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Autumn Linkfest: Week in Preview

Sunday, September 30, 2007 | 06:30 PM

Yesterday we looked at the week that was. Today, we  preview the week that might be.

With the Quarter now over, investors will be looking for any signs as to how Q4 will unfold. We are in the middle of the earnings warning period, so specific stocks -- as opposed to the entire market -- can get volatile. Pay close attention to what we hear from retailers (mediocre), finance firms (lots of unanswered questions) and technology (surprisingly strong numbers).

Barrons_econ This week will also see a smattering of earnings reports: Palm (PALM), Research in Motion (RIMM), Walgreens (WAG), Marriott (MAR), and Pepsi Bottling Group (PBC). Across the pond, my very favorite necktie designer, Ted Baker plc, reports on Thursday.

In terms of economic data, we are backloaded this week. The mack daddy of data points, NonFarm Payrolls, will be released on Friday (consensus = 115,000 new jobs). Was last month's negative NFP data an aberration, or a sign of things to come? Perhaps Friday's release will shed some light on the subject.  Other employment related data this week includes a preview of NFP via the ADP Employment Report, along with the Challenger Job-Cut Report Wednesday. On Thursday, we hear Jobless Claims, as well as the Monster Employment Index.

But its not just a week of employment data: On Monday, the ISM Mfg Index is released (ISM Non-Mfg Survey is on Wednesday). Tuesday is Same Store Store Sales and the Pending Home Sales Index. Other Central bankers weight in on Thursday, when the BOE and the ECB both announce any rate changes. Factory Orders are also released on Thursday, with Consumer Credit coming out later on Friday.

The other key factor investors should pay attention to is the credit crunch, and if its eased up very much. That will in turn could impact share buybacks and private equity LBOs.

It is also another week of Fedspeak, with speeches or Q&A from Dallas Federal Reserve Bank President Richard Fisher (2X), Federal Reserve Governors Frederic Mishkin, Donald Kohn and Kevin Warsh (all FOMC voting members) throughout the week.

Where to begin this week: The Dow within 1% of its all time highs? The Dollar near its all time lows? (Don't we have a strong dollar policy?) Retail Sales? Bonds? Housing?

Let's get it on!:

INVESTING & TRADING

Rate Cuts: Cheer or Jeer? The idea that interest-rate cuts are good for stocks is viewed as such an absolute truth on Wall Street that it isn't even a matter of debate. But the reality is a bit more complicated. Investors cheered when the Federal Reserve surprised the market last week with a larger-than-anticipated half-point rate cut. Academics applauded, too, because it gave them another piece of information that can be used to study the relationship between stocks and central-bank policy. (Wall Street Journal)

Goldman Sachs tiptoeing into the bear camp? Goldman Sachs has abandoned its ultra-bullish view of the world economy, warning of a likely recession in Japan and mounting risks that US property slump could spread to parts of Europe. In a new report, "The Global Economy Hits a Crunch", the US investment bank said it was no longer sure that Asia and Europe would be able to pick up the growth baton as America stumbled. It fears that turmoil is spreading beyond the debt markets to the factory floor. (Telegraph)    

The Mind and the Moment: Consider this mental state: Acceptance of what has happened combined with confidence about what will happen. That's the fascinating lessons on "conserving concentration" from tennis great Roger Federer that is very applicable to investors and traders. (Tennis World)

US dollar slide: The Financial Times asks: Can sentiment get any worse? As the dollar flirts with all-time lows on a trade-weighted basis, the smell of approaching capitulation is in the air. The bears have plenty of fodder. A need to rebalance the huge current account deficit has provided a solid long-term case for dollar weakness. The prop of higher-yielding dollars has been eroded by rising interest rates abroad and now pummelled by the Federal Reserve’s half-point cut. See also Robert Reich's Who Gets Hurt When the Dollar Slides? and NYT's As the Dollar Falls, New Doors Open to Currency Bets      

How often do you see me post anything nice about Mister Softee? Microsoft gets its game on: Microsoft scored a huge victory with the release of its Halo 3 video game. The final installment of Microsoft's wildly popular Xbox 360 first-person shooter trilogy attracted casual and hard-core gamers to midnight release parties across the country and set one-day sales records. In the 24 hours that followed, sales of the game set the all-time record for most revenue earned in a single day by any entertainment property. Microsoft said the game netted $170 million in sales in the United States in its first day. If true, that would top previous records set by the motion pictures Spider Man 3 and Harry Potter and the Deathly Hallows. (C/Net

An Early Look At Tax Brackets For Next Year: Most people will get a modest dose of tax relief next year. But high-income taxpayers are likely to receive a bigger portion. Each year, the government is required to adjust many tax-related numbers, including income thresholds, to reflect inflation. For example, in most cases, the top federal rate of 35% won't kick in unless taxable income received in 2008 exceeds $357,700, up from a threshold of $349,700 for 2007. Upper-income taxpayers will benefit not only from these changes -- which mean that more income will be taxed at lower rates -- but also from other inflation adjustments that will enable them to keep more of their itemized deductions and personal-exemption amounts. (Wall Street Journal)

