Where to begin this week? Markets got off to a rocky start, found their footing, and never looked back. Commodities plunged, with Crude Oil reaching a 19 month low, falling 6% for the week, down 13% YTD. Retail Sales were robust, up a seasonally adjusted 0.9%, above consensus of 0.7%.
The Industrials gained 1.3%, while the S&P500 tacked on 1.5%, but it was the tech-heavy Nasdaqwhere the real action was: After lagging in 2006, the Tech index led the way (if we ignore a few late week profit warnings from big names), with the Comp jumping 2.8%. Meanwhile Apple excited geeks and investors alike.
Jeez, another 3 day weekend? Ok, let’s set up em up for your clicking pleasure:
INVESTING & TRADING
•One of the more intriguing things about pulling the fest together each week is how clearly the two sides have hardened in their views — I cannot recall the last time consensus was so split:
- Goldilocks still defies the bears: Investment managers do not generally believe in fairy tales, but
there is one that dominated all discussion as 2007 began. Unless a lot
of investors are wrong, Goldilocks is alive and well and impervious to
the bears who believe the US and world economies are on their way down.
- What if bulls are wrong about 2007? Contrarian forecasts global recession and market meltdown
- Too Hot, Too Cold — or Just Right?: a fair number of panelists don’t expect the
party to end this year. The sort-of-consensus view: U.S. stocks will
rally "not much" to 8%-10% in ’07, dividends included, though some see
a violent shake-up along the way. Bonds won’t be terribly interesting,
and the dollar will continue to struggle.
- Danger ahead? Stocks’ early warning signal: According to the Stock Trader’s Almanac, how the S&P 500 performs in the first five sessions of the year can be an indicator of how it will perform for the full year.
- Already in ’07, There Are Signs the Conventional Wisdom Is Off
• World’s Assets Hit Record Value Of $140 Trillion — fascinating chart, too
• Cramer takes alot of grief from detractors (most of it unjustified), so when he utterly, precisely, and undeniably nails something, he deserves credit for it: 1/10/2007 9:30 AM EST Memo to the bulls: "this is what you have been waiting for: a DOWN opening. This is the opposite of the first day of the year. It is a godsend. YOU MUST BUY THIS DOWN OPENING" He couldn’t have been more right.
• As Oil Falls, the Dow Becomes a Gusher (Barron’s)
• How Wall Street ‘Sweeps’ the Cash Gee, go figure Wall Street firms have figured out yet another way to snake some coin from their clients. . .
• Marc Faber Says Global Assets Markets Face `Severe Correction’ Faber talks with
Bloomberg about the outlook for the U.S.
economy, the dollar, commodity and stock prices and his investment
strategy. (See also: Video)
• John Dorfman on why Under followed stocks outperform: Wall Street Analysts Stumble on 2006 Stock Tips (I wonder if this is merely a function of market cap size)
• The bull market has at least a little further to run, according to the contrarian view.
• Trader Interviews: just what it says: Interviews with various traders
What Wall of Worry?
• Art Laffer on the Yield Curve: He says "Its different this time"
• Is the ‘Growth Recession’ Ending: Incoming data suggest a stronger pace of economic
activity than thought likely a month ago, leading Morgan Stanley raise GDP estimates. Also, Harris of Lehman Expects 2.5%-3% U.S. Growth in First Quarter (video)
• Old Economy Rules Need Modernizing: Some economists talk
about the U.S. economy as if it were still 1890. Their old-economy concerns seem to have little relevance
to today’s new economy.
• Anyone notice how the banks and credit unions across the country have
increased their interest rates on bank deposits? You can get 5.5% to 6%
now on 1 to 3 year maturities. What is it that Banks know that all these analysts don’t? (See also: Banks’ Cry: ‘Give Us Your Cash!’)
• Fortune’s Best Company to Work For 2007; Guess what firm grabbed the top slot?
• Study says tax cuts aid richest-report: The 2001 and 2003 tax cuts offered the biggest benefits to families
in the highest income categories, according to a citing a Congressional study by the nonpartisan Congressional Budget Office study. Families earning more than $1 million a year saw their federal tax rates drop more sharply than any other group.
