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Weekend Reading

Posted By Barry Ritholtz On August 10, 2003 @ 7:10 am In Finance | Comments Disabled

WSJ: August Wins Dubious Honor Of Worst Month for Stocks [1], by ERIN SCHULTE
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“If history is any guide, brace yourself for a potentially ugly couple of weeks on Wall Street.

While September historically takes the honor for the worst month of the year on Wall Street — October is commonly perceived as worst because both the 1929 and 1987 crashes took place in that month — with traders returning from the Hamptons and other vacation retreats to “clean house,” August is giving it a run for its money. According to the Stock Trader’s Almanac, August is the worst month for the Dow industrials and the S&P 500-stock index in the past 15 years, with the Dow industrials falling an average 1.6%. The last week can be particularly murderous: in the past six years, the blue-chip indicator has tumbled an average of 4.6% . . . “

NYT: Bulls Have Left Bonds, but Should You? [2], by JONATHAN FUERBRINGER

“It is a tough time for the bond market. July was its worst month in more than two decades, compressing a year’s losses into 23 trading days. Interest rates have been rising, the federal budget deficit is growing and the nearly 22-year-old bull market in bonds may be over.

But high-tailing out of bonds is not wise. The bond market can still be your friend. Bill Gross, the Pimco portfolio manager who runs the largest bond mutual fund, certainly thinks so. His Pimco Total Return fund lost 3.8 percent in July, its worst month ever, and he believes that low money market and Treasury yields and the prospect of rising inflation are very damaging to investors. But, he added, “If done properly, a bond portfolio can be managed to be fairly investor-friendly over the next couple of years . . .”

MSN Money: Five Trends Investors Must Watch [3], by Jim Jubak, 08/06/2003 07:05 AM EDT

The short-term direction of this stock market and economy remains wrapped in a fog. There simply isn’t enough data to say if the rally will run another couple of months or melt in the August heat, let alone predict whether the much-anticipated economic recovery will kick in during September, October or next year.

In contrast, the long-term picture is remarkably clear. The trends that will have the most influence on the financial markets over the next 10 years are already in place. The way they’ll work out certainly isn’t preordained, but investors can pretty easily identify the forces that will shape the future.

CBS.MarketWatch: Echoes of the Crash of ’87 (Do surging bond yields spell another meltdown?) [4], by Rachel Koning

CHICAGO (CBS.MW) — “So much for Economics 101. Basic laws of the dismal science tell us that higher bond yields signal a pickup in economic growth. But this summer’s huge spike in interest rates has come without much economic steam to back it up, forcing some market pros to draw comparisons to the October 1987 market crash.

A steep rise in borrowing costs threatens to irritate both Corporate America and the nation’s sluggish attempts to revive growth, say market professionals. They’re struck by the fact that stocks have held their own during the bond sell-off . . .”

India Economic Times: Service advantage of Indian IT offshore model [5], by ISHANI DUTTAGUPTA, TIMES NEWS NETWORK[ SUNDAY, AUGUST 10, 2003 12:45:48 AM]

“The meeting with Sandeep Sahai, managing partner financial services of TechSpan, started on a high note. “More and more countries are in the race to co-opt the Indian IT offshore model. But India is the undisputed leader, in fact, Phillipines is officially trying to be No 2 in the region having acknowledge India s the undisputed leader,” said Sahai, who’d just had a meeting with senior government officials in Phillipines the day before.

Obviously that’s music for his ears, considering he’s a sought after speaker at several US industry conferences on offshore outsouring as a strategic tool for IT managers. And in just three years, TechSpan, of which he is a co-founder, has set-up development centres in Noida and Bangalore, and risen to be one of the prominent players in eBusiness integration in the US market . . .”

Reuters: Bush Calls Iraq ‘Long-Term Undertaking’ in Mideast [6]

CRAWFORD, Texas (Reuters) – President Bush ( news -web sites ) on Saturday vowed a “long-term undertaking” to bring democracy and economic prosperity to Iraq ( news -web sites ) and across the Middle East. In his weekly radio address, broadcast amid renewed violence in Iraq and marking 100 days since he announced major combat operations over, Bush offered an upbeat assessment.

