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Tuesday, July 31, 2007 | 04:09 PM

in Derivatives | Markets | Psychology/Sentiment | Trading

Don't leave home without it . . .

Hat tip: Thanks, G!

How Microsoft Can Become More Innovative

Tuesday, July 31, 2007 | 11:15 AM

in Corporate Management | R&D | Web/Tech

How could I not love this page one WSJ article about Microsoft-the-innovator?

"Throughout its history, Microsoft has been slow to grasp some of the computer industry's biggest technology shifts and business changes. When it decides to embrace an innovation, the company has often succeeded in chasing down the leaders, as it did years ago with Lotus Development Corp. on spreadsheets that allow users to organize data, and a decade ago with Netscape Communications Corp. on Web browsers that transformed the experience of using the Internet. For years, this catch-up-and-surpass approach worked well.

Early this decade, however, companies such as Google Inc. and Apple Inc. exposed holes in the approach. Microsoft was slow to see the potential in Web search and online advertising, and despite heavy investments, has so far failed to catch industry leaders Google and Yahoo Inc. It also was late coming to market with its own music player, and despite a push, remains far behind Apple. Today, a host of Web-based software services from Google and others threaten to reduce the importance of Microsoft's personal-computer software."

What is the solution? Craig Mundie, the man designated to replace Bill Gates, has quite the challenge on his hands:

"Mr. Mundie says advances in technology that represent "fundamental change" or "whole new business opportunities" are "more disruptive, and so people aren't as focused on them" at Microsoft as they are on developing new features for existing products. "When they encounter them, they are naturally a bit more skeptical."

Microsoft's product groups -- business units built around products such as Windows and Office that produce much of the company's cash -- have long had enormous clout in its corporate culture. Star product-group managers, the company's so-called shippers, get the big, profitable products like Windows out the door year after year. For them, meeting deadlines is all-important; longer-term thinking about technology isn't.

Mr. Mundie is trying to help shift some clout to the company's long-term thinkers and to gain more attention for new technologies and businesses. He nurtures small groups in areas he considers promising long-term bets for Microsoft, such as health care, education and super-fast "quantum" computers. During the past year, to attract foreign talent, he has opened more than 50 small research centers in such distant locations as Egypt, Chile, Malaysia and Russia."

Essentially, the approach is to tear a page from the R&D wizards at Google, and encourage greater creativity from the non-product groups (product groups are Windows, Office, Internet services, X-Box, etc.) to anticipate the next major shift in computing technology.

In other words, Microsoft, in seeking to become more innovative, is copying Google's model.

How Classic is that!

Source:
Behind Microsoft's Bid To Gain Cutting Edge: A History of Catch-Up
Mundie Follows Gates As Long-Term Thinker;
ROBERT A. GUTH
WSJ, July 30, 2007; Page A1
http://online.wsj.com/article/SB118575380139081784.html

Case Shiller Housing Composite: Worst since 1991

Tuesday, July 31, 2007 | 09:54 AM

in Data Analysis | Real Estate

Pretty amazing: This data release (May 2007) marks the 18th consecutive decline in growth, dating back to December 2005.

As the chart below shows, annual returns of the Case Shiller Composite now shows continued negative annual returns -- an annual decline rate of 3.4%. These place the national market for real estate and single family homes at levels not seen since the summer of 1991. (The 20-City annual decline rate is 2.8%).

Excerpt:

“At a national level, declines in annual home price returns are showing no signs of a slowdown or turnaround,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “Year-over-year price returns are continuing to either move deeper into negative territory or experience persistent diminishing returns. If there is any positive news in these numbers, it may be that in both May and April eight of the 20 markets showed positive monthly growth rates. This compares to only one or two of the 20 in the late winter and early spring. We need a few more months of data, however, to determine if this is the beginning of a national turnaround, since the national trend is still at a sharp deceleration.”

