A midweek dip was shrugged off with a strong finish to the week. The Dow Jones Industrial Average tacked on 0.4%, while the S&P500 gained 0.6%. The
Nasdaq was the big winner this week, adding 0.8%, with the Russell
2000 a close 2nd, adding 0.7%.
In the coming week, earnings season ramps up. Barron’s Trader column notes that "investors have been primed for pain: the first quarter of — gasp — single-digit profit growth after a seeming eternity of double-digit gains." But if investors are truly prepped for the worst, it won’t take much to surprise to the upside.
The economic highlight this week is likely to be CPI on Tuesday.
And an interesting sidenote about this week’s linkfest: The market articles are nearly all upbeat, while the economic and housing links are almost uniformly negative. What gives with this? I guess that’s just the way the links crumbles.
On to the linkfest:
INVESTING & TRADING
• Stocks Are Back on Their Feet As Investors Applaud Profits: Upbeat inflation news and optimism about early
corporate-profit reports are taking investors’ minds off broader
economic weakness. The Standard & Poor’s 500-stock index has
recovered the ground it lost during late February’s downdraft. The Dow
Jones Industrial Average has nearly done the same, as has the Nasdaq
Composite Index. (WSJ)• Investors Need Not Be Bearish to Hedge Risk
• Profits May Be Fickle Oracles This Quarter: Wall Street is about to get information on one of the stock market’s biggest drivers — and one investors haven’t focused on lately: corporate profits. Whether, and how, the profit news surprises investors is likely to be the main determinant of the market’s direction in the next few weeks (free WSJ)
• Short Sellers Target Small-Company Shares as U.S. Growth Slows: What? There are short sellers left?
• Contrarian Play: Why Investors Should Consider Real Estate:
With housing prices softening and subprime lenders tanking, investors
have been running from anything that smells of real estate. But they
may be bailing too quickly, as some parts of the sector are still doing
well. (Real Estate Journal)• Why China Need Not Fear U.S. Economic Slowdown (free WSJ)
• Technically speaking, Stock Market Running on Empty?: The stock market has put on a nice show with the Dow Jones Industrial Average rising some 5.5% off its March 14 intraday low. Along the way, it has ignored several technical barriers and even saw one major index, the NYSE comp set a new closing high. But from the start of the rally through this week’s action, trading volume has been conspicuous by its absence. Without volume, the market will soon run out of fuel, and under such conditions we cannot expect it to run much longer (Barron’s)
• His Fund Was Phony, But the Bars Are Real: Forget 2 & 20 — this guy charged 100%… (Trader Magazine)
• Fascinating look at Commodity Prices in Babylon 385 – 61 BC
ECONOMY
The Wall of Worry now looks like the Great Wall of China:
• All this week, I debated Don Luskin about the economy: The Capital Commerce DebateUS News & World Report) (
• Happy Tax Day! How to caclulate your Tax Freedom Day (Barron’s) See also: Why U.S. tax policy makes saving a sucker’s game. (Slate)
• Economy Enemy No.1: Soft Capital Spending: Housing worries are giving way to concerns about weak business spending as the biggest cloud hanging over the U.S. economy, a WSJ.com survey found. Still, economists again cut forecasts for home prices. (free WSJ)
• Fed Says What It Means — No Interest Rate Cut
• The Coming Tax Crash: "Speculation" based taxes have been are large portion of the Federal government’s tax rise; meanwhile, states are seeing sales based tax revenue fall. Slate’s Dan Gross asks: Are federal tax revenues on the brink of collapse?
• Current recovery great for profits, poor by most other measures (EPI)
• IT LOOKED LIKE A JOB BOOM, BUT IT REALLY ISN’T : So why was the March jobs number so strong? Give credit to the birth/death model. In March the Labor Department added 128,000 jobs to its count that the government thinks were created by newly formed companies. So this estimate accounted for much of the month’s 180,000 gain. And the optimism – as well as the confusion – will only grow when the April job figures come out. (NYPost)
• 2007 called "awful year" for boat market: “While there are many factors at play, we believe softness in the housing market, especially the Florida market, is the largest factor influencing consumer purchase behavior.” (Boating Industry)
HOUSING• Defaults Rise in Next Level of Mortgages: Some of the problems afflicting mortgages sold to borrowers with weak,
or subprime, credit increasingly appear to be cropping up in loans made
to homeowners who were thought to be less risky. (New York Times)• Housing Boom Tied To Sham Mortgages: Many experts have concluded that the nation’s real estate boom of recent
years was fueled in part by weakened lending standards that sparked excessive
demand and drove up prices. Now, some are worried that the looser standards may
have permitted a boom of another kind — a big expansion of mortgage fraud. (Washington Post)• Realtors Forecast Falling Home Prices: The National Association of Realtors, which has long proclaimed
that U.S. home prices haven’t declined on a nationwide basis since the Great
Depression, now says they are likely to do just that this year. (Real Estate Journal)
• Heebner Says Home Prices May Fall 20% Amid Bad Loans: Kenneth Heebner, manager of the
top-performing real-estate fund over the past decade, said U.S.
