You gotta have Street Sense. If you don’t have any, then you wish you did — or at least wish you bet on the 9-2 favorite yesterday, ’cause he won the
133rd running of the Kentucky Derby, moving past 19 other horses in a terrific come from behind victory. While Wall Street fave Liquidity failed to show, the Street breathed a sigh of release that Storm in May also failed to place.
Lets have a look a what news we might see in the coming week — cause we can all use as much "street sense" as we can get out
This week, there are several important economic releases, and of course, the May FOMC meeting: We get an early read of chain retail same store sales on Tuesday; the full Retail sales data for the month of April is released on Friday (consensus = 0.4% m-m gain).
Important inflation readings this week include Import and Export Prices on Thurday, and the Producer Price Index (PPI) on Friday (consensus for PPI is 0.7%).
The highlight of the week will be Wednesday’s FOMC announcement, when yet another "nothing done" is widely expected. That will cap a year of unchanged Fed rates. The statement and subsequent minutes will all be subject to the close scrutiny by
What else might color our world over the next 7 days? To find out, get clickin’!
INVESTING & TRADING
• Want to Be Next Warren Buffett? The Line Forms in Nebraska: Last month, Warren Buffett posted the mother of all
help-wanted ads: a request for candidates to replace him as chief
investment officer of Berkshire Hathaway. Now, the résumés are flooding in — and the process is
turning out to be every bit as unconventional as the billionaire
investor himself. Among the 600 or so applicants so far: a Talmudic
scholar who picks stocks from home, a Canadian economist with an
intense yoga practice and even a four-year-old. (free Wall Street Journal)
• Twelve Unusual Items Affecting the Markets Now: Great round up from Real Money’s Dave Merkel.
• HAL 9000-Style Machines, Kubrick’s Fantasy, Outwit Traders:
As finance Ph.D.s, mathematicians and other computer-loving disciples
of quantitative analysis challenge traditional traders and money
managers, Kearns and a small band of AI scientists have set out to
build the ultimate money machine. (Bloomberg)
• Sell in May? It depends on the Seasonal Timing Strategy
• Are Investors "Double Counting" share buybacks?:
In recent weeks, investors have been enthralled with the idea that
stocks are being supported not only by earnings surprises, but also by
heavy repurchases, as if these are two separate effects.As I’ve noted
before, repurchases are already reflected in the calculation of the
S&P 500 index and index fundamentals such as earnings and dividend
figures. To assume that repurchases are a separate source of “return to
investors” is double counting.
• How High Will Gas Prices Rise This Summer? Gasoline prices, already flirting with $3 a gallon, could move
even higher during the summer driving season. It all depends on refineries,
weather and drivers’ tolerance for expensive fuel. (free Wall Street Journal)
• Sentiment Reading: No Satisfaction: Why What, You Have Is Never Enough: As a country, we are richer than ever. Yet surveys show that
Americans are no happier than they were 30 years ago. The key problem: We aren’t
very good at figuring out what will make us happy. (free Wall Street Journal)
• AAII survey still in bullish territory.
• What to Do When Rupert Calls? As they confront their continuing financial challenges, the Bancrofts can sit around and pray that a deep-pocketed white knight emerges — Warren E. Buffett, Bill Gates or The Washington Post are said by insiders to be favored choices — but it’s hard to think that even if such potential suitors did buy it they would seriously invest in the business the way Mr. Murdoch claims he would. It could result in just another holding pattern. (New York Times)
• Goliaths Gain Momentum on Davids: The giants are finally staging a comeback. The question is
whether it will last.For months, Wall Street professionals have been recommending
big-company stocks as a safe bet in a slow-growing economy, only to be proven
wrong as small stocks surged ahead. Now, after the Dow Jones Industrial Average’s run this month to
records and its first close above 13000, gains for blue-chip industrials this
year are equal to those of the small-stock Russell 2000 index. Both are up 5.3%.
But for just this month, the industrial average is up 6.2%, compared with 3.6%
for the Russell. (free Wall Street Journal) See also, The Year of the Large Caps? This Time, Don’t Laugh
The Wall of worry continues to build:
• Bernanke Is Wrong on Inflation, Interest Rates, Goldman, Merrill, UBS Say: Federal Reserve Chairman Ben S.