With Chicago now reporting negative annual returns, 15 of the 20 metro areas are now reporting negative annual price returns. In addition, 16 of the metro areas saw a decline in their annual growth rate compared to April’s data. Detroit continues to lead the metro areas in growth rate declines, down 11.1% from a year ago and has been in annual decline since May 2006 . . .

Pretty astonishing fall from the peak. And, based upon inventory levels and present sale rates, we are not remotely close to done.

Case Shiller Home Price Index

chart courtesy of Standard & Poors

Here is the break down via Tradition Financial Services, Inc. / TFS Derivatives Corp.

	S&P/Case-Shiller Index - May 2007
	May 06	Apr 07	Apr 07R	May 07	Apr07 v May07	Apr07 v May07	May06 v May07
Bos	178.61	169.60	169.60	170.95	1.35	0.80%	-4.3%	Bos
Chi	166.61	165.87	165.87	165.68	(0.19)	-0.11%	-0.6%	Chi
Den	138.31	134.86	134.86	136.32	1.46	1.08%	-1.4%	Den
LV	234.39	226.65	226.65	224.79	(1.86)	-0.82%	-4.1%	LV
LA	272.12	263.36	263.36	263.19	(0.17)	-0.06%	-3.3%	LA
Mia	278.68	273.53	273.53	269.52	(4.01)	-1.47%	-3.3%	Mia
NY	215.57	211.65	211.89	210.69	(0.96)	-0.45%	-2.3%	NY
SD	249.15	232.64	232.64	231.80	(0.84)	-0.36%	-7.0%	SD
SF	218.37	211.47	211.47	210.89	(0.58)	-0.27%	-3.4%	SF
WDC	251.07	235.29	236.17	235.15	(1.02)	-0.43%	-6.3%	WDC
Comp	226.00	218.93	219.01	218.37	(0.64)	-0.29%	-3.4%	Comp

Source:
Late Spring Numbers Bring Chilly Returns According to the S&P/Case-Shiller Home Price Indices
S&P, July 31, 9:00 AM EST
PDF
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_May1235.pdf

Triggers & Tipping Points

Tuesday, July 31, 2007 | 07:23 AM

in Economy | Investing | Markets | Psychology/Sentiment | War/Defense

Futures are higher this morning on positive earnings news, strength in Asian and European bourses, and a dearth of any new credit disasters. (It is also the last day of the month).

As we mentioned yesterday, investors should watch the quality of this overall bounce, keeping a close eye on volume and breadth, to determine the next move beyond this week.

While there was plenty of teeth-gnashing angst over this very minor correction, I have not seen the sort of capitulatory panic that typically marks the end of a major selloff.

Some commentators have pointed to Thursday as a 90/10 day -- more than 90% of the volume was to the down side -- but historically, that marks a bottom only when it comes after a long decline. A 90/10 down day within 5% of a high has never been shown to be a reliable buy signal.

Considering that we have yet to see a 10% SPX or Dow correction in this 5 year old Bull, what might actually cause that major dislocation? MarketWatch's in-house curmudgeon, Paul Farrell, gives us a menu to choose from:

1. War/military defense budget busting

2. Real estate bubble raging

3. Foreign trade imbalance, trillions new debt

4. China's economy overheating

5. Private-equity credit imploding

6. 'Homeland Insecurity' failures

7. Hedge funds hurting retirement plans

8. Oil rocketing toward $100 a barrel

9. Weak U.S. dollar keeps sinking

10. Federal budget deficits

11. Social Security entitlements

12. Medicare's massive deficits

13. Health-care-insurance deficit

14. Climate change fuels global wars

15. Personal savings shortfall

16. Consumer debt surging

17. Corporate pension defaults

18. Local government pension deficits

19. International credibility deficit

20. Washington politics in endless gridlock

I find 7 of these (in italics) that represent serious threats, some short term, some long term.

Which of these are real threats? Which are hyped up and already discounted by Mr. Market? What unknowns have been omitted from the list? The comments await your insights . . .

