Easter Linkfest

Okay, its Easter, and I know many readers have other things to do — but since this was such a topsy turvy week, with so much going on, I thought we needed to do at least post an abbreviated linkfest:

Day by day, the week gave credence to the belief that markets have no memory: Down 150 most of Monday, only to close up 21, then up 420 on Tuesday, off nearly 293 on Wednesday, and finally tacking on 261 on Thursday!

The gains were due primarily in belief that the Fed has the credit crisis under control, as interest rates came down, and commodities prices finally cracked.

Indeed, the Commodities were at the back of the pack this month, free-falling 8.6%, as Gold tumbled 7.9%, and Oil  plummeted 6.3%.

Somewhat surprisingly, the European and Emerging market stocks got hit also, falling 2.4 and 4.3% respectively. In the US, the gainers were Nasdaq (+2.1%), Russell2000 (+2.8%), S&P500 (+3.2%), and Dow Industrials (+3.4%). The big winner were REIT stocks, up 7.9%. 


In the coming week, we Existing Home Sales on Monday, followed by Durable Goods Orders and New Home Sales on Wednesday. Thursday brings the final Q4 2007 GDP, which now seems like it was years ago.  On Friday, we get Personal Income and Outlays, and Consumer Sentiment.

Enough Ben Steinery! On with the linkfest:



The Fed’s Revolution: The current financial crisis—perhaps the biggest since the Great
Depression—has turned Federal Reserve Chairman Ben Bernanke into a
reluctant revolutionary. The quiet academic who wanted to make the post
of Fed chairman less heroic is leading a dramatic expansion of the
central bank’s role. In the process, he is setting the stage for the
next big boom—or bubble. (BusinessWeek)

• The flipside? Fed policy these days seems "Born of a Panic"   

Contrary Indicators Galore! A couple of very bullish contra-indicators showed up this week: First, blog traffic spiked on Monday (we were pretty close to 100k page views); Then,  Goldman’s perma-bull, Abbey Joseph Cohen, was replaced as Chief S&P 500 Forecaster

Profit Forecast for First Half: Ouch!
The corporate-profit engine that powers the stock market is sputtering.
And the gloom extends beyond the financial sector, which has been much
in the news for loan losses and write-downs of troubled mortgage
securities. (Wall Street Journal)   

When Blood Is on the Street: Turning panic into profit (Forbes)

Mismanagement 101:
The dollar’s woes reflect the world’s collective verdict on the ability
of the U.S. to manage the global financial system — At some level, the
dollar’s woes reflect the world’s collective verdict on the ability of
the United States—businesses, individuals, the government, the Federal
Reserve—to manage the global financial system and the world’s largest
economy. Lately the verdict has been two thumbs down.  (Newsweek)

U.S. Stocks Most Volatile Since 1938 on `Enormous Uncertainty,’
The U.S. stock market is the most volatile in 70 years, according to a
Standard & Poor’s study of daily price swings in the S&P
500.The benchmark for American equities has advanced or declined 1
percent or more on 28 days this year. That’s 52 percent of the trading
sessions so far, which is the highest proportion since 1938, said
Howard Silverblatt, S&P’s senior index analyst. The S&P 500
lost 12 percent in 2008 through yesterday following $195 billion in
bank losses related to subprime mortgages.
Who is to Blame for Bear Stearn’s Demise?  Bear Stearn’s economists blame the Fed for their firms demise. Perhaps they need to look a little closer to home.  See also Why Has Bear Stearn’s Stock Been Rallying?

Bull and Bear Markets, According to Oaktree’s Howard Marks:
3 stages of a bear market: 1) when just a few prudent investors
recognize that, despite the prevailing bullishness, things won’t always
be rosy; 2) when most investors recognize things are deteriorating, and
3) when everyone’s convinced things can only get worse. (WSJ Deal

Was the JPM/Bear Stearns deal really a bailout — or more of an "Orderly Liquidation" ?    

The Market Bottom That Wasn’t:  To be sure, I was unprepared for the
sheer size of Tuesday’s 420-point rally of the Dow Jones Industrial
Average. While sentiment was near panic levels — which is bullish —
and prices did react positively Monday when almost all the news was
pointing to a financial Armageddon, the market’s move upward cannot be
ignored. But it seems that the same thing
happened just one week ago and that rally not only fizzled but several
major indexes probed new 18-month lows within days. Many thought that
last week’s low was the second leg of a supposed bottoming pattern
called a "double bottom." However, despite the precedent for
such a huge rally being just a one-day wonder, we have to once again
dig into the evidence to see if the call once again for a bottom —
even a double bottom — has technical merit.  (Barrons)    

Is there really not enough Bullish Sentiment?