Bernanke’s assertion that interest rates may need to increase to
curb inflation is wrong. That’s what Goldman Sachs Group Inc.,
Merrill Lynch & Co. and UBS AG are saying. While Bernanke warned last month that the odds of worsening
inflation have increased, chief economists at the three firms say
the worst housing slump in a decade may drive the U.S. economy
into a recession and stifle consumer prices. Their chief
economists say the Fed will cut its target for overnight loans
between banks at least three times this year. (Bloomberg)
• Labor Market Slowdown May Have Arrived:
April’s tepid gain could signal the beginning of a weak patch for the
labor market, in which job creation decelerates, unemployment rises and
wage gains moderate. It may also help explain a question that has been
puzzling economists. Janet Yellen, president of the Federal Reserve
Bank of San Francisco, this past week framed it this way: "If the
economy is even more lackluster than before, why is the labor market
still going gangbusters?" (free Wall Street Journal)
• Does It Even Matter if the U.S. Has a Cold? As the domestic growth rate has declined sharply in recent quarters,
the rest of the world is growing rapidly. India is blowing the door off
its hinges. China’s economy is expanding at a double-digit pace. The seemingly countervailing trends — deceleration in America, full
speed ahead abroad — have led some economists to wonder whether the
United States and the rest of the global economy are going their
separate ways. Some even suggest — shudder — that changes in the global
economy have made the United States a less-central player. (New York Times)
• Stagflation on the Horizon as Dollar Hits New Low: The value of the dollar sank to a record low against the euro on Friday on the
back of poor U.S. economic growth numbers combined with evidence that
inflationary pressure in the U.S. economy continues to build (Resource Investor) See also The Bush-Dollar Curve — Obscure economic indicator: Does the dollar fall when the president is unpopular?
• Consumer Spending Sluggish:
Consumer spending rose at the
slowest rate in five months in March while construction activity
managed only a tiny gain, weighed down by further weakness in housing.
The Commerce Department reported that consumer spending on
all items was up 0.3 percent last month, the slowest increase since a
similar rise in October.
• Homes: Big drop in speculation:
After years of big increases in the buying of real estate for
investing, speculators fled many housing markets last year.Second-home
sales dropped from 40 percent of all home sales to just 36 percent,
according to a report released Monday by the National Association of
Realtors (NAR). That happened despite a rise in vacation-home
purchases, one of the
two components of second-home sales. These were actually up 4.7 percent
during the year to a record 1.07 million units. But a
precipitous decline in investment-home sales, they fell 28.9 percent in
2006 to 1.65 million units, led to the overall drop in second-home
sales. (CNN Money)
• Rents Peak in Housing Glut; New York Escapes Decline:
The glut of U.S. properties for sale is about to hit the rental market.
A record number of homeowners who can’t sell condominiums and houses
are competing for tenants with the country’s biggest apartment owners
led by Chicago-based Equity Residential, said Jack McCabe, the founder
of Deerfield Beach, Florida-based McCabe Research & Consulting LLC.
Metropolitan New York, where demand for housing exceeds supply, may be
the only place where rents increase, albeit at a slower pace, he said.
• Fighting to Keep the Roof: If you’re a financially troubled borrower, there are a few steps you
should consider before contacting your mortgage company, especially if
you have not missed a payment. Think about refinancing or taking out a
home-equity loan, if you have equity in the property. (Washington Post)
• Build It, And Pray They Come:
Amid the worst slump in housing sales in more than a decade, a new book
by architecture professor Witold Rybczynski helps shed light on the way
developers really work. (Newsweek)
TECHNOLOGY & SCIENCE
• Patently obvious: In a unanimous opinion, the justices ruled that the patent in question
was invalid because designing a gas pedal in such a way was an
"obvious" thing to do, at least to the average gas pedal designer, and
therefore not really an invention. What’s more, Justice Anthony
Kennedy, writing for the court, argued that the current patent regime
threatened to stifle the sort of creativity that the Founding Fathers
had originally created the system to foster. (Boston Globe) See also, Top U.S. Court Clears Way for More Patent Challenges (Bloomberg)
• The wrath of Ballzilla: Why Microsoft CEO Steve Ballmer can’t stop bashing Google:
Last month Steve Ballmer, Microsoft’s notoriously bombastic CEO, set
bloggers blabbing again when he went on an anti-Google tirade that was
shrill even for him. In a speech at Stanford’s business school, he
derided many of Google’s forays beyond search and advertising as "cute"
stunts produced by a "random collection of people doing their own
thing." He also blurted out to the audience that Google was "insane"
for trying to grow its headcount so fast. (Fortune) See also Microsoft admits Vista failure
• Slate’s special issue on the brain: Mind Science and the state of Neuro-Culture
MUSIC BOOKS MOVIES TV FUN!