Source:
New contest: Pick one big tipping point
You decide: which of 20 triggers will end 'aging bull'
Paul B. Farrell
MarketWatch, 7:54 PM ET Jul 30, 2007
http://tinyurl.com/yo264y

Teeth Clenched, While Buttocks Remained Firm

Monday, July 30, 2007 | 03:30 PM

in Financial Press

Nipples rose dramatically, while small bits of tin consolidated:

Hat tip: Mike Covel

Credit-Market Tremors

Monday, July 30, 2007 | 11:00 AM

in Credit | Derivatives | Finance | M&A | Markets

Another good piece from the public WSJ on "How Credit-Market Tremors Have Affected Junk Bonds, LBOs and Hedge Funds." Its sortable by clicking on the top of each column.

SCORECARD: DEBT DILEMMAS
click thru for full size table

If I keep promoting the WSJ, I am gonna have to ask for a piece . . .

Source:
SCORECARD: DEBT DILEMMAS
How Credit-Market Tremors Have Affected Junk Bonds, LBOs and Hedge Funds
Annelena Lobb, Cassandra Vinograd
http://online.wsj.com/public/resources/documents/info-BondTurmoil0707-sort.html

Media Appearance: CNBC's Morning Call (07/30/07)

Monday, July 30, 2007 | 10:45 AM

in Media

This morning, I'll be on CNBC at 11:00am, discussing the market volatility last week, including sentiment issues and defensive rotation with Dylan Ratigan.

Also on the show -- Noel Lamb, CIO at Russell Investment Group will be on as well. In addition to Dylan, we guest hosts Liz Ann Sonders and John Carey from Pioneer Investments will be grilling us.

On today's agenda:

-Our quantitative ranking system had an average group rank of the 275 industry groups we follow was 70 (out of a possible 100) -- Now, its 48. There are many more groups weakening, which suggest this is the first leg of a more significant correction.

-The 90/10 day we saw last week is a bottom signal only AFTER a long run down. Whne it comes so close to a new high, it is NOT a cathartic punctuation.

-The nominal bounce we got today is disappointing

- The Russell is now in the red 1.7%, year-to-date. The defensive rotation is well underway.

- All sectors have been broadly hit -- but in particular Banks, Energy, Reits, Real Estate, and Home Builders. The only strong SPX group has been the Internet Retailers, and that is most likely because of Amazon.

Should be fun!

Is the Bull Market Over, or Are Stocks Cheap?

Monday, July 30, 2007 | 06:51 AM

I am a news junkie.

I think that's fairly apparent to readers from the weekend linkfests. And, despite the fact that I have warned in the past that reading the news is hazardous to your investment returns (see Lose the News), I do occasionally like to Use the News -- but for other reasons.

I find it quite interesting to see how different financial publications respond to market turmoil. Sometimes, it can be incidentally revealing of the psychology of the moment.

Consider these two articles: One is a Bloomberg piece which came out over the weekend, and the other is on the front page of the WSJ.

The WSJ article is a balanced look at two different schools of thought regarding last week's action. Its starts by asking "Is the bull market over?". However, it outs itself by describing the Dow's 4.23% sell off as "stock-market carnage." Students of market history will derisively snort of a four percent weekly drop as carnage.

Here is an excerpt:

"There have been some signs of a roof forming lately. Markets have seen a series of records, with big stocks beginning to lead the way and fewer stocks showing gains. When the Dow industrials hit their record just above 14000 on July 19, many second-tier stocks didn't join them; indeed, after a strong start, small stocks are down for 2007. Meanwhile, money managers who were skeptical for much of the past year showed signs of greed, setting aside doubts and jumping into the market.

At the same time, until last week, middle-size stocks had been holding up better than small ones, and the gradual topping out hadn't gotten very far. Financial, consumer, telecommunications and health-care stocks, as well as real-estate stocks and utilities, all had turned down, but technology, energy, basic materials and industrial stocks all were holding up well. Market interest rates had risen, but not heavily. Moreover, even after last week, the Dow's worst in more than four years, the index remains up 6.4% in 2007 and 18.2% in the past 52 weeks."

