Here’s something new and way cool: This week’s market commentary made its way into both the Up & Down Wall Street column as well as The Trader column in Barron’s print edition.
(If I were to ignore my own advice about being a middle-aged white guy, I would ask "How whack is that?" but I know better, so I won’t go there . . .)
Bubble 2.0 is the first column, with Randall Forsyth stepping in for Alan Abelson. The excerpt:
"Indeed, with deals seemingly endless in number and boundless in size, the stock market has entered a proverbial melt-up that probably will continue until John and Jane Q. Public get sucked in. With the billions being thrown around by private equity, hedge funds and foreign-government funds, what else would you expect?
On the latter score, the central banks abroad are getting a little restive sitting on trillions of dollars of reserves parked in boring Treasury notes. Japan and China have announced plans to emulate Singapore in investing some of their cache in something other than cash, like stocks, for instance.
This influx of liquidity has produced a seeming paradox — a rapidly accelerating market set against the backdrop of a rapidly decelerating economy, writes Barry L. Ritholtz, chief market strategist of Ritholtz Research & Analytics. "This is now a trading market, where momentum and trend dominate, increasingly detached from the decaying domestic fundamentals."
To attempt to square that circle, investors have been rotating increasingly to the big-cap names that populate the Dow 30 and dominate the Standard & Poor’s 500. While the U.S. economy’s growth slowed to a crawl of 1.3% in the first quarter, S&P earnings so far are posting gains on the order of 7% to 8%, twice the lowered expectations going into earnings season. And much of the those earnings gains are coming from overseas, in part because they’re being translated into depreciated dollars.
As for the economy, proof of the continued slowdown arrived Friday morning in the form of another punk employment report, in which only 88,000 folks were added to nonfarm payrolls in April, the fewest in any month since November 2004. The unemployment rate ticked up by 0.1 percentage point, to 4.5%, which actually understates the weakness. In the household survey, the one used to calculate the jobless rate, some 392,000 folks were estimated to have dropped out of workforce. If you’re not pounding the pavement for a job, you are not counted as unemployed. Had they been, the jobless rate would have been up 0.2 percentage points."
The second piece is the The Trader column, "Even the Bulls Aren’t So Bullish." A quick excerpt of the same:
"But after a long rise, still-confident investors who grow wary of high prices start taking profits in their broader portfolio and funnel those toward blue chips. "The longer the broader averages make little progress in an environment of blue-chip strength, the more likely a top is forming," [Miller Tabak's chief technical analyst, Philip Roth] says.
To Barry Ritholtz, chief market strategist at Ritholtz Research & Analytics, the juxtaposition of rising stocks and a cooling economy makes this "a trading market, where momentum and trend dominate, increasingly detached from decaying domestic fundamentals." A melt-up to Dow 14,000 would not surprise, Ritholtz says, but that represents a risky "trading, not investing, opportunity."
Whether the rally is slowing — or, as the bulls prefer, consolidating — remains to be seen. For days, the benchmarks have made new highs on dwindling volume and waning leadership. Yet, sentiment is far from excessively bullish. In fact, short interest that is nearly 18% above a three-year average suggests there are skeptics, and money on the sidelines, that might still be converted."
How unbelievable is that? I am honored and humbled and tremendously appreciative of the work getting recognized.
Moved to Yahoo Finance: Bubble 2.0
Even the Bulls Aren’t So Bullish
Barron’s, May 7, 2007
Moved to Yahoo Finance: S&P High Brings Muted Revelry
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.