Markets never spot the black swan   

Ethanol’s Boom Stalling as Glut Depresses Price: The ethanol boom of recent years — which spurred a frenzy of distillery construction, record corn prices, rising food prices and hopes of a new future for rural America — may be fading. Only last year, farmers here spoke of a biofuel gold rush, and they rejoiced as prices for ethanol and the corn used to produce it set records.But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks.  (New York Times)

 • Morgan Stanley's new man in Asia, Stephan Roach, discusses currencies in the New York Times: "Currencies are first and foremost relative prices — in essence, they are measures of the intrinsic value of one economy versus another. On that basis, the world has had no compunction in writing down the value of the United States over the past several years. The dollar, relative to the currencies of most of America’s trading partners, is off about 20 percent from its early 2002 peak. Recently it has hit new lows against the euro and a high-flying Canadian currency, likely a harbinger of more weakness to come . . ." Save the Day

The New $5 Bill (US Mint)

Getting Ready for the Roof to Fall  with mortgage defaults climbing and home sales falling, the plot line of this drama is becoming clear. But Gundlach says there are still several acts to come -- and that the curtain may not come down until the close of this decade. He sees U.S. home prices dropping an average of 12% to 15% annually from the highs achieved last year and not reaching their eventual trough until late 2008, at the earliest. And they may not start recovering until 2010 or 2011, inflicting, in the meantime, real damage on the economy. (Barron's)

Credit Crunch – The New Diet Snack for Financial Markets   


ECONOMY

The Wall of worry continues to build:

How Economy Could Survive Oil At $100 a Barrel: The world economy has managed, with some indigestion, to swallow the rise of oil prices past $80 a barrel. How well could it survive $100 a barrel? The answer is quite well -- so long as several conditions still hold true. The price rise would probably have to be gradual. Inflation couldn't get so bad as to force big interest-rate hikes. Oil-rich nations would need to pump their profits back into U.S. and European economies. All of this has happened so far. The happy confluence may continue, though fears remain strong that high energy prices will tip the U.S. into recession. (Wall Street Journal)

A Handy Translation Book: When the Fed says X, they really mean Y

There's No Inflation (If You Ignore Facts): Imagine that a cardiologist told you that aside from the irregular heartbeat, the stratospheric cholesterol count and a little blockage in your aorta, your core heart functions are just fine . . . (Newsweek)

New Concern: Business Spending Orders for durable goods such as computers and machinery tumbled in August, raising concerns that business spending may slow.The Commerce Department said orders for durable goods, which are items designed to last three years or more, fell 4.9% last month. Analysts had expected orders to decline, considering July's especially strong 6.1% gain. (Wall Street Journal)

Mortgage Withdrawals Driving UK Consumer Spending, Also

Ahead of the (yield) curve: Little noticed in the wake of the Federal Reserve's rate cuts one week ago is how much steeper the yield curve has become. That usually would be taken to mean that the risk of a recession has lessened. I think it is significant that it hasn't received more attention. The yield curve, of course, refers to the difference between shorter-term and longer-term interest rates. Normally, shorter-term rates are lower. Now and then, however, the situation becomes reversed; on these relatively rare occasions, the yield curve is said to be "inverted."  (Marketwatch)

• Argmax: Middle class squeeze see also Consumer Confidence Slumps, Home Sales Decline

September Unemployment Data Will Likely Shape Next Fed Move: With the economy under recession watch, Friday's coming report on September employment may give the strongest signal yet about whether the U.S. is headed for a painful contraction or a soft landing. The August report, which showed that monthly payrolls fell for the first time in four years, fueled recession fears and paved the way for an aggressive action by the Federal Reserve, which cut its target for the benchmark federal-funds rate by a half-percentage point. But some economists argue that technical problems bedeviled the August data and that September's tally will show a healthy jobs gain. Others aren't so sanguine. Either way, the September employment data should help clear up the confusion -- and provide a clue about the Fed's likely next move. (Wall Street Journal)



HOUSING

Continuation of Negative Annual Returns in Housing   

Foreclosures drag down home sales: The explosion in home foreclosures and a tightening in mortgage lending dragged down real estate prices in Massachusetts in August, a real estate research and publishing firm reported yesterday. Warren Group in Boston said median single-family home prices last month fell 4.9 percent, to $314,000, from August 2006 - the 16th consecutive month in which prices have declined. The number of sales in the period fell by 1.5 percent. (Boston Globe)  see also Foreclosure Pickings Are Plentiful but Not Easy

Wheeee! New Homes Sales, Prices in Freefall  See also Why Investors May Want To Shun Builders (WSJ)

Freddie Mac chief warns of recession: The US economy faces a 40 to 45 per cent risk of recession induced by the housing market downturn, the chief executive of Freddie Mac warned on Thursday as data showed sales of new homes hit a seven-year low in August. Richard Syron, chief executive of the government-sponsored mortgage company, said the credit squeeze had left some parts of the US housing market “literally frozen”. This was a “substantial depressive to the overall economy”. He forecast the Federal Reserve would make another “material” cut in interest rates. (FT)