The author, E.S. Browning, manages to raise many technical and fundamental issues without taking a stand on either side. It is a nuanced, balanced piece, characterized as lacking any shrill emotional elements.

The Bloomberg article is far less balanced: It starts by claiming "Investors are preparing to snap up shares of telephone, health-care and computer companies after last week's $2.1 trillion global stock market rout left U.S. equities the cheapest in 16 years." The key identifier to the tone is this quote: "The window for buying is starting to open."

The rest of the article mostly quotes bulls, who say the market is cheap. The one note of caution is Ryan Beck's market strategist Kevin Caron. He is "defensive'' and plans to keep 35 percent of his clients' assets in cash.

My takeaway from both pieces -- alternatively neutral or bullish -- is that neither reflects any sort of mass fear or panic. They are relatively bloodless columns; no one is running around with their "hair on fire."

It may only be anecdotal, but neither of these suggest capitulation.

~~~

Finally, consider this unscientific WSJ online survey: About an equal number of voters expect a big rebound as a big decline (18/17%). While 36% expect a small bounce back, almost as many (29%) expect a small decline or a sideways week.
>

WHAT WILL HAPPEN IN THE STOCK MARKET THIS WEEK:
courtesy of Online WSJ

>
My wholly unscientific read of this poll -- lets call it anecdotal evidence -- is that there is hardly the sort of rampant fear one associates with a true and lasting bottom . . .

~~~

Bottom line: Watch for the market bounce, keeping a close eye on volume and breadth.

Sources:
Analysts Debate If Bull Market Has Peaked
For Some, Charts Warn Hurricane Is Forming; Will Storm Pass Over?
E.S. BROWNING
July 30, 2007; Page A1
http://online.wsj.com/article/SB118575324077581751.html

Cheapest Stocks in 16 Years Entice Investors
Lynn Thomasson and Eric Martin
Bloomberg, July 30 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4tg9V99WLjU&

Linkfest Week-in-Preview (whackage edition)

Sunday, July 29, 2007 | 06:30 PM

in Financial Press

Yesterday, we looked at the week that was (Yikes!). Today, we preview the upcoming week.

Markets will attempt to stabilize after last weeks shellacking. While we don't yet know if a bounce of a further whack is forthcoming, we do know that investors will be surfing choppier markets, as we have seen big increases in volume and volatility.

The coming week has plenty of other events to focus the minds of wary traders. This week sees plenty of economic releases. Starting Tuesday, we learn Same Chain Store Sales, the Employment Cost Index, Personal Income and Outlays, Construction Spending and Consumer Confidence. Wednesday has Mortgage Purchase Applications, Challenger Job-Cut Report, the increasingly interesting ADP Employment Report. Later in the morning, we hear ISM Mfg Index, Pending Home Sales Index, and the EIA Petroleum Status Report. The data flow keeps coming Thursday, when we hear the European and Bank of England Central Bankers' announcements. Also on the docket: the Monster Employment Index is released, as are Jobless Claims. Factory Orders and EIA Natural Gas Report are later in the morn. All that is a preview for Friday's big one: The Employment Situation report aka Non-Farm Payroll.

All told, a busy week of economic data flow -- and that is before we even get to the earnings releases. The peak of earnings season may have been last week, but there are still plenty of reports to come

Verizon (VZ) starts us off on Monday, along with ABN Amro and Tyson Foods (TSN). GM is on Tuesday, along with Coach (COH), Valero (VLO) and Whole Foods (WFMI). Wednesday is the biggest earnings day of the week, when we hear from Walt Disney (DIS), Time Warner (TWX), Kraft Foods (KFT), Electronic Arts (ERTS) and Starbucks (SBUX). Next up is Viacom (VIA), International Paper (IP) and NYSE Euronext (NYX) on Thursday. Procter & Gamble (PG) ends the week on Friday. A slew of REITs also report next week, including Simon Property (SPG) and General Growth Properties (GGP).

