June Linkfest, part II

Sunday, June 03, 2007 | 06:30 PM

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

You may notice that the Sunday edition tends to be heavy on the prospective questions: That is by design. We try to review the issues and events that will matter in the coming days and weeks -- what sectors are worth scrutinizing, what stocks could see action. Part I, on the other hand, looks more at what already happened and why.

Barrons_econ_calendar_6407 Q1 earnings season is all but over, and the coming week is light on economic releases: On Monday, we get Factory Orders, Tuesday sees Same Store Sales and ISM Non-Mfg Survey.  Productivity and Costs data comes out Wednesday, and Thursday is the May Retail Sales report. Consensus (according to Dow Jones) is for a 2.5% increase in same-store sales. That's in between last month's abysmal 2% decline and last year's strong 4.5% gain. On Friday, we get the release of April's trade balance. According to Bloomberg, a consensus predicts a sleight narrowing of the deficit.      

One of the bigger conferences this week is the American Society of Clinical Oncology (the full list of topics of the 43rd ASCO Annual Meeting begins on page 9) -- news from the conference has the potential to drive certain biotech and big pharma stock prices.

This week will see a plenty of international activity: On Tuesday morning, U.S. Fed Chairman Ben Bernanke will conference with ECB President Jean-Claude Trichet and Bank of Japan Governor Toshihiko Fukui at a monetary conference. The European Central Bank (ECB) announces a rate decision on Wednesday (a 1/4 point increase is expected), while the Bank of England (BOE) announcement is on Thursday; with the U.K. Economy expanding faster (2.9%) than most economists forecast, another rate hike might be in the offing -- if not June, than August.

Also on this week's agenda: The Group of Eight summit begins Wednesday. President Bush is expected to meet extensively with France's new President, Nicolas Sarkozy for their first formal talks. And, the President will privately meet with Russian President Vladimir Putin.

One other note: While you were sleeping, the FBI broke up a plot to bomb fuel lines at JFK.

Last, Scooter" Libby gets sentenced this week in the CIA leak case. Regardless, many expect him to be pardoned after the November 2008 elections are over (I have no opinion on this one!). 

Let's get clicking:

INVESTING & TRADING

Benchmark yield seen barreling through 5% soon: Recent strong data reports and soaring global economic growth have made it harder for investors to believe that a Fed rate cut is in the works -- even if the U.S. housing sector continues to struggle and some analysts think that the labor market is not as strong as U.S. statistics show it to be."If you take out the U.S., global growth is around 5% and you have rate tightening by the European Central and the Bank of England." (Marketwatch)

• A TheStreet.com smackdown:

Several Factors Point to End of Rally
      versus:
Rally Isn't Quite Finished Yet

*Equity analysts facing new quant challenge: Wall Street equity analysts have had their share of problems in recent years, from regulatory heat to budget cuts to a loss of star power and prestige. Now, with the growth of quantitative analysis, some are facing a worse possible fate: being supplanted by computers. At an increasing number of Wall Street investment banks, hedge funds and elsewhere, computers are churning out investment analyses culled from enormous pools of data. (Reuters)  *This is probably my most significant link of the day.

Coattail caveats: This notion of coattail investing becomes infinitely more difficult in the world of hedge funds. The challenges are at least two-fold. First hedge funds in all likelihood have a shorter time horizon than most mutual funds. Therefore by the time data is released publicly it may be stale, i.e. the hedge fund may have already exited said position.

Real & Private Fixed Investment

Charting the Bull's Next Move:  Yes, the technical analysts -- those folks who scrutinize price charts and trading volume in search of clues as to which market, industry group or stock is poised to generate outsize returns or tank -- are no more ready to return to the irrational exuberance of a decade ago than their counterparts, the fundamental analysts. Both camps, it seems, are united in a wary acceptance of the market's recent gains. (Barron's)

Burgeoning Treasury Yields Loom Over Stocks: While stock investors have welcomed signs of a stable, growing economy lately, they also have shrugged off a potentially troublesome byproduct: higher Treasury yields. Because those yields are the basis to price various forms of debt, including mortgages and corporate loans, a sustained rise can signal rough going ahead in key parts of the economy. Also, as Treasury yields rise, bonds and other debt securities become more attractive as an investment, and could draw buyers away from the stock market. (Wall Street Journal)
 

Quirky link of the dayIt's an all-star performance: The use of astrological charting in the financial world may seem  unconventional but, according to this article, it is a much more commonly-used device than you might expect. (FT)

Inside the Black Box of Google: At its core, Google remains a search engine. And its search pages, blue hyperlinks set against a bland, white background, have made it the most visited, most profitable and arguably the most powerful company on the Internet. Google is the homework helper, navigator and yellow pages for half a billion users, able to find the most improbable needles in the world’s largest haystack of information in just the blink of an eye. (New York Times)

New rules altering brokerage relationships: It's time to sit down and have a nice long talk with your financial adviser, especially if she works at a bank or brokerage firm. It's likely that you'll soon have to change -- or at least define more carefully -- the way your account is set up, so it pays to know what you're facing. Investors who get their financial advice through so-called "fee-based" accounts are most likely to be affected. (Reuters)


ECONOMY

The Wall of worry continues to build:

Suprise! You are making less than your dad did!: Report reveals that American men in their 30s earn less than their fathers did, as family income growth decelerates. American men in their 30s are earning less than their father's generation did, challenging a long-held belief that each generation will be better off than the one that preceded it, according to a new study published Friday. The report, the first in an ongoing 18-month study on economic mobility in the United States, also revealed that the income growth of the median American household is declining. (CNNMoney)

The Return of NILF

Rules 'hiding' trillions in U.S. debt: The federal government recorded a $1.3 trillion loss last year — far more than the official $248 billion deficit — when corporate-style accounting standards are used, a USA TODAY analysis shows. The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military personnel. The loss — equal to $11,434 per household — is more than Americans paid in income taxes in 2006. Total liability is $516,348 per U.S. household. (USA Today)

The Steakhouse Index Their stocks are down. Should we worry about the rest of the economy?  (Slate)

Death Pool in Detroit: Anyone who has spent any time in Detroit recently will tell you it is by all apparent indications a dying city. Crumbling buildings, widespread decay and a population in flight make for a depressing landscape. Detroit's fortunes have always been tied intimately to the fortunes of the U.S. auto industry. So it's hardly surprising that a look at Ford's (F) and General Motors' (GM) balance sheets will show just as much decay and devastation as a trip through Detroit's worst slums. The only real question is: Which automaker will declare bankruptcy first?