home prices may plunge as much as 20 percent because of rising
defaults on riskier mortgages. (Bloomberg)• Builder tells subs to cut prices mid-contract: Home builder Lennar Corp. has sent letters to its subcontractors in Southern California, Nevada and other states, telling them to cut their prices by as much as 20% and resubmit invoices for work not yet paid for. The letters said the subcontractors have a choice of either cutting their invoice prices or being shut out of bidding on Lennar projects for the next six months. In some cases the work has already been completed. (Contractor Mag.com)
• Broker Universe: Real life tales of desperate brokers seeking lenders for their "non-traditional" borrowers.
SENTIMENT/PSYCHOLOGY
• Reversal of Fortune: The formula for human well-being used to be simple: Make money, get happy. So why is the old axiom suddenly turning on us?
• Most Americans See Recession in the Next 12 Months: Most Americans expect a recession
within a year and disapprove of President George W. Bush’s
handling of the economy even though the unemployment rate is at a
five-year low, a new Bloomberg/Los Angeles Times poll found. Six in 10 who were surveyed predicted a recession, similar
to the 64 percent who anticipated the economy would contract in a
December 2000 poll by the Los Angeles Times three months before
the last decline. (Bloomberg)
• How to scare bank robbers? Try smiling: What’s the best way to make a bank robber turn around and walk out the door empty-handed? Try a handshake and a smile. Excessive friendliness is the key to the “Safecatch” system created by FBI Special Agent Larry Carr. The premise is that an overdose of courtesy will unnerve would-be robbers and get them to rethink the crime. (AP)
TECHNOLOGY & SCIENCE
• Behind the Fall of Imus, A Digital Brush Fire:
This time it was different. The target was a sympathetic team of young
athletes. In the ensuing furor, the lucrative and often vulgar business
of talk radio found itself running into new limits, as the Internet
sent Mr. Imus to millions of PC screens, driving executives,
advertisers and employees to distance themselves from his racist words.
(free WSJ)• Google maps the Darfur crisis
• Apple Shares Down Slightly On Leopard Delay; Analysts Largely Unconcerned (Barron’s Tech Trader Daily) Also, increasing Pressure to launch iTunes monthly fee. (Telegraph)
• Earth to Bloomberg: the Gold Fields bid story is a hoax: The wire service gets punk’d (original article here)
• Revolution, flashmobs, and brain chips. A grim vision of the future from Britain’s Minister of Defence (Guardian)
• The NYTimes Has Gone Blog Crazy!
MUSIC BOOKS MOVIES TV FUN!• Always Expect the Unexpected: Interview with Nassim Nicholas Taleb in Wired. Taleb’s follow up to Fooled by Randomness: The Hidden Role of Chance in Life and in the MarketsThe Black Swan: The Impact of the Highly Improbable. (No answer as to why there have been no reviews out yet). will be out this week. Its titled:
• To those of us who grew up in a certain era, Kurt Vonnegut was one the most interesting satirical novelists of the time. If you haven’t read Cat’s Cradle or Slaughterhouse Five, you’ve got some homework to do . . .
• What happens when one of the worlds top violinists plays in a subway station as an anonymous street musician? An absolutely lovely story. Long version here Washington Post)
• Southern California running low on servants
• The New Yorker story on David Belle, the inventor of parkour. He demonstrates his sport in this 11-minute video. Astounding.
• Hysterical Kodak commercial (wait for the 2nd half)
• The little-known transcontinental burrito tunnel,
linking San Francisco and NYC. "By the time they reach Cleveland the
burritos are fully heated through and traveling uphill at about twice
the speed of sound:" (via kottke)
This linkfest was powered by James Brown’s Funky People. Believe it or not, this weekend, we are expecting a Nor’Easter — and Snow in
the NorthEast, where Old Man Winter refuses to go quietly.