Its gonna be a busy week. We have all the links you need to get prepared:

INVESTING & TRADING

• And Now, the Good News: Large-Company Stocks May Rise: Investors wondering what to do after the past week's stock-market turbulence shouldn't be throwing in the towel. Fast-growing big companies could be poised to move higher in coming months. (Wall Street Journal)

• Is the Bloom off Emerging Markets? Ten years ago this month, financial calamity of nearly unprecedented proportions in the post-war period crippled developing Asian economies, spread to emerging markets around the globe, derailed the U.S. economy temporarily and ended up toppling one of the highest-profile hedge funds of the time. The Asian flu, it was called. Now, emerging markets could catch a bad case of the American flu. (Barron's) if no Barron's sub, go here go here.

• Our own James Altucher shakes off the bad news, and gives us Seven Reasons to Be Bullish Now: Private equity, Retail investing, Buybacks, Low-P/E oils and financials, Global economy boom, China, Tech upgrade cycle. My only question is how many of these were well known and already reflected in market prices prior to this week's action. (TheStreet.com)

• Honda, With Accord `Buzz,' May Win Investors as Toyota Stalls Shares of Toyota Motor Corp. outperformed those of Honda Motor Co. in the first half of the year on rising U.S. sales. Now it may be Honda's turn. (Bloomberg) see also The Way Forward Is Painful Forbes take on the US automakers.

• The Residential Mortgage Backed Securitization Process Cool info-graphic from Credit Suisse.

• Going nuclear: It may surprise you to know that nuclear power has stayed with us all these years, stubbornly clinging to about a 20% share of U.S. electricity generation - about the same as natural gas but lagging far behind coal at 50%. (Globally, nukes have a 16% market share.) And while no new plants have come online since 1996 (construction began on that one in 1973), suddenly we're hearing lots of talk about a nuclear revival - or "renaissance," as the boosters call it. (Fortune)

• Uh-Oh: Wall Street Bonuses in Peril Normally, by late July bankers at JPMorgan, Citigroup and Bear Stearns are busy jockeying for morning tee times. But with their firms stuck holding billions of dollars in loans they had hoped to sell, hard-hitting investment bankers suddenly have a more pressing concern: Will I get my bonus this year? (TheStreet.com)

• note: this came out prior to the correction: Five Reasons to Sell, Sell, Sell No matter how wonderful things look, the good times won't last forever. Even as most market observers remain bullish, we asked them what could derail this bull market. Stocks could keep setting records for months or even years, but it pays for investors to know what dangers are lurking out there. This Five for the Money lists the five biggest threats to the stock market rally. (Business Week)

• Stop and Think Before Using Stop Losses: Roger Nussbaum advises us to tailor each exit strategy to the specifics of each stock; a utility stock should have a different exit strategy from a biotech stock. (TheStreet.com) See also Protect Your Backside.

• Is sourcing in China worth it? Suddenly, outsourcing to China-standard procedure for thousands of entrepreneurs-looks a lot more complicated. Now businesses must factor in the true cost of obtaining their products at the world-beating "China price." After the recalls, says Andrew Bartolini, an expert on global sourcing at Aberdeen Group, a research firm in Boston, "there's an understanding that low costs come with risks." (CNN Money)

• Will the Leak Ruin the Engine? High-profile deals left hanging by this week's turmoil include the big buyout of Chrysler by Cerberus Capital Management, KKR's purchase of British retailer Alliance Boots and Citigroup's purchase of Allison Transmission. Barry Diller was forced to trim the stock buyback through which he hoped to take Expedia private. And there were reports that the sale of Cadbury Schweppes's drink business, which was being shopped around, will be delayed for months. (Washington Post)