Despite almost daily attacks on U.S. troops in which 55 have been killed, Bush said Iraq was more secure with 6,000 Iraqi police patrolling Baghdad and about 20,000 more on duty in other towns. The U.S. military and its allies had made “steady progress,” he asserted. “We’re keeping our word to the Iraqi people by helping them to make their country an example of democracy and prosperity throughout the region.”

But, he added, “One hundred days is not enough time to undo the terrible legacy of Saddam Hussein ( news -web sites ). There is difficult and dangerous work ahead that requires time and patience . . .”

NYT: Business Spending Helps Offset Lag in Refinancing [7], by LOUIS UCHITELLE and JENNIFER BAYOT

“It is on such mixed motives and uncertain optimism that the economy is riding. Almost on cue, as if business spending and mortgage refinancing were coordinated, refinancing applications have plunged. They are down nearly 60 percent since May, the Mortgage Bankers Association reported last week. Business spending, in contrast, rose in the second quarter at an annual rate of 6.9 percent, the strongest showing in three years.

“This early investment is not for expansion; it’s for replacement to bring in new technology and lower costs,” said Lawrence H. Meyer, an economic consultant and a former Federal Reserve Board governor. “It is spending that had been postponed.”

Whatever the reason, business spending is a powerful force. It can lift an economy when companies invest in machinery, computers, software, office buildings, factories, trucks, aircraft and all the other tools used in the production of goods and services — or sink an economy when companies cut back. Indeed, a cutback in business spending when the Internet and stock market bubbles burst brought on the recession of 2001 and the prolonged weakness that has existed since then. During all those months, consumers kept the economy above water. With interest rates falling and home prices rising, consumers raised huge amounts of spending money through home sales and mortgage refinancing. Now that mechanism is weakening as interest rates rise and homeowners are holding off on refinancing . . .”

Globe and Mail: Costner’s last stand [8], by DAVID GIAMMARCO

“Kevin Costner poured his own money into Open Range, his epic western shot in Alberta and opening next week. Disney says it’s too violent. The rest of Hollywood dismisses it as a stale genre piece. But, as the actor director tells DAVID GIAMMARCO, he always has been a bit of a maverick

CANMORE, ALTA. — Kevin Costner has always marched to the beat of his own drum. So why, at 48, should he change now?Back when he was a struggling actor, he adamantly refused to utter his only line of dialogue, opposite Jessica Lange in 1982′s Frances, because he felt it didn’t ring true for his character. He made this stand even though it would have guaranteed him a Screen Actors Guild card, a prerequisite for the union auditions that had eluded him for five years . . .”


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URL to article: http://www.ritholtz.com/blog/2003/08/weekend-reading-2/

URLs in this post:

[1] August Wins Dubious Honor Of Worst Month for Stocks: http://online.wsj.com/article/0,,SB106018398527821500,00.html

[2] Bulls Have Left Bonds, but Should You?: http://www.nytimes.com/2003/08/10/business/yourmoney/10PORT.html

[3] Five Trends Investors Must Watch: http://www.thestreet.com/funds/jubak/10105998.html

[4] Echoes of the Crash of ’87 (Do surging bond yields spell another meltdown?): http://cbs.marketwatch.com/news/story.asp?guid=%7B3876C5ED%2D7CA8%2D4E73%2DBBCF%2D5552A6A9CE97%7D&siteid=mktw

[5] Service advantage of Indian IT offshore model: http://economictimes.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=122963

[6] Bush Calls Iraq ‘Long-Term Undertaking’ in Mideast: http://story.news.yahoo.com/news?tmpl=story&cid=584&ncid=584&e=3&u=/nm/20030809/pl_nm/iraq_bush_dc

[7] Business Spending Helps Offset Lag in Refinancing: http://www.nytimes.com/2003/08/10/business/10ECON.html

[8] Costner’s last stand: http://www.globeandmail.com/servlet/story/RTGAM.20030809.costner/BNStory/Entertainment/

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