• What are the jobs Americans won’t do? Dirty Work
Real Estate remains the most vulnerable sector of the economy, and the data flow continues to be bleak:
• The National Association of Realtors sees Home Prices Rising in ’07; I figure they are suffering from blunt head trauma. (no, really — they are tripping). As if on cue, 3 home builders announce record setting cancellations of sales.
• File this one under Holy Snikes! California Company Announces No Mortgage Payment for 12 Months
• Fascinating study by a Wellesley College prof on Buyers vs. Sellers: It paints a picture of a market nearing a standstill, where would-be sellers take their homes off the market rather than accept markdowns. Over such a lengthy period, even in a slow market, 70% of these homes should have sold. But theonly 30% moved in the current market: The Standoff could lead to recession
• Foreclosures increase 51 percent nationwide — but they are still not at a record level yet.
• Through a Glass, Darkly: How Data Revisions Complicate Monetary Policy
• Thanks, Goldie! GSCI Cuts Energy Exposure (Again) Note that the last time they did this, the markets lit up from July til December;
• FRIEDMAN on Green Coal
• Lots about Iraq:
- Murtha Outlines StrategyTo Restrict Troop Surge (WSJ free)
- Same Old Fatal Mistakes on Iraq (Bloomberg)
• Our approach to fighting terrorism is pathetically inadequate: Make Them Fight All of Us
• Doomsday clock ticks; Nuke programs push world to ‘perilous period’
Technology & Science
In case you somehow missed it, Apple introduced a new mobile phone. Long story short: Its Drool Worthy.
There’s a lot of other coverage on it, but here are some of the more interesting items you may have missed:
-What the iPhone Means for Everyone from Cellular providers to chip makers to handset competitors
-Steven Jobs: iGenius
-Good comparison of various smart phones: The iPhone is here
- Why use Cicso’s Trademarked name iPhone if you know it will invite litigation? Free publicity (also, expect 3G speed eventually)
- full iPhone round-up about all the rest
• Oh, and uh, CES was this week. The WSJ blogged it.
• Duo Envisions Merging Best of TV, Web: KaZaA and Skype’s founders are backing a video start-up that promises to let users watch broadcast-quality movies and TV shows on their PC
• Gartner: Vista still not ‘done’
• The Snoop Next Door: Bad parking, loud talking — no transgression is too trivial to document online. WSJ reporters on new Web sites for outing fellow citizens.
Music Books Movies TV Fun!
• I just love the name of this band: Ferocious Bubbles.
• Stephen Colbert and Bill O’Reilly will appear on each other’s respective shows on Thursday, January 18;
• The missus is finally reading a book I gave her years ago, and is loving it: The Time Traveler’s Wife
• Nice roundup of the Detroit Auto Show via the NYT
• New Yorker’s film critic Davd Denby’s take on the present and future of movies: Hollywood looks for a future
• Time lapse of Pablo Picasso painting in oils, allowing us to see his creative process at work.
Enjoy the extra day’s rest!
These are not intended to be predictions, but rather "events that have a
reasonable chance of occurring, despite the general perception that the odds are
The real purpose of this endeavor is to consider positioning a portion of my
portfolio in accordance with outlier events — with large payoffs. After all,
Wall Street research is still very much convention and groupthink,
despite the reforms over the past several years.
25 Possible Surprises in 2007
1. Private equity deals begin the year in a spectacular fashion with
two separate $50 billion dollar acquisitions announced in January.
2. Robert E. Rubin returns to his brokerage roots and becomes the CEO
and Chairman of Salomon Brothers/Smith Barney after Citigroup (C)
decides to break up into three separate companies: a domestic money center bank
(Citibank), investment banking/retail brokerage (Salomon Brothers/Smith Barney)
and international consumer finance (Citiglobal).
3. Based on misleading government statistics, the housing market
appears to stabilize in the first quarter of 2007.