• D'Oh! Simpsons Campaign Uses a Backward Approach: Instead of having real products from 7-Eleven and other companies strategically dropped into the movie, the "Simpsons" team is putting its fictional brands -- from Krusty Burgers and KrustyO's cereal to Buzz Cola -- to work in the real world, as marketing partners like 7-Eleven, Burger King Holdings Inc., Jet Blue Airways Corp. and shoe maker Vans Inc. promote "The Simpsons Movie." (Wall Street Journal) See also 'Simpsons' Kwik-E-Mart Sales Double as Homer Simpson Meets 7-Eleven

• Have a laugh on us: Just Another Day On Wall Street

ECONOMY

The Wall of Worry adds a loft and a wraparound terrace:

• The Sinking Dollar Also Has an Upside: The weak dollar is a source of humiliation, for a nation's self-esteem rests in part on the strength of its currency. It's also a potential economic problem, since a declining dollar makes the steady diet of imports on which Americans subsist more expensive and exerts upward pressure on interest rates. And yet there are substantial sectors of the vast U.S. economy—from giant companies like Coca-Cola to mom-and-pop restaurant operators in Miami—for which the weak dollar is most excellent news. (Slate)

• A Big Shift for Retail? Big changes are coming to a department store near you. Whether the $27-billion buyout offer for department store king Macy's is consummated this summer or topped by a richer one later, the chain's days as a mega-national merchant are numbered, as are those of many of its competitors and many specialty stores, too.
For consumers, that will ultimately mean higher prices as scores of stores close and competition falls. (Kiplingers)

• Wealth Effect or Borrowing/Asset Sales Effect? Paul Kasriel of Northern Trust notes: "The wealth effect refers to the phenomenon that as household net worth increases, household spending relative to income increases. In other words, if the value of my stock portfolio rises today, I dine out at Applebee’s tonight rather than McDonald’s. Although the wealth effect might be appealing theoretically to academics, it does not stand up to logic if households are incurring outright deficits. If households are running deficits – i.e., they are spending more than their income – they either must be borrowing, and perhaps posting their wealth as collateral, or selling assets to non-household entities. MEW, of course, would fall into the borrowing category." (PDF)

• The usually circumspect Mark Zandi is getting nervous: Subprime could create global crisis, economist says With a "high level of angst" in the financial markets about who will take the losses from more than $1 trillion in risky mortgages, we could be just one hedge-fund collapse away from a global liquidity crisis, said the chief economist for Moody's Economy.com. A global meltdown is not likely, but the risks are growing, Zandi emphasized in a conference call with reporters following the release of a new study on subprime debt that concludes that the housing crisis could be deeper and last longer than investors now believe. (Marketwatch)

HOUSING

• Countrywide: "Home price depreciation at levels not seen since the Great Depression" Quite the eye opening conference call

• Franco Is Still Dead, and Housing Is Still Bust: The latest round of housing statistics -- sales, starts, homebuilders' outlook surveys and earnings reports -- offered little hope that residential real estate would be back on its feet anytime soon.``Housing is bust, and wishful thinking cannot unbust it anytime soon,'' says Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York. (Bloomberg)

• "Unexpected Weakness in Home Sales?!?"

• And now for some good news: Some Hard-Hit Cities See Signs Of a Housing Market Turnaround The latest trends offer some hope for an eventual recovery in a U.S. housing market that generally has been cooling since mid-2005. Even so, many economists and industry executives say that recovery will be very gradual and won't start before 2008 at the earliest. That's partly because more-stringent lending policies are keeping many potential buyers on the sidelines, while others are holding off in hopes of prices heading even lower. Meanwhile, there is still a glut of homes on the market in much of the country, especially in Florida and parts of Arizona, Nevada and California. (Real Estate Journal)

WAR/MEDIA/POLITICS/ENERGY

• Two magazine cover stories caught my eye this past week:
- The riddle of Iran (The Economist)
- How to Leave Iraq (Time)

• George W. Bush is Handling His Job as President: Polling data for the Bush and the G.O.P. gets worse and worse. Doug Kass is likely correct when he says a Democratic sweep may have significant market implications . . . If you have the option of taking one-time capital gains or special dividends anytime soon, I suggest you make sure they are paid prior to January 2009, to take advantage of the current 15% rate. I suspect that the rate will be less advantageous in 2009 . . .