National Association of Realtors (NAR) on "Temporary" Housing Problems but see Investors See Four Years’ Worth of Housing Slump      

Can These Mortgages Be Saved? Lenders, government officials and loan servicers, who take in borrowers’ monthly mortgage payments, contend that troubled borrowers everywhere are being helped to stay in their homes by those overseeing their loans. But neither data nor anecdotal evidence supports this view. A recent survey of 16 top subprime loan servicers by Moody’s Investors Service found that for the first six months of 2007, an average of only 1 percent of loans experiencing an interest rate adjustment, or reset, had been modified. (New York Times)

Is Florida Over? (Let's hope so!)  For almost a century, Florida has been a magnet for mobile Americans. The state's plentiful sunshine and open space has attracted "snowbirds" fleeing winter, retirees living out the last chapter of their lives and down-on-their-luck workers in search of jobs. A steady flow of newcomers has kept the state's population growing faster than the nation's, often much faster, since the 1920s. But for Americans on the move, Florida has become a less-appealing destination. Moving company Atlas Van Lines brought 6,700 families into Florida last year and took 8,000 out, the first time it has moved more out than in. The number of people from other states who switch to a Florida driver's license is down more than 8% from last year. And the state's crowded schools actually lost students last year, prompting many counties to cut back on their construction schedule and, in some cases, look to close schools. While foreigners continue to arrive at a rate of about 100,000 year, migration from inside the country is slowing. (Wall Street Journal)


TECHNOLOGY & SCIENCE

• The Guardian puts up online 15 great interviewss of the 20th Century, including Richard Nixon, John Lennon, Marlon Brando, F Scott Fitzgerald, Margaret Thatche, Malcolm X and Adolf Hitler.

Openmoko: Worthy open source iPhone competitor? The Economist and eWeek have all the details.

Google Earth Forces the Navy to Do Some Remodeling: The Naval Base Coronado near San Diego has gone unnoticed since it's groundbreaking in 1967. Then Google Earth had to come in and ruin everything. The satellite mapping site revealed to the public that, from the air, the structure was shaped like a swastika (oops!). Turns out that the Navy knew about this all along, but since the airspace over the Navy yard is restricted they thought no one would ever notice. Well, the Anti-Defamation League did . . . (Wired)   

Why it's really alright to be left-handed! 

National Geographic's Week in Photos

Why Living a Life of Gratitude Can Make You Happy

 



MUSIC BOOKS MOVIES TV FUN!

• The new Springsteen disc, Magic, gets released this week. I like the first single, Radio Nowhere. The New York Times, via a huge Arts & Leisure article, likes it alot: "There is a brightness of sound and a lightness of touch that are not quite like anything else Mr. Springsteen has done recently." 30 second audio clips of all songs are included. Also of interest: Who’ll be the next Springsteen? 

Has the new James T. Kirk been cast for Star Trek XI?   

• I had no idea that Dice Stacking was such an art

Mesmerizing video of basketball dribbling drills (via kottke)

 

If anyone saw the new release Blade Runner: Final Cut, please tell me what you thought!

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Got a comment, suggestion, link idea? Or do you just have something on your mind? The linkfest loves to get email!  If you've got something to say, then by all means please do.

Sunday, September 30, 2007 | 06:30 PM | Permalink | Comments (3) | TrackBack (0)
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MicroIslet Board of Directors

Sunday, September 30, 2007 | 03:00 PM

Since this was announced this week, and so many of you emailed me, I might as well make it official: this week, I joined the Board of Directors of MicroIslet (MIIS).

I have for quite some time liked their bio-technology -- an area that is far, far afield from whatever expertise I have. My own lack of medical expertise notwithstanding, their approach to managing diabetes seems to me to have lots of potential promise to resolve some of the problems that Diabetics encounter. 

Diabetes has run in my family (skipping a generation), has a genetic component, and hence, my interest in this space.

My prior issue with the company was never their technology -- it was the lack of communication by management. When the stock ran into trouble in late 2006, there was almost no public response from the company about it. The shares slid from $2.15 to pennies with not much said.  I had previously recommended the stock, with a $1 stop loss (Its now 61 cents).

Over time, I had been in contact with some of the larger shareholders, many of whom also "noticed" the lack of communication from (the former) management. I made a few suggestions as to what they should have done, what they should do in the future, in terms of investor relations, etc.