The Debt Shuffle:
What actually happened to Lehman’s balance sheet in the first quarter?
Assets rose. Leverage rose. Write-downs were suspiciously minuscule.
And the company fiddled with the way it defines a key measure of the
firm’s net worth. Let’s look at the cautionary flags:Lehman’s balance
sheet isn’t shrinking, as we’d expect. (Portfolio) 

Don’t Fear the Bear:
Why you should be furious, not terrified, that Bear Stearns, thousands
of employees, and millions of homeowners are about to get the shaft

• Here is the full Derivative exposure for iBanks, via Jesse’s Café Américain

Insurer Losses From Subprime Approach Katrina Claims:
The collapse of the subprime mortgage market will lead to record losses
for insurance companies, overtaking Hurricane Katrina, the worst
natural disaster in U.S. history.The amount of asset writedowns and
credit losses reported by the industry has reached at least $38
billion, just short of the $41.1 billion in claims from Katrina

The Bear Trap:  What Went Wrong & Can the Fed Fix Things? (Time)   

Investing in a Post-Fact Society:
Philosophically, I want to explore — beyond the legitimate gains
mentioned above — a nagging question about the spin and artifice. Why
have we as a nation been increasingly reluctant to confront objective
reality? What is it about the present social mood, political
leadership, and economic environment that has so totally led us to a
world of denial? Up is down, black is white, good is bad — its all
very Orwellian

Bove Recommends Buying Banks, Says Worst of
U.S. Financial Crisis Is Over
The U.S. financial crisis is over and the
decline in bank stocks offers a “once in a generation opportunity”
for investors, according to Richard Bove, analyst at Punk Ziegel &

• Until Tuesday, the Charts of Bear Stearns & Lehman Bros looked terribly similar

Can You Afford Not To Watch Jim Cramer?       

• Gallows humor about the market, Bear Stearns, housing, etc:

Bear Stearns Paraphernalia on eBay   
Is This The Real Price?  (Bohemian Rhapsody)
Its a Great Time to Lease an Office !
Why Australia is Insulated From US Sub-Prime Woes  (Australian Comedy)
S&P Report on Subprime Write-downs
Candlesticks !



The Wall of worry continues to build:

How America’s Banks Lost their Reputations: After the near-collapse of Bear Stearns, some of America’s biggest
banks are reeling badly. The markets are falling into a state of panic
— and elbow room is shrinking when the banks need it most.  (Spiegel)

Lots of recession talk from some heavy hitters:

Recession began in December, signposts say:
Although the official word won’t come for months, the economic data now
available show that the recession probably began in December. Four of
the five indicators watched most
carefully for signs of a break in economic growth are now trending
lower.It’s only a matter of time before the semi-official recession
judges at the National Bureau of Economic Research meet to confirm it.
They’ll wait a few months in case the trends that now seem so clear are
revised higher. 
(Marketwatch)  see also
It’s a recession! Lakshman Achuthan finally pulls the trigger (Time)

Merrill’s Rosenberg: Deep Recession Looms (Video) 

Harvard’s Feldstein Says U.S. Economy in a Recession: I believe the
U.S. economy is now in recession,” Feldstein, president of the
National Bureau of Economic Research, told the Futures Industry
Association conference in Boca Raton, Florida. “Could this become the
worst recession we have seen in the postwar period? I think the answer
is yes. I would emphasize the word `could.’ ”  (Bloomberg)

Recessions and the Duration of Bad News: Every recession is unique, and the current set of characteristics can’t
be matched exactly against previous contractions. But averaging past
recessions (including particularly nasty recessions, like 1974 and 1982
as well as more mild recessions, like 1991 and 2001) can provide
insight about the performance of the economy and the stock market
around a “typical” recession. (Hussman)

The Girl Scout Cookie Sale indicator: An economy on thin ice is hurting sales of Thin Mints. Girl Scout and Brownie troops say cookie sales are noticeably down this
year as their customers struggle to pay for groceries, gasoline and
home heating fuel. Becky Santos, leader of Brownie Troop 74 in Barrington, said her group
sold 300 boxes outside a Wal-Mart recently, down from 500 in the same
location last year. Sue Cusack, the troop’s co-leader, said she and her
daughter also made fewer door-to-door sales, with some repeat customers
buying one box instead of two. (The Boston Globe)


