Labor Day Linkfest Week-in-Preview

Sunday, September 02, 2007 | 06:30 PM

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

Back to work, back to school, back to the usual routine: We kick things off start off with a relatively light, four day work week.

We find out how the back-to-school season went, as the retailers report their August sales figures. We already heard from Target they were doing well, while Wal-Mart noted their customers were suffering from high gas prices and housing and credit turmoil. Last week, we heard from several high end retailers that their part of the market is just fine, thank you very much.

There are still quite a few significant earnings to report: Many of the automakers release this week, and home builder Hovanian reports Thursday; expectations remain muted.

On the other hand, Apple has scheduled a media event for Wednesday, and expectations for enhancements to the company's products run high. The smart money is betting on yet more enhancements for the company's ubiquitous iPods. I actually wrote this linkfest on an iPod, and I am hoping they improve the speech recognition. There are expectations that Apple will be adding teleportation to a new model, but I suspect that's just wishful thinking.

Lots of economic releases this week: On Tuesday, ISM Manufacturing Index, and Construction Spending data gets released (yawn). Wednesday sees MBA Purchase Applications, Challenger Job-Cut Report and the ADP Employment Report (little more interesting). Thursday we hear from the central bankers: The BOE announcement is at 7:00am ET, and then we hear from the ECB 45 minutes later (now I'm awake). Thursday we get the Monster Employment Index, Jobless Claims, and Productivity and Costs (and paying attention). Friday is the one you have been waiting for: Employment Situation. As usual, I'll be doing NFP duty that morn. We will also hear from a virtual parade of Fed Presidents on Thursday, repeating Chairman Bernanke's message from last week at Jackson Hole.

This week, Congress returns from recess, so we got THAT going for us, which is nice.

Volume over the past few weeks have been light, and with the return of the crowds, we should expect to see those numbers pick up.

Also worth noting are several sentiment issues: Barron's Mike Santoli points out that "the ratio of insider selling to buying has been below 10 for nine weeks, a rarity. And TrimTabs last week noted that insiders were net buyers of shares on six separate days this year, and four of them were since Aug. 16. Meantime, money-market fund inflows have surged and the American Association of Individual Investors survey Thursday showed bears outnumbering bulls for a fourth straight week." That excess of negative sentiment might be suggesting potential upside action, lurking somewhere in the near future.

Let's get busy:

INVESTING & TRADING

Dispelling the 'Bin Laden' Options Trades: As if the mortgage-market meltdown wasn't enough to spook investors, some market players expressed concerns about unusual options bets that some observers have dubbed "Bin Laden Trades." The blogosphere and options trading desks have been rife with speculation about these trades, which are unusually large bets that the market will make a huge move in the next month. Some entity, or entities, has taken a large position on extremely deep in the money S&P 500 options, both puts and calls, that won't pay off unless the market undergoes an extremely large price move between now and the options' expiration on Sept. 21. (TheStreet.com) see also This $900 Million Bet Has Global Traders Talking…

The Punch Bowl Caucus: In the past week, a strange group has been pleading for the Federal Reserve to return the punch bowl to the toga party—to slash interest rates to restart the Wall Street party. The Punch Bowl Caucus, whose members hail from all over and hold different ideological views, share a common belief: that the Federal Reserve, by reducing either or both of the interest rates it controls, can turn the clock back to the halcyon days of 2005 and 2006, when home values moved in only one direction, when defaults were nonexistent, and when credit to homebuyers, consumers, and, above all, to hedge fund operators, ran downhill like a mighty stream. (Slate)

The Bulls Have It! In fact, the eight strategists surveyed by Barron's see stocks climbing well into 2008, despite the credit-market tumult and the policy uncertainty of the election year.The average forecast among the eight calls for the S&P 500 to reach 1568 by New Year's Eve, or 6.4% higher than today's level of 1474, and even the most cautious have penciled in hardly any downside for stocks. In contrast, their economic prognosis is far less assured and unanimous: Three firms see economic threats grave enough to require the Federal Reserve to slash interest rates to 4.5%, from 5.25% today, while two others think the economy is doing just fine. (Barron's)  See also Bullish on the inside: Corporate insiders' buying bodes well for the stock market (Marketwatch)

Eric Bolling Bolts CNBC's Fast Money for Fox?

Where's Merrill? Another day of carnage in the subprime mortgage sector on Wednesday, and another day of silence from Merrill Lynch. Someone get Jeff Edwards, the investment bank's finance chief, on the phone. It's high time Merrill let us in on how much damage it has incurred from the subprime mess. (CFO)

• Market Beater(?): Introducing the Barron's 400 When you think about the history of the many Dow Jones Indices, its almost surprising that Barron's doesn't already have its own index. Barron's says "the index is based on the research methods of MarketGrader, a Miami firm that rates stocks by a proprietary formula that incorporates companies' growth profile, profitability and stock valuation." Still, stating the new index is "built not as a mere reference point but as a money-making tool for investors" sounds like it could be an exercise fraught with risk . . .

No Rush to Snap Up Lenders: It may be tempting to go bargain hunting, but the prevailing opinion of investment advisers is that prices do not yet account for the difficulties that the industry is expected to face in the months, and possibly years, to come as the housing market deteriorates. Opportunities are far better, they say, in diversified banks that do a brisk mortgage business but do not depend on mortgages for the bulk of their revenues.    

Will a Fed rate-cutting program bail out Wall Street?   