When the new regime came in, we spoke, discussed the firm's needs, I made some suggestions as to what should be dine differently. Long story short, I an now on the Board.

~~~

NOTE:  For obvious reasons, I will not be discussing any of the particulars of the company going forward. I am writing this now because I do not yet have any non public material inside information. This will very likely be my one and only post on MicroIslet.

Suffice it to say that this space is quite dynamic: Thanks to our increasingly fat planet, Diabetes has become epidemic world-wide, and whatever company develops a treatment and/or cure stands to make its investors a lot of money . . .

Those of you who are interested should do your homework into the various competitive Diabetes treatment companies, including this one.

Sunday, September 30, 2007 | 03:00 PM | Permalink | Comments (6) | TrackBack (0)
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There's No Inflation (If You Ignore Facts)

Sunday, September 30, 2007 | 08:14 AM

First Bloomberg, now Newsweek:

One of our favorite topics -- inflation ex-inflation -- has been slowly creeping into the mainstream. We have been hammering away on this for years; the surprise half point cut by the Fed is the most likely reason as to why the MSM seems to have discovered this meme.

Here's the latest from Dan Gross' Contrary Indicator column in Newsweek:

"Readings on core inflation have improved modestly this year," the Federal Open Market Committee said in justifying its 50-basis-point interest-rate cut last month, while conceding that "some inflation risks remain."

Catch that bit about "core inflation"? That's Fedspeak for: inflation is under control, unless you look at the costs of things that are going up. The core rate excludes the prices of food and energy, which can be volatile from month to month. Factor them in, and inflation is about as moderate as Newt Gingrich. In the first eight months of 2007, the consumer price index—the main gauge of inflation—rose at a 3.7 percent annual rate. That's more than 50 percent higher than the mild 2.3 percent core rate. The prices of energy and food are soaring, at 12.7 percent and 5.6 percent annual rates, respectively, and have been doing so for years. As a result, the CPI—including food and energy—has risen 12.6 percent since July 2003, for a compound rate of about 3 percent.

Signs of inflation are evident throughout the economy. When investors fear a rising inflationary tide, they latch onto the driftwood of gold. The day Bernanke cut rates, the price of the precious metal soared to heights not seen since 1980, when inflation ran at nearly 12 percent! I read about this in The Wall Street Journal (whose newsstand price rose 50 percent in July), which I picked up in the lobby of a New York hotel (where the average nightly rate soared 12.5 percent in the first seven months of 2007 from 2006, according to PKF Consulting) while sipping on a Starbucks Frappuccino (whose price has risen twice since last October)."

The whole article is wroth your time to read . . .


>



Source:
There's No Inflation (If You Ignore Facts)
Dan Gross
Newsweek, Oct. 8, 2007
http://www.msnbc.msn.com/id/21047604

Sunday, September 30, 2007 | 08:14 AM | Permalink | Comments (31) | TrackBack (1)
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Autumn Linkfest: Week in Review

Saturday, September 29, 2007 | 06:30 PM

And that's the bell!

At the end of the qurter, we see the scoreboard is rather different than many imagined just a few short volatile weeks ago.

The leader for the third quarter is the Nasdaq,which added a solid 3.8%. The Dow Industrials were right behind, gaining 3.6%. Leadership continues to come from Tech and very big cap. The S&P 500 was held back by the financial sector, and gained less than half of what the Dow did -- a mere 1.6%. The big loser were the small-caps, with  Russell 2000, sliding 3.4%. Since the Fed cut the discount rate on August 16, the S&P500 is up 11%. Both the Dow and the Nasdaq gained 4% in the the month of September.

Hotnot_20070928For the week, the big winners were emerging market stocks; They gained 3.8% for the week -- as much as the Nazz did for the quarter! Gold added 1.5%, while REITs saw a gain of 1.4%, as the dollar's slide continued, falling 0.6% against a trade weighted basket of currencies.

Barron's Trader column noted that the "Dow Jones Industrial Average has climbed in the fourth quarter for nine consecutive years, and in 24 of the past 27 years. The Standard & Poor's 500 has produced fourth-quarter rallies in 13 of the past 15 years."

Will this 4th quarter be as market friendly as Qs gone by?  Perhaps not; Barron's Trader column quotes Goldman Sachs economist Jan Hatzius:

"But for all the hopes, there are plot twists that could thwart this year's happy ending. For a start, last year's economic rot was well-contained within the housing market and proved meaningful enough to push rates lower but not enough to dent S&P 500 earnings. So even as housing slumped, consumer spending managed to improve 3.3% over last year's second half, due to the twin tailwinds of declining rates and waning energy costs.

"This year, things look different," says Goldman Sachs economist Jan Hatzius. Consumer-spending growth has already slowed to 2%, which could affect a greater swath of consumer-dependent companies and retailers. "Rates have eased, but credit is tighter." A reprieve from high oil prices also looks unlikely, with crude oil up 34% this year and gas-refining spreads threatening to widen."   

The key will be Q3 earnings. If they stay strong, the Bulls will keep the rally going; If they fall precipitously, then recession talk will begin in earnest, and investors may seek more defensive asset classes.

But that's still weeks away. For now,we have some links to click!:

INVESTING & TRADING

U.S. Stocks Have Biggest September Gain Since 1998 on Rate Cut: U.S. stocks rose this week to complete the steepest September advance since 1998 as the Federal Reserve's interest-rate cut helped energy and raw-material companies lead the market's recovery from a summer rout. It was the fifth straight quarter of gains for the  Standard & Poor's 500 Index. The Fed's Sept. 18 reduction to 4.75 percent of its rate for overnight loans sustained the stock market's recovery from losses spurred by subprime-mortgage defaults. In July and August, the S&P 500 had the largest slump in four years. (Bloomberg)

Tech Stocks Get Giddy :) Technology stocks are posting big gains, after a long period when they were scoffed at by the market, and some money managers say the recent rally is just the beginning. [This week] three of the best-known tech stocks finished at all-time highs: Google Inc., Apple Inc. and BlackBerry maker Research in Motion Ltd. And the tech-dominated Nasdaq-100 index of large nonfinancial stocks is now up 18% so far this year, reaching its highest level since February 2001. "There's a lot to be positive about in tech," says Bruce Bartlett, a portfolio manager at the $263 million Lord Abbett Large-Cap Growth Fund, which has roughly 30% of its assets in tech stocks. (Wall Street Journal)

• Bear Stearns snookered the NYT, CNBC, and lots of other folks the other day with a far-fetched story about Warren Buffett. The very next day, they issued a few billion in new debt. I was having absolutely none of it: Buffett to Buy Bear? Bull$%*#

• Merrill Lynch's 10 major macro themes of the past week (PDF)   

Most hedge fund strategies lost money in August: Most hedge fund strategies lost money last month as the effect of the credit crisis swept through the $1.7 trillion industry, according to firms that track manager performance.Funds run by firms including SAC  Capital, Red Kite and Third Point were among those affected.An index of hedge fund managers run by Credit Suisse (CS) and Tremont Capital Management fell 1.53% in August, leaving it up 7.03% so far in 2007, the firms said on Monday.All the different strategies tracked by Credit Suisse and Tremont lost money last month, including managers with a short bias, who mostly bet on declines in the price of securities, the firms noted. (Marketwatch) 