Bernanke Pulled in Different Directions by Economy: Federal Reserve Chairman Ben S. Bernanke is pulled in opposite directions by worries over inflation and housing, leaving him little choice other than to keep interest rates unchanged. Fed officials said they still expect a pickup in the economy this year and view inflation as their main concern, minutes of their May 9 meeting showed yesterday. They listed several caveats, including the risk that the housing recession may "weigh heavily'' on growth. (Bloomberg)

 

How Long Can the Fed Fight a Lagging Variable?  (PIMCO)

 



HOUSING & REAL ESTATE

Skyscraper Prices Might Start Returning to Earth: After an unprecedented boom that saw values of skyscrapers and other commercial real-estate properties double and even triple in price, there are signs that investors and lenders are turning cautious. The Wall Street Journal asks "Is the buying frenzy nearing its peak?" (free)

Some More Housing Charts

Subprime Fiasco Exposes Manipulation by Mortgage Brokerages: After years of easy profits, a chain reaction of delinquency, default and foreclosure has ripped through the subprime mortgage industry, which originated $722 billion of loans last year. Since the beginning of 2006, more than 50 U.S. mortgage companies have put themselves up for sale, closed or declared bankruptcy, according to data compiled by Bloomberg...Brokers are merely the first link in a chain stretching from mortgage companies, which originate loans; to wholesale lenders, which bundle them together; to Wall Street banks, which package the bundles into securities; and finally to commercial banks, hedge funds and pension funds, which buy these investments. (Bloomberg)    

Speed of subprime bust surprises lenders: The subprime mortgage meltdown has been a shock to industry insiders, but now they say it's hitting harder and faster than expected - even to those who predicted the crisis in the first place. (CNN Money)


WAR/MEDIA/POLITICS/ENERGY

More Murdoch Malefaction  "Having accepted Rupert Murdoch's invitation to sit down with him and his kin to discuss the possible sale of Dow Jones & Co., the Bancroft family should come to the meeting with a bundle of impolite questions to ask the mogul about his plans for the Wall Street Journal. The rotten old bastard intends to charm them all with his lies, as he has his previous marks. To cancel his spell, I suggest that every Bancroft purchase a copy of Marilyn Nissenson's new book, The Lady Upstairs: Dorothy Schiff and the New York Post, and read the section about how Murdoch acquired Schiff's newspaper." (Slate)

•  Records: Senators who OK'd war didn't read key report (CNN)

California says no to coal, but world disagrees: California took its final step toward weaning itself off coal last week, while the rest of the nation -- and the world -- continued going resolutely in the opposite direction, one that environmentalists say bodes ill for the fight against global warming. (San Francisco Chronicle)

Hmmmm, minty anti-freeze! Q&A: Why China Tops the FDA Import Refusal List: The discovery of the chemical melamine in U.S. pet and livestock food earlier this spring has triggered a wider FDA investigation into the possible contamination of food imports from China. The tainted pet food is blamed for killing cats and dogs in the United States, and has been traced to two Chinese manufacturers who added the chemical — used to make plastics and sterilize swimming pools — to wheat and rice products to make them appear protein-rich. (NPR) See also Toxic Toothpaste Made in China Is Found in U.S.

Global Debate Is Just Heating Up: Suddenly, it seems, everyone is talking about global warming. A big worry for diplomats gathering to discuss the issue this coming week at a meeting in Germany of the Group of Eight leading nations is that their countries may actually have to do something about it. (Wall Street Journal)


MUSIC BOOKS MOVIES TV FUN!

• The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business looks like an interesting if wonkish economic history. Bloomberg's Caroline Baum book review is here.

• The German imitation of YouTube: WebNews.de

• Which leads me to this video clip from the South African jungle. It is utterly fascinating -- I personally guarantee you have never seen anything like this before: Battle at Kruger: Lions, Buffalo, Crocodile -- Totally, amazing.

 

The media question on my mind: Who will win the prize that is the WSJ/Dow Jones? Murdoch is clearly the front runner, I previously suggested Yahoo!, others have said Microsoft, GE, NYT and the Washington Post Group.

Any suggestions who will emerge victorious?  Send your ideas for who is most likely to will win -- and who SHOULD win -- here.

Sunday, June 03, 2007 | 06:30 PM | Permalink | Comments (14) | TrackBack (0)
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Comments

So in a post that includes
• Suprise! You are making less than your dad did!:,
you think the fact that
• *Equity analysts facing new quant challenge:
is probably your most significant link of the day?

Sorry Barry but I'd have to take issue with that one. Usually, I take these think tank reports with a few grains of salt since the originators tend to be biased to one side or the other of the political spectrum and the results usually reflect what one would expect to hear from a particular side. This one, however, appears to be fairly nonpartisan and confirms what many have suspected for some time. In a nutshell, children doing better than their parents is the so-called American Dream. Very sad.

Posted by: RMX | Jun 3, 2007 11:03:19 PM

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