• Another fabulous British retro female vocalist: Amy Winehouse. Imagine a cross between a jazz chanteuse and a 60s soul singer.
In case you were sleeping late Saturday night, at three minutes and four
seconds after 2 AM on the 6th of May this year — that would be today — the time and date will
Don’t worry if you slept through it. The same thing happens this afternoon.
Enjoy the gorgeous weekend — Spring has at long last sprung!
Another guest musical director for FNJ this week: Eddie Elfenbein of Crossing Wall Street on Artie Shaw. Take it away, Eddie:
Artie Shaw was cool. Not Elvis cool or Sinatra cool, but a darker, more subdued cool.
What Shaw did was make things look easy. Check out this clip and notice how, even after six decades, his music hasn’t aged a bit. It’s still fresh and smooth. It’s just…cool. (You gotta love Shaw’s reply to the compliments: “Yeah, yeah. Glass of water.” Pure cool.)
Artie Shaw was the very last of the big bandleaders. He died a year ago at age 94 and fifty years after his last performance. He wound up outliving all the greats—Goodman, Herman, Miller. Those names may loom larger today, but back then, Shaw’s star was the brightest. He was making $60,000 a week—not bad for the Depression. With America poised to enter World War II, Time magazine reported that Germans’ vision of America was “skyscrapers, Clark Gable and Artie Shaw.”
Fascists, apparently, have issues with tall buildings.
When Shaw hired Billie Holiday, he became the first white bandleader to hire a full-time black singer. But Shaw detested the limelight. In fact, Shaw hated the words “jazz” and “swing.” No, he considered himself a musician. He hated the audience. He hated the singers. He hated the dancers. He hated other bandleaders (“Benny Goodman played clarinet. I played music.”)
By 1951, Shaw walked away from music altogether and became—what else?—a dairy farmer. Crazy, maybe, but cool in its own way. Duke Ellington told him, “Man, you got more guts than any of us.”
So what did Shaw like? Women. Lots and lots of them. He was married eight times. He nabbed Betty Grable which would have pleased most men. Not Shaw. While they were engaged, he ran off with Lana Turner. (Whoa, Duke was right!) Shaw had an affair with Rita Hayworth. He dumped Judy Garland. He married Ava Gardner before Sinatra. How in earth did he have time enough time for music?
Ah, the music. Brilliant. Here’s an example: In 1938, Shaw took an obscure and forgotten Cole Porter song and made it a jazz classic. Have a listen to “Begin the Beguine.”
If you’re keeping score, that’s a Jewish bandleader playing Negro music written by a homosexual.
Exceedingly trivial trivia: “Begin the Beguine” has been performed a gazillion times since. In the movie, The Rocketeer, it’s performed by Melora Hardin, who’s better known as Jan in The Office. (Told you it was trivial.)
If you’ve never heard of Shaw and want to get your feet wet, I’d recommend: The Very Best of Artie Shaw
That pretty much has it all. Personally, I love “Star Dust” and “Deep Purple.” Wonderful stuff.
BR adds: Thanks Eddy — nicely done. There is a terrific recording of Shaw over at NPR: Performance by Shaw of Shaw’s 1940 Concerto for Clarinet
videos after the jump . .
The Payroll numbers are out, and they are not particularly pretty:
88,000 new jobs were created in April, according to BLS. This is the weakest job gain since November ’04. Cumulative revisions for prior months were to the downside by 26,000.
As expected, losses were in Manufacturing (19k), Retail (26k) and Construction (11k). The weakness in Construction has been very uted, implying that the full impact of the housing slow down has yet to be fully realized.
Biggest gains were had in Services (116k), Education and Health (53k), Gov’t (25k) Professional (24k) and Leisure/Hospitality (22k).
Temporary help jobs fell for a 3rd month (January was flat) making 4 consecutive months of no gains. Temp help tends to lead employment gains, and this weakness can be read as a future forecastor of employment.
We don’t pay close attention to the Household survey, (the self reported number is very volatile) but the drop of -468k was an eyebrow raiser.
To put this into some context, of those 317k new jobs hypothesized by BLS, 49k of those supposed jobs are in construction. Now what are the odds of that?
While Wall Street celebrates the upcoming recession, let me remind you that this economy requires about 150k new monthly jobs to merely keeep up with population growth.