Still Seeing Bargains, Selectively: The Federal Reserve’s interest rate cut has given fresh momentum to the stock market, but that could make buying opportunities harder to come by. Still, fund managers say they are finding companies that offer solid growth prospects at a decent valuation.(New York Times)

Fed's Rate Move Slows Nasdaq Bears: Short-selling activity fell sharply on the tech-stock-led Nasdaq Stock Market in the latest monthly reporting period, which included a rally in tech shares as investors placed their bets ahead of the Federal Reserve's latest interest-rate cut. (Wall Street Journal) but see European Stocks Post Quarterly Loss   

Brokers' Fictitious Gains: Most of the Street applauded earnings by the big brokers. They shouldn't have -- the earnings gains, which were due to a new accounting rule, don't exist.   see also Why I Distrust Goldman Sachs’ Good Fortune (NY Post)

Papers Study August Crisis, From First Wave to Last Ripple: Smart investors love crises. People panic, everything gets out of whack, securities get cheaper, and the world gets more interesting. Academic types also love crises because they produce data, which prompts questions and every once in a while produces some answers. August, the month in which everything went awry on Wall Street, offered up fascinating data. The financial world trembled, which it does every so often, and even though everyone seemed to know it was coming, everyone seemed surprised. Two recent papers, one academic and one written for investors, examine the August unwind. They reach similar conclusions about risk (there is more of it) and the cause of the collapse (an unknown multibillion-dollar fund unwinding), but they differ slightly on what it means for the types of hedge funds that were most affected. (New York Times)

The Barron's 400: You gotta think an ETF is soon to follow . . . 

How Wal-Mart accidentally became "green": The “Wal-Mart environmental moment” starts with the C.E.O. adopting a green branding strategy as a purely defensive, public relations, marketing move. Then an accident happens — someone in the shipping department takes it seriously and comes up with a new way to package the latest product and saves $100,000. This gets the attention of the C.E.O., who turns to his P.R. adviser and says, “Well, isn’t that interesting? Get me a sustainability expert. Let’s do this some more.” The company then hires a sustainability officer, and he starts showing how green design, manufacturing and materials can save money in other areas. Then the really smart C.E.O.’s realize they have to become their own C.E.O. — chief energy officer — and they start demanding that energy efficiency become core to everything the company does, from how its employees travel to how its products are manufactured. (New York Times)

Betting On Yahoo! (Forbes)

A SHORT COURSE IN THINKING ABOUT THINKING with the co-creator of behavioral economics, Danny Kahneman   


ECONOMY

The Wall of worry continues to build:

• We have long argued that CPI Inflation Data is a "Lie". For the most part, the media has dutifully reported the nonsensical CPI data as if it were scripture. This drumbeat of criticism -- both here and elsewhere --  has begun to penetrate the MSM. We've seen a few critical columns over the past year or so. But I never expected to see this kind of critical reporting in a mainstream outlet such as Bloomberg. See also Speechless on Core CPI

In Sequel, Fears Of Stagflation Haunt Economy: There hasn't been serious stagflation since the 1970s and early 1980s, when inflation and unemployment hit double digits. With inflation, expectations make all the difference, and inflation expectations are much lower and more anchored now than then.In the 1970s, an oil-price shock helped to convince people that all prices would keep soaring. Businesses passed higher costs to customers and workers demanded huge wage boosts. Inflation became a fact of life.By 1980, the Philadelphia Federal Reserve's inflation expectation survey found professional forecasters anticipated consumer-price inflation of nearly 9% annually over 10 years.In the first half of this year, the survey projected long-term inflation at less than 2.5%. Consumers and businesses are now used to low inflation. Having learned from history, central bankers are more vigilant.(Wall Street Journal)

Is the Fed Deflating?   

Fed Bank Presidents Warn Against Assuming an October Rate Cut: Four Federal Reserve bank presidents warned investors against assuming the central bank will lower interest rates in October, indicating that weaker economic data would be needed to justify the move. "It would be a mistake for markets to bake into the cake the assumption of ongoing rate cuts,'' St. Louis President William Poole said today in New York. Atlanta Fed President Dennis Lockhart said he had an ``open mind'' on the need for further reductions. The remarks are at odds with traders, who are betting that the Fed will lower borrowing costs for a second straight meeting on Oct. 31, interest-rate futures show. Stocks fell to their lows of the day after Poole's remarks. (Bloomberg)

The Econoblogosphere!

• Inflation rates in China are very high: Food inflation is running 18.2% year-over-year, led by meat and poultry (49%) eggs (23.4%) and vegetables (22.5%): see Exporting Inflation from China   see also Inflation is Dead? Part II

Housing Chill Grows Worse, Bites Consumers: The housing market is going into a deeper chill, and consumers are starting to shiver.Sales of existing homes in August fell sharply, and home inventories by one measure soared to an 18-year high, according to data released yesterday. One major home builder, D.R. Horton Inc., is auctioning homes this weekend with starting prices for some units at 50% off an earlier price.The housing market is worrying consumers, raising fresh concerns about economic growth. Consumer confidence fell this month to its lowest level in almost two years, a new survey showed. Retailers such as Lowe's Cos. and Target Corp. said they're feeling the pain. Both reported softer-than-expected sales Monday. (Wall Street Journal)

 


TECHNOLOGY/MEDIA/SCIENCE

• CNBC reshuffles their line up: Fast Money to 5:00 pm; Kudlow & Co. to 7:00pm   

• Apple iTunes killer? Not quite but, Amazon's DRM-Free MP3s is quite interesting.

GovTrack.us is a nexus of information about the United States Congress. Bringing together information on the status of federal legislation, voting records, and other congressional data from official sources, and turning it into an understandable and trackable free information resource for everyday citizens, GovTrack aims to narrow the divide between the public and our government.

Run away the ray-gun is coming : We test US army's new secret weapon    

The Piracy Paradox: A recent paper by the law professors Kal Raustiala and Christopher Sprigman suggests that weak intellectual-property rules, far from hurting the fashion industry, have instead been integral to its success. The professors call this effect “the piracy paradox.” (New Yorker)   

Trust in Federal Government, On Nearly All Issues, Hits New Low -- Even Less Than in
Watergate Era
   

'Miracle' saved teenager's eye after chair assault The xrays are astounding . . . 

 



MUSIC BOOKS MOVIES TV FUN!

• One of the all time great science fiction movies is finally restored to its director's original specs: BLADE RUNNER: FINAL CUT NYC makes its big screen debut in NYC Saturday night.  The Q&A we mentioned last week with director Ridley Scott is now on line. Also, BR Movie is an utterly massive Blade Runner fan site.   

RIAA Complaint Dismissed as "Boilerplate"   

The top 10 hand gestures you’d better get right      

 

This week, we end with a quote: 

"The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians.  "It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait."  - G. K. Chesterton

~~~

Got a comment, suggestion, link idea? Or do you just have something on your mind? The linkfest loves to get email!  If you've got something to say, then by all means please do.

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NAR on "Temporary" Housing Problems

Saturday, September 29, 2007 | 09:53 AM

I almost miss David Lereah. He was the former chief economist for the National Association of Realtors (NAR), and author of many fabulous books on how to lose all your money in Real Estate (as well as Tech/Telecom/Internet stocks). Since Housing peaked in August 2005, we could always count on Lereah for some utterly ridiculous economic absurdity, explaining why the Housing numbers really weren't that bad, and why the-bottom-was-in !

Sheer, delightful idiocy.

It was great theater. Each month the NAR could be counted on for denial, cheerleading, and blind stupidity. When the NAR ended up with a new, somewhat less-hallucinogenic chief economist, I was actually a bit disappointed.

Well, cheer up kids! At least a little of the ole psilocybin may be back in the NAR drinking water. This month, they served up the following delightful headline:

August Existing-Home Sales Fall on Temporary Mortgage Problems

And ya know, these problems ARE "temporary." Thanks to the entropy of the universe, eventually all real estate will disappear as the universe eventually succumbs to its own mortality (heat death). So if you want to be technical about it, all problems are temporary. Thank you, Lawrence Yun, for that bit of existential insight.

Where was I? Oh, yes, real estate.

What did this month's NAR report have to say?

• Mortgage availability problems peaked in August (How they know this, I cannot say. But if they said it, well, there's a chance its true: A very, very small chance).

• There were unusual disruptions in the mortgage market. (Really? I must have issed 'em)

• We saw a fairly high number of postponed or cancelled sales. (I guess this must be a fairly new phenomena)

• Lower sales contributed to a buildup of unsold inventory. (duh)

• The NAR expects similar results for home sales in September.