Extension of the Lushkin Paradigm:
GDP minus housing was 3.7; then it follows that job growth minus birth/death was 52,000.
By the way, the April jobs data will be a real hum dinger as the B/D model emphasizes April as the biggest job creation month.
I’ve also seen some comments on the polls about how folks feel about the economy mention that folks say that they’re doing okay, but that they’re worried about how other people are doing.
There is a lot of anti-Bush sentiment in this country that I believe has folks feeling bad about everything. Even their new Plasma TV. It’s quite bizarre.
The US dollar index just fell below 82—the dollar may be in trouble–if it breaches 80 look for a serious spike in interest rates across the entire curve!!!
As to the link “Current recovery great for corporate profits…”, those pesky facts are the latest in a long line of evidence showing just who this administration is really working for. It goes back to their earliest days in office when that champion of democracy, Dick Cheney, decided it was none of Us The People’s damn business who he met with on the Energy Policy task force. With the end result being $3 a gallon gas and record oil profits, I’m sure more than one oil exec. said “Bushie, you’re doing a heckuva job!”
There is a great response to the Joshua Bell article by a NYC subway musician in her blog: http://www.SawLady.com/blog
She interprets the situation differently from the Washington Post reporters… I thought you might find it interesting.
On the article “Reversal of Fortune”:
While I agree with the general thrust of this article, I would like to add something.
People say they want to be happy; we are eager to believe that people want to maximize happiness. But “happiness” is a rather vague concept–you can claim to be measuring “it” in numerous ways–but the measure you choose inclines you (or says something about your inclinations) towards a particular definition of happiness.
Let me put it this way: what if it turns out that people are failing to maximize happiness not because they are committing some error of judgement, but because their genes (say) are actually urging them to maximize something else, say “possessions” or “control” for example? It can easily be true that people strive subconsciously to maximize these other things, at the expense of their own “happiness” and even health, and also contrary to their own beliefs about themselves.
Then it would not seem to be enough to point to measures of “happiness” that exclude things like excessive consumption etc., say “look you are less happy than before” and “look you are doing this and that to yourself and the planet” and “see how short-sighted you are”.
One must look more closely and honestly at the roots of these behaviors. Do people isolate themselves in huge fortress-houses in order to soothe insecurities, i.e., out of fear? Are they selfish at heart, to the point of allowing the destruction of the environment just to take things away from others or to prevent others from having things they can’t have? Are they cruel, saying with enjoyment: look at all the problems those other people have, and look, we don’t have those problems–and so what if we are the cause of their problems!
For better or worse, Pandora let all of these things out of her box. It would be too simple to say that these things are “bad” and that we should stop doing them, because to them we owe our survival, in part(!), over many thousands of years. They are too much a part of us to be simply condemned and exiled.
Instead, we might try to see these things inside ourselves, not in order to judge and criticize (“human bad!”) but in order to understand how they are at work in our lives–and for what reasons, good as well as bad. A tangled webs of emotion and behavior will have to be unravelled in order to arrive at the ability to choose with a clear head the future we really want, as well as the ability to achieve it without being undermined by ourselves.
I think muckdog is on to something there. A lot of folks are unhappy with the war, the scandals, etc. This unhappiness bleeds over to their view of the nation at large, including the economy. That’s not to say bad things are not happening. Rather many of these bad things have been in place several years and are being focused on now because of the sour national mood. In more ways than one this seems like the 70s all over again. “Grindhouse” anyone?
I have heard more than one commentator predict the real showdown between Congress and the Pres over the war will happen this fall as Republicans defect. Also have heard commenters predict the markets will ride up and then snap back around the fall time frame. If that does come to pass we could see a sentiment driven recession. Mix in with that the pretty much inevitable job cuts (and headlines about the same) from a Private Equity buyout of Chrysler and the rough 07 UAW/Big 3 talks and there should be quite the toxic brew. It’ll be interesting to watch the candidates stepping lively to keep up with events on the eve of the microwave primaries in ’08. Interesting times.
“I have heard more than one commentator predict the real showdown between Congress and the Pres over the war will happen this fall as Republicans defect. Also have heard commenters predict the markets will ride up and then snap back around the fall time frame.”
Sounds like once again we will be seeing “It’s the economy, stupid!” on a lot of 2008 Presidential bumber stickers.