Lots of Fed speak this week, and commentary also:

FOMC Statement on the 75 bps cut

The ins and outs of the Fed’s open window:
The Federal Reserve Board this week made a dramatic departure from
long-standing policy, opening its low-cost lending window to an
institution outside the commercial bank membership of the Federal
Reserve System.
In providing short-term lending to Bear Stearns Cos.
and announcing it would make its so-called discount window available to
19 other investment banks, the Fed startled Wall Street and Washington
lawmakers. Until now, the discount window has been limited to federally
insured depository institutions. (The Deal)

A Social View of the FOMC: David Merkel gives us this background on all of the FOMC members  (PDF)

Moral Hazard Redux:
The real moral hazard in this saga started when Fed Chair Ben Bernanke
cut the Fed’s discount rate (charged on direct federal loans to banks)
and announced that the Fed would take whatever action was needed to
"promote the orderly financing of markets." Translated, this means that
lenders, credit-rating agencies, financial intermediaries, and hedge
funds will be bailed out, one way or another, because they’re simply
too big to fail. Note that behind every one of these institutions lie
thousands of well-paid executives who would have lost big if the Fed
didn’t come to their rescue. Even though they had more information and
experience at risk-taking than the suckers who borrowed their money,
and even though executives at the top of these instutions typically
earn more in a day than the borrowers do in a year, moral hazard
somehow doesn’t apply to them. (Robert Reich)

Are we asking too much of monetary policy? (Econbrowser) 

Bernanke Wrote the Book on Inflation, Depression:
When Ben Bernanke arrived at the Federal Reserve in February 2006 as
the new chairman of the central bank, he had a copy of his 2001 book,
“Inflation Targeting: Lessons from the International Experience,”
tucked under his arm.Not literally, of course. He was hoping to
convince his colleagues on the Federal Open Market Committee of the
value of an explicit inflation target.Little did he know that less than
two years later he’d be shelving “Inflation Targeting” and turning to
"Essays on the Great Depression,” another of his books, for guidance.

GREENSPAN: We will never have a perfect model of risk:
(I’ll say!) The current financial crisis in the US is likely to be
judged in retrospect as the most wrenching since the end of the second
world war. It will end eventually when home prices stabilise and with
them the value of equity in homes supporting troubled mortgage
securities. Home price stabilisation will restore much-needed clarity
to the marketplace because losses will be realised rather than
prospective. The major source of contagion will be removed. Financial
institutions will then recapitalise or go out of business. Trust in the
solvency of remaining counterparties will be gradually restored and
issuance of loans and securities will slowly return to normal. Although
inventories of vacant single-family homes – those belonging to builders
and investors – have recently peaked, until liquidation of these
inventories proceeds in earnest, the level at which home prices will
stabilise remains problematic.  (FT)   

Memo To The Fed: Stop Those Rate Cuts:
The Fed needs to quit chasing declining GDP growth and instead focus on
curbing inflation and anchoring inflation expectations. Recent
allusions to the stagflation of the 1970s are appropriate. Gold has
been hitting all-time nominal highs, and oil prices have shattered the
inflation-adjusted record set in 1980 during the Iranian hostage
crisis. The dollar, meanwhile, is trading at all-time lows against the
euro. (Forbes)

Fed: No Talks on Joint MBS Buying:
The U.S. Federal Reserve, responding to press reports, said it is not
discussing coordinated purchases of mortgage-backed securities with
other central banks."The Federal Reserve is not involved in discussions
with foreign central banks for coordinated buying of MBS," a senior Fed
official said.The Financial Times reported on its web site Friday
evening that "central banks on both sides of the Atlantic are actively
engaged in discussions about the feasibility of mass purchases of
mortgage-backed securities as a possible solution to the credit
crisis."  (Wall Street Journal)


Great News! Housing Starts and Permits Plummet! Given that the enormous overhang in inventory is a huge part of the problem, this is, perversely good news

US Housing Market Vacancy Rates Nice interactive graphic (WSJ)

Housing: US (today) vs Japan (circa 1990s) The problem in the US is excess housing inventory, elevated Housing Affordability Index, and House Price to Rental Ratio;

How bad is the mortgage crisis going to get?
What started in subprime is likely to continue cascading into the
markets and keep the economy down until 2010, economist Paul Krugman
forecasts. Bottom line for homeowners: An average drop of 25%.