Sow while the NAR cannot help themselves but spin the data somewhat -- a flack is a flack is a flack -- they are no where near Baghdad Bob's levels.

Of course, most sober commentators who reviewed the data were much more circumspect. Our own response to this week's utterly dreadful Housing datapoints were of that ilk:

Wheeee! New Homes Sales, Prices in Freefall

Continuation of Negative Annual Returns in Housing   

Warnings of a Housing Crisis (in Real Time) 

But to really get a sense of how poor the data was, check out what  Floyd Norris wrote in the NYT today:

"With sales of both new and existing homes down, more homes are now on the market than ever before — almost 4.5 million, a figure that is nearly double the number in early 2005, when prices were rising and home builders were reporting high profits.

And many of those homes have been on the market for a while. Of the 178,000 completed new homes that were available for sale at the end of July, fewer than 15 percent found buyers in August. That was the lowest rate in more than a decade.

In late 2006, it appeared that the housing market had stabilized after falling, with new homes selling at a seasonally adjusted annual rate of about one million, and investors bid up the price of home builder stocks.

But with all the bad news, those prices have fallen to new lows. The pace of new-home sales in August was just 795,000, a seven-year low."

But the money shot is the accompanying graphic:

0929bizchartsweb

graphic courtesy of the NYT
>

By late 2008, or even 2009, we should Housing more "normalized. But between now and then, we should expect to see prices drop more, until much of the huge inventory build gets worked off. For those of you who put more faith into futures markets than I do, note that prices aren't shown bottoming until 2010. 

Temporary?  I guess if your definition of temporary is a few years, well then yeah -- its temporary.  But so is everything else . . .


>

Sources:
August Existing-Home Sales Fall on Temporary Mortgage Problems
NAR September 25, 2007
http://www.realtor.org/press_room/news_releases/2007/ehs_aug07_sales_fall_temporary.html

For Housing, the Summer of the Unsold
FLOYD NORRIS
NYT, September 29, 2007
http://www.nytimes.com/2007/09/29/business/29chart.html 

Saturday, September 29, 2007 | 09:53 AM | Permalink | Comments (20) | TrackBack (0)
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BLADE RUNNER: FINAL CUT NYC Saturday

Friday, September 28, 2007 | 07:30 PM

Blade_runner_5_2That's right kids, its coming:  The preview of the Final Cut is Saturday Night, 9pm, at the THE 45th NEW YORK FILM FESTIVAL (full schedule here).

Here's the official blurb:

"Blade Runner: The Final Cut
Series: The 45th New York Film Festival [Sep 28 - Oct 14 2007]
Director: Ridley Scott, Country: USA, Release: 2007, Runtime: 118   

Ridley Scott’s legendary adaptation of Phillip K. Dick’s Do Androids Dream of Electric Sheep? gave us a startling vision of a noir-ishly dystopic future, in which the line between human and non-human has worn perilously thin.

Scott’s masterpiece not only anticipated our future but designed it: Much of our world today appears, well, just so Blade Runner. To commemorate its 25th anniversary, Scott has gone back, corrected a few details and fashioned a version that he feels is closest to what he had originally intended.

One of the greatest American films of the Eighties has just gotten even better.
(A Warner Bros. release.)

In addition to screening Blade Runner: The Final Cut, our 25th anniversary salute to this key work of science fiction includes "The Future Is Now," a panel discussion with prominent film scholars."

I also see that one of the screenings is taking place at the single best movie theater on the planet: The Ziegfeld (141 West 54th Street).

Very very cool.

Blade_runner_4 As we noted previously, the 5 DVD disc  Blade Runner set is to follow next year. I am not sure if there will be a wider theatrical release, but one can hope.



>


Source:
Blade Runner: The Final Cut
The 45th New York Film Festival
Sep 29 - Oct 14 2007
http://www.filmlinc.com/nyff/program/films/bladerunner.html

Friday, September 28, 2007 | 07:30 PM | Permalink | Comments (9) | TrackBack (2)
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UAW/GM Modern Times

Friday, September 28, 2007 | 03:43 PM

I haven't really commented much about the GM/UAW.

Mostly, because I don't have much interest insight into either side of the debate.

And while I love older GM cars -- especially 1950s and a few early 60s -- I am not a fan of their present wares  ('Vette, Skyy and Solstice notwithstanding).

This perfectly sums up what just happened.

Uaw_modern_times

Friday, September 28, 2007 | 03:43 PM | Permalink | Comments (31) | TrackBack (0)
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Exporting Inflation from China

Friday, September 28, 2007 | 10:46 AM

China_bls

Speaking of Inflation, you can actually see the official inflation rate of China here:

Some of the actual data: Food inflation is running 18.2% year-over-year, led by meat and poultry (49%) eggs (23.4%) and vegetables (22.5%).

Health care in China was low (2.3%) -- hey, its a communist state, and those costs are fixed by the Central government.

Also low: Booze and cigarettes -- 1.7% year-over-year, (mostly because they do not carry the new ultra-premium vodkas we have here).

China_cpi

Some oddities:

Transportation & communication were negative. Why are these two lumped together?  I strongly doubt that the price drops in telecommunication equipment offset the rise in Crude Oil and gasoline prices. Oh, wait, those prices are also fixed by the central planners. (Communism defeats inflation? How long can that last for?).

Residences gained 4.3%.

~~~

There is a sad element to this:  Why is it that Communist propagandists at the National Bureau of Statistics of China are at least as truthful about price increases, if not more so, than we are here in America . . .

Friday, September 28, 2007 | 10:46 AM | Permalink | Comments (49) | TrackBack (1)
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Speechless on Core CPI

Friday, September 28, 2007 | 07:23 AM

I did a really crappy job last night responding to Jason Trennert's comments on inflation. Mostly because I was stunned that, at this point, anyone is seriously going to argue that inflation is benign.   

I am paraphrasing, but Jason (an otherwise very nice guy) said words to the effect of "The Fed’s preferred inflation measure, Core PCE, showed  little or no inflation (+1.4%)."

Meanwhile, Gold, Crude Oil, soft commodities and the CRB Index all rallied to new highs as the US Dollar $ declined to new lows. The front page of today's WSJ has an article: Historic Surge In Grain Prices Roils Markets  . . .  but there's no inflation.

I wonder what people will be saying when the September CPI comes out. It will be substantially higher due to soaring energy and food prices this month. Oh, wait, that's not in the core. (Nevermind).

>
No Inflation here:

Comm_indices

>

Gee, I wonder why the Fed prefers Core PCE as an inflation measure -- instead of what is occurring in the real world?

Ironically, while Wall Street pundits and economists lap up obviously defective government data, the rest of the country is having none of it: According to this recent Gallup poll, public trust in the Federal Government -- across the board, on nearly every issue -- is at or near all time lows.

The government now ranks lower than it did post-Watergate:

"A new Gallup poll reveals that, as the organization puts it, Americans now "express less trust in the federal government than at any point in the past decade, and trust in many federal government institutions is now lower than it was during the Watergate era, generally recognized as the low point in American history for trust in government."

Among the findings: Barely half trust the government to handle international problems, the lowest number ever. And less than half express faith in the government handling domestic issues, the lowest findings since 1976.

Faith in the executive branch has fallen to 43% -- only 3% higher than it was just before President Nixon's resignation in 1974. At the same time, trust in Congress, at 50%, is its lowest ever.

Gallup has asked about trust in government since 1972. It conducted this year's poll Sept. 14-16 and found the following:

-- Barely half of Americans, 51%, say they have a "great deal" or "fair amount" of trust in the federal government to handle international problems.

-- Less than half of Americans, 47%, now have at least a fair amount of trust in the federal government to handle domestic problems."

The apportionment of this can be debated. I put about 60% of it on the White House -- primarily Iraq, Katrina, and the bifurcated economy -- and 40% on the Congress.

When the GOP controlled the legislative branch, they were either spending taxpayer money like drunken sailors on shore leave, chasing interns, or having gay sex in airport bathrooms. You know, the business of the people.

Now that the Democrats control Congress, they appear to this Independent to be nearly as bumbling and incompetent as the executive branch.

It almost makes you think Mark Twain was right: "Why Vote? It only encourages them!"

>

Source:
GALLUP: Trust in Federal Government, On Nearly All Issues, Hits New Low
Even Less Than in Watergate Era
E&P, September 27, 2007 10:30 AM ET
http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003647275

Low Trust in Federal Government Rivals Watergate Era Levels
Trust in state, local governments holding steady
Jeffrey M. Jones
GALLUP NEWS SERVICE, September 26, 2007
http://www.galluppoll.com/content/default.aspx?ci=28795

Historic Surge In Grain Prices Roils Markets
SCOTT KILMAN
WSJ, September 28, 2007; Page A1
http://online.wsj.com/article/SB119093856250042023.html

Friday, September 28, 2007 | 07:23 AM | Permalink | Comments (66) | TrackBack (1)
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Fast Money to 5:00 pm; Kudlow & Co. to 7:00pm

Friday, September 28, 2007 | 04:26 AM

In case you missed this announcement last night, The Big Picture broke the news about some CNBC programming changes.

Starting October 10th, Kudlow & Company moves to 7:00pm. That will allow the first half of the show to be economic/stock focused, and put the political/policy half of the show closer to Prime Time.

At the same Time, Fast Money moves to 5:00 pm: Its a more trading oriented show, and their audience is still sitting at the desks and turrets wrapping up the day.

With this shift, they are doing something that I have long been advocating for: Moving some shows around so as to better match up the content with the most suitable time slot and appropriate audiences.

Given the coming competition from Fox, this makes sense to me. Fast money has become the premiere CNBC show, with ratings that are still rising. Mad Money, though still getting respectable numbers, has slid considerably. And the move to 7:00pm frees up Kudlow & Co. to become a more pundit/policy wonk type of show.

expect to see more tinkering with the CNBC line up in the coming weeks . . .

Friday, September 28, 2007 | 04:26 AM | Permalink | Comments (11) | TrackBack (0)
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