Why a U.S. Subprime Mortgage Crisis Is Felt Around the World: But the global financial turmoil — set off by problems with subprime mortgages — has prompted a backlash in some quarters against such financial engineering.More broadly, it has led to a better understanding of the downside of spreading risk so well — it can be felt in all corners of the world, unsettling hedge funds, banks and stock markets as far away as Australia, Thailand and Germany. In effect, reducing risk on a global scale appears to have increased it for some players. (New York Times)

US Cellular: Next In Line For Telecom Takeover? If Sprint acquired U.S. Cellular it would add 6 million subscribers to its base, putting it up there with its two bigger competitors in terms of size. But why would Sprint, which has struggled since its merger with Nextel, want to make an acquisition? Analyst Gorbatenko thinks he knows. “When you’re drowning in an ocean and someone’s swimming next to you, you latch on,” he said. (Forbes)   

Unskilled and Unaware of It: How Difficulties in Recognizing One's Own: People tend to hold overly favorable views of their abilities in many social and intellectual domains. The authors suggest that this overestimation occurs, in part, because people who are unskilled in these domains suffer a dual burden: Not only do these people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it.



ECONOMY

The Wall of worry continues to build:

Heading for the rocks: Will financial turmoil sink the world economy? Via The Economist Intelligence Unit, the shockwaves of the subprime mortgage crisis are still being felt in financial markets around the world. But what is the likely longer term impact on the global economy?

• Want to know what the Fed is going to do next? Here is a Primer on calculating the probabilities of Fed rate moves.

Markets Are Normalizing, Causing Dilemma for Fed: Federal Reserve officials' decision to provide liquidity to credit markets rather than an interest- rate cut appears to be paying off.With the Fed supplying funds to relieve the sudden cash crunch, investors have had time to begin to distinguish good credits from bad. As a result, large portions of the market have begun to normalize. (Bloomberg) See also Normalcy Still Is a Ways Away       

Milton Friedman, Meet Richard Feynman: How physics can explain why some countries are rich and others are poor. (Slate) 

Knockoff Nation: The guide to shopping for counterfeits (Radar)      

 


HOUSING

• On a 30 year conforming loan, fixed rate mortgages are now 50 to 100 bps cheaper than ARMs. Looks like Wells Fargo (WFC) is trying to push borrowers to away from ARMs and into the higher standards of fixed interest rate loans.

Goldman Sachs Housing Forecast: Excerpts from a Goldman Sachs research note on housing: Home Price Declines: Accelerating and Around for a While

Subprime Mortgage Crisis Spreading to High-End Housing Market The subprime mortgage crisis is spreading to a somewhat unexpected place: homes costing more than $500,000.As lending has rapidly gotten more restrictive for borrowers taking out large loans, sales of expensive homes have fallen sharply around the country during what should be one of the busiest seasons for buyers and sellers, mortgage bankers and real estate agents say. (AP)

Inside the Countrywide Lending Spree: Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers, according to interviews with former employees and brokers who worked in different units of the company and internal documents they provided. One document, for instance, shows that until last September the computer system in the company’s subprime unit excluded borrowers’ cash reserves, which had the effect of steering them away from lower-cost loans to those that were more expensive to homeowners and more profitable to Countrywide. (New York Times)


TECHNOLOGY & SCIENCE

3 Ways to Re-Engineer the Gulf and Stop Katrina 2.0: The root sources of the problem in 2005 have been traced back through the entire history of design, construction, operation and maintenance, and have since been dubbed grand failures in engineering. But the truth is more complex: There were failures in engineering—existing technology was not properly used, leaving the margins for safety far too low. (Popular Mechanics)

• Google twofer:

-Hey, Who’s He? With Gwyneth? The Google Guy   
-Hidden inside Google Earth is a secret Flight Simulator that takes full advantage of Google’s extensive satellite imagery.      

Jewish Genius: Contentious author Charles Murray explains the history of Jewish achievement. Murray, who is not Jewish, is the author of the controversial The Bell Curve, and the less controversial Human Accomplishment: The Pursuit of Excellence in the Arts and Sciences, 800 B.C. to 1950   



MUSIC BOOKS MOVIES TV FUN!

• Berkley Professor Robert Reich's new book, Supercapitalism gets a good review in the New York Times today: "[Reich] does not rip into opaque hedge funds and demand their regulation. Nor does he harp on lax government regulation of credit and mortgage practices. On the contrary, he criticizes many of the usual liberal fixes directed at the “excesses of the market.” His book is smart and compelling, if ultimately toothless." Reich was Labor Secretary under Clinton, and is a regular on Kudlow & Company. His Blog and home page can be found at the links nearby.

The CD Turns 25   

• In last week's fest, a NYMag article noted the score from Terry Gilliam's "Brazil" was showing up everywhere. Several readers wrote to correct me: Michael Kamen did not write the theme, but rather, adaptated it from Tommy Dorsey's "Brazil", which another readers informed us it can be enjoyed here: http://cfelt.com/0210_2.html

Another gorgeous day! Yes, I am taking the XSR48 out again, hoping to set a new Atlantic speed record.

Enjoy the rest of your holiday weekend!

~~~

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 02, 2007 | 06:30 PM | Permalink | Comments (8) | TrackBack (0)
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Okay, guys, back to work, spend less and buy more US bonds. I kid you not!

"God Bless America"; Land we love, lets us dedicated ourselves to our troops and those who fight to protect freedom and liberty.

"We few, we happy few, we band of brothers;"
Shakespeare

Posted by: David | Sep 2, 2007 10:56:54 PM

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