Housing Bust Blame Game    

Woes in Condo Market Build As New Supply Floods Cities
The condominium market is about to get worse as many cities brace for a
flood of new supply this year — the result of construction started at
the height of the housing boom.  he new building comes on top of
unprecedented supply. The U.S. finished 2007 with a supply of condos
large enough to absorb 10 months of demand, the highest level since the
National Association of Realtors began the tally in 1999. (Wall Street

Rent Vs. Buy Myths That Ruined the Housing Market (eFinance)

Bloomberg: Citigroup reneging o    n rate locks

USAToday names NAR Chief Economist Lawrence Yun a Top Forecaster: I guess they were unfamiliar with his track record. 


Apple is in talks with the major music companies about several approaches to an unlimited music subscription model. (GMSV)  see also eMusic: Apple’s bundled-music device would be anticompetitive   

• New: Yahoo Buzz

Prices on digital cameras are in freefall — 7.2MP, anti-shake protection, and ful;l video recording — less than $150!

Wired Magazine cover article: Apple = Evil Genius? How Apple Got Everything Right By Doing Everything Wrong

The Encyclopedia of Life:
Imagine the Book of All Species: a single volume made up of one-page
descriptions of every species known to science. On one page is the
blue-footed booby. On another, the Douglas fir. Another, the oyster
mushroom. If you owned the Book of All Species, you would need quite a
bookshelf to hold it. Just to cover the 1.8 million known species, the
book would have to be more than 300 feet long. And you’d have to be
ready to expand the bookshelf strikingly, because scientists estimate
there are 10 times more species waiting to be discovered.   (NYT)

Yes, Money Can Buy Happiness
. . . but probably not in the way you imagined. Spending it on yourself
may not do much for your spirits, but spending it on others will make
you happier, according to a report from a team of social psychologists
in the new issue of Science.  (NYT Lab)   

Quadripedal self guiding robotic Big Dog

Musical improvisation shuts down your brain’s "overthinking"
Scientists scanned several jazz keyboardists while they improvised
solos. The finding? The parts of the musicians’ brains that monitor
their performance shut down, while the sections that organize
"self-initiated thoughts and behaviors" were highly activated.    

Bloggers Raising Money. Here Come The Politics. And Here Comes My
. (TechCrunch)   

How to Think: Managing brain resources in an age of complexity:
Ed Boyden is an assistant professor in the MIT Media Lab and MIT
Department of Biological Engineering, where he leads the
Neuroengineering and Neuromedia Group. His lab broadly invents and
applies novel tools for the analysis and engineering of brain circuits
in order to correct aberrant brain activity in intractable disorders. 

YouTube’s 2007 top video awards

How to Get to Alpha Centauri:
If the nearest star system, Alpha Centauri, does harbor rocky planets
similar to Earth as new findings suggest, there exist a host of ways to
get us there, in theory.Sending a person to Alpha Centauri within a
human lifetime wouldn’t be easy. Alpha Centauri is 4.37 light-years
away — more than 25.6 trillion miles, or more than 276,000 times the
distance from the Earth to the sun.  (SPACE.com)

How to read WSJ for free   

The Technology That Toppled Eliot Spitzer:
If there is a lesson from former New York governor Eliot Spitzer’s
scandal-driven fall (aside from the most obvious one), it is this:
banks are paying attention to even the smallest of your transactions.
(MIT Technology Review)

More Bloggers Raising Money   

Moore’s Law and the future of education   



• Book: Anatomy of the Bear: A look at 4 major Bear Markets, by examining over 70,000 WSJ articles at the time of the Bear

• Farhad Manjoo: TRUE ENOUGH Learning to Live in a Post-Fact Society: Significant repercussions for this widespread trend for investors.

How can you tell if you’re being followed?   

Brilliantly funny video advert for BMW, featuring (of all people) Madonna, who gamely plays a caricature of herself.

Are We Giving Robots Too Much Power?   

International Association of Time Travelers   


That’s all from what was a lovely weekend in
the NorthEast — crisp and clear. Hope your brackets served you well this weekend!