• Edwards, Trailing Rivals, Holds Sway Over Party's Agenda (free Wall Street Journal)

TECHNOLOGY & SCIENCE

• $300 TiVo HD Unboxed and Fondled (Verdict: Hell Yes!)

• Ever wonder what the offices of those really cool websites look like? Check out Office snap shots

• Is Microsoft Still a Growth Company? The Street sure doesn't seem to think so. Goldman Sachs noted in a report last week that large-cap-growth mutual funds are dramatically underweight in the software giant's shares; the average fund holds a 1.23% position, compared with Microsoft's 3.3% weighting in the Russell 1000 growth index. Goldman software analyst Sarah Friar asserted that the low level of enthusiasm offers "potential for significant buying if growth managers fear missing the upside." (Barron's) See also Tech Stocks Check In

MUSIC BOOKS MOVIES TV FUN!

• In a spin, the music business wants artists to give their all: Music Labels now want to "own" musicians, including publishing and live performance rights. (FT)

• Staying Safe: The Complete Guide to Protecting Yourself, Your Family, and Your Business: From the former Mossad agent depicted in the film Munish, he had who warned the US of a use of airplanes against high profile buildings a month before 9/11. This common sense guide gives lots of advice as to how to protect your family in an age of terrorism.

• The Impoverishment of American Culture There is an experiment I'd love to conduct. I'd like to survey a cross-section of Americans and ask them how many active NBA players, Major League Baseball players, and "American Idol" finalists they can name. Then I'd ask them how many living American poets, playwrights, painters, sculptors, architects, classical musicians, conductors and composers they can name. I'd even like to ask how many living American scientists or social thinkers they can name. (WSJ Op Ed)

• The iPod has become a target for theft. So how can you take your iPod out of your home without fear? Here's how to make y our iPod theftproof

Whew! What a week. And I suspect the coming one will be no better. Get some rest, you'll need it.

~~~

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 .

Markets See Rising Volume and Volatility

Sunday, July 29, 2007 | 09:10 AM

in Investing | Markets | Psychology/Sentiment | Technical Analysis | Trading

If you look in last week's credit-driven market dislocation, one small tidbit has peaked through the wreckage: Investors will be surfing choppier markets, as we have seen big increases in volume and volatility.

This is not likely to wane anytime soon.

An interesting article on this exact subject was in the Saturday Journal. Greg Zuckerman took a surprisingly sanguine approach to this significant change in market demeanor:

"Rising volatility, along with heavy trading volume, isn't necessarily troubling. There have been similar recent periods when volatility, or sharp moves in the prices of securities, soared to these levels, and each time markets rebounded sharply. And a surge in volume doesn't indicate which way stocks are headed next.

It feels worse this time around to some, though, because it has been so long since they had to deal with these kinds of jumpy markets."

For all I know, he may be precisely right.

However, whenever a prior element in markets shifts dramatically, it sets my trading antennae all aquiver. And when that element was a factor in the bull argument -- lack of volume meant the market was being driven by the so-called "smart money" -- it is doubly noteworthy.

What might be the risks to this increase in volatility and volume?

"Just as important, potential dangers are higher -- so many traders have been using heavy leverage, or borrowed money, which can amplify gains -- and losses. As July comes to a close, more traders fear that hedge funds will start selling to meet possible margin calls from lenders or redemption requests from their investors.

And it is getting harder for some large investors to get certain trades done in parts of the bond market, because their brokers are wary of buying riskier debt amid worries about fallout from the difficulties of subprime-mortgage borrowers."

Whoops! Not very smart after all.

While low volatility often means complacency, it can also suggest a lack of retail traders. So this element is far from conclusive.

Great chart, tho: