards” that is set to implode after years of reckless mortgage lending, chronic oversupply of new flats and widespread fraud, a leading analyst said yesterday. (The Times)
• Governors: Coal must be part of energy: Governors pushing alternative energy development are not shying from coal, a major culprit in global warming but also a homegrown energy source and an economic lifeline for many states. Leaders of coal-rich states say clean-coal technology is a must. Governors from states without coal want more evidence the technology works. See also: U.S. energy independence? Don’t bet on it (Reuters)
• Obamanomics: Certainly, when compared with the differences among the Republican presidential contenders we’ve seen this year—Mike Huckabee, oh, proposed eliminating the Internal Revenue Service and replacing it with a kind of national sales tax, and John McCain has spent the winter in a raging argument with himself over the Bush tax cuts (he voted against them and now he loves them)—there ain’t much difference between Obama and Clinton. Both would repeal the Bush tax cuts for the wealthy and spend most of the money to provide health-care coverage. In fact, when the two senators rolled out their stimulus packages back in January, they were so similar that Clinton’s economic adviser, Gene Sperling, had no specifics in Obama’s plan to deride and was left thanking the Obama camp for following Clinton’s lead. An Obama adviser acknowledged to me, "The difference is really shades of gray." (Portfolio)
• iReport.com: CNN’s (beta) site for uncensored, user-powered news. All stories are
user-generated and instant: CNN does not vet or verify their
authenticity or accuracy before they post.
• Presidential Politics on Intrade: On Thursday, it was Obama over Hillary, 80/20; Now its 84/16; McCain was 35% chance to win it all, today he’s still 35% (So much for the Nader effect)
TECHNOLOGY & SCIENCE
• Why Microsoft Thinks Big Is Better (Adweek)
• How Yahoo went from Web star to Microsoft prey (Marketwatch)
• Trying to Figure Out How to Put a Google In Every Data Center: Today, the list of computer problems for which data centers might be
useful is still growing. Yet, the facilities remain very difficult to
design and operate; you basically have to be a Google or an Amazon to
even try. Enter Dr. Fox and his team. Their goal is to make building
and running data centers as easy an engineering feat as putting up a
new building and turning on the lights. (Wall Street Journal)
• Interesting Tech Investor News aggregator for Apple and Google, with more names coming soon.
• Revealed: Secrets of the Camouflage Masters Cuttlefish and their relatives octopus and squid are the world’s camouflage champions (NYT)
• The God Particle: Starting sometime in the coming months, two beams of particles will race in opposite directions around the tunnel, which forms an underground ring 17 miles in circumference. The particles will be guided by more than a thousand cylindrical, supercooled magnets, linked like sausages. At four locations the beams will converge, sending the particles crashing into each other at nearly the speed of light. If all goes right, matter will be transformed by the violent collisions into wads of energy, which will in turn condense back into various intriguing types of particles, some of them never seen before. That’s the essence of experimental particle physics: You smash stuff together and see what other stuff comes out. (National Geographic)
• Best of Green Design 2008: 16 Products & Projects for Your Home (Popular Mechanics)
• The Toxic Ten: For all the environmental-speak coming out of American corporations these days, many remain polluters. A look at 10 companies that should be doing better. (Portfolio)
• Why Don’t The French Get As Fat As Americans? Answer: they use internal cues — such as no longer feeling hungry — to stop eating, reports a new Cornell study. Americans, on the other hand, tend to use external cues — such as whether their plate is clean, they have run out of their beverage or the TV show they’re watching is over. (ScienceDaily)
• Secret Pentagon report: climate change will destroy us (UK Observer)
• Study: You are sheeple: Results from a study at the University of Leeds show that it takes a minority of just five per cent to influence a crowd’s direction – and that the other 95 per cent follow without realising it.
MUSIC BOOKS MOVIES TV FUN!
• Born Standing Up: Steve Martin’s memoir is (obviously) funny. That sensibility is clearly reflected in the book. What I found so impressive was how beautifully the book was written. The prose is clean, and at times quite lovely. He’s a playwright who’s written serious works. I simply had no idea what a careful and creative author he is.
• The strike’s over: A Complete Guide To How Your Favorite Shows Are Affected
• Jamie Johnson: The Superrich Are Totally Psyched About Recessions (free WSJ) discussion about this is here: Hackonomics, Part II
The Ebb and Flow of Movies: Box Office Receipts 1986 – 2007
Full NYTimes Oscar Coverage
Yahoo Movies Academy Awards Page
Big Screen Themes: Love, Adventure … and Economics (WSJ)
Live Blogging the Oscars (Newsweek)
• Too funny: HILLARY IS MOM JEANS as a witty response to Barack Obama Is Your New Bicycle. Its a long list of eclectic web references, film and pop culture trivia: A few samples: Hillary wants less cowbell, has cankles, brings all the boys to the yard, is a close talker, wears Uggs in the summer, knows all the words to every Celine Dion song, says BRB out loud, and my personal fave: HILLARY BUILT SKYNET. Hysterical . . .
That’s all from the snowy NorthEast, where we are enjoying all of this fluffy white stuff that keeps falling out of the sky, and getting ready to watch at least the opening half hour of the Oscars.
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