Got a comment, suggestion, link idea? Or do you just have
something on your mind?
The linkfest loves to get email!  If you’ve got something to say,
send email to thebigpicture [AT] optonline [DOT] net.

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What's been said:

Discussions found on the web:
  1. Jim commented on Mar 23

    OK. This is the first time I have ever seen a linkfest that didn’t have a section that began with “The Wall of Worry continues to build…”

    Does that mean the wall of worry has been built? Does that mean we’ve reached a bottom? A top?

    What’s going on here? Did you think none of us would notice? This is a creepy omen of something…

  2. Jim commented on Mar 23

    You must have known I was going to post that comment. NOW, you have edited the linkfest and started a section with the proverbial words.

    You really had me worried about the missing wall of worry. Don’t scare me like that.

  3. Eric commented on Mar 23

    Just FYI. On 9/27/2007, with the stock in the $120s, Jim Cramer wrote an article entitled: “Shocker: Bear Stearns’ Shares Are Survivors”

  4. Jessica commented on Mar 23

    About “Investing in a Post-Fact Society” or This Vehicle Has No Brakes

    “Why have we as a nation been increasingly reluctant to confront objective reality? What is it about the present social mood, political leadership, and economic environment that has so totally led us to a world of denial?”

    Viewing the question this way as a matter of national misbehavior, almost sin, is one valid way to pose the question. I think though that some aspects of the answer are more clearly seen from other angles.

    – The Internet has broken down barriers to the flow of information within organizations, between organizations, and in the spaces in between.
    – Much of our social structures depend on differentials between those who have information (CEOs for example) and those who don’t (lower level employees).
    – Since the Internet ensures that information will flow, in order to maintain current social structures (primarily governmental and corporate), it is necessary to camouflage the power-generating information with lots of chaff.
    That is the supply side for truthiness.
    Then, there is the demand side: the way our societies function in many areas has changed so fast that we have not been able to keep up. So it is natural that we throw our hands up in despair and stop trying. We stick to the smaller world around us, decorate it with the best gadgets in history, hope our own relationships and families hold up, and hope that if we ignore the bigger picture, it will ignore us.
    Ask yourself this: if society were changing faster than most of us were comfortable, faster than most of us could process, so fast that it ate up social cohesion rather than build it up, what social mechanism would slow down the pace of change? I suggest that there is no social mechanism capable of doing this. (Or at least no cure that is not much worse than the disease – the Spanish Inquisition, Brezhnevite communism, and Islamism come to mind as examples of bad cures.)
    I can’t prove this in numbers, but the absence of numeric proof is not proof of absence. After all, the illusion that anything that can’t be fit into a spreadsheet can be safely ignored is the core quasi-religious belief underlaying the current multi-trillion dollar meltdown.

  5. David commented on Mar 23

    In the past, every Easter week and Easter weekend, one could find old religious movies on every TV channel, a treasure trove of past movies. Not this Easter, except one. What happen?
    I miss these old vintage movies. Is this a harbor of things to come? The time is out of joint and times are a changing.
    It’s all about the Dollar (again). Happy currency trading.
    “There are more things in heaven and earth, Horatio, Than are dreamt of in your philosophy.” William Shakespeare

  6. Mike G commented on Mar 23

    The dollar’s woes reflect the world’s collective verdict on the ability of the U.S. to manage the global financial system — At some level, the dollar’s woes reflect the world’s collective verdict on the ability of the United States—businesses, individuals, the government, the Federal Reserve—to manage the global financial system and the world’s largest economy. Lately the verdict has been two thumbs down.

    Gee, it’s a good thing we don’t have an administration in power that has pissed off and alienated most of our allies over the last seven years with an arrogant, aggressive unilateral foreign policy and a dismissive “F* You” attitude toward the rest of the world. Then we might really be in trouble.

  7. TL commented on Mar 23

    Forgetting WSs dictim to always march shoulder to shoulder in rotating swastikas towards that ebulliently bullish future, noone has yet been able to answer, ?WHAT HAPPENED ON 11/01/2007?!
    Solve that, you can march to your own drummer.
    Solve that, and you might understand BSC>JPM!

  8. Eric commented on Mar 24

    Mike M,

    Nice quote from that Hussman post, on the BS-JPM-Fed deal:

    “This deal should, and I believe will, be restructured. J.P. Morgan will cry foul, but that will be like a child who found the Easter basket and is now forced to share the chocolate.”

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