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Mid-October Linkfest: Week in Review

Another wild week is in the books. This one had a little something for everyone: mystery, intrigue, murder (ok, no murder).

Let's start out with the numbers: Some of last weeks big winners were this week's losers, and vice versa:  Crude Oil gained 3% -- its up ~43% over the past 52 weeks! Emerging market stocks tacked on  2.4%, while European bourses added 1%. So too, did Gold grab a 1% gain.

The Nasdaq edged up 0.9%. Global stocks, corporate junk bonds, and commodity futures all saw 0.7% moves higher. The S&P, the Dow and Investment Grade Bonds each were barely positive, gaining 0.3, 0.2, and 0.1% respectively. The Russell 2000 spent this week in the red, down 0.4%. REITs, last weeks big gainer, were down 2.2%.

Had it not been for Thusday's intraday reversal -- a ~250 point peak to trough swing -- the weekly numbers would have been much better.   

Barron's Trader column notes that while "early reports on third-quarter results, which were disappointing in some high-profile cases like Alcoa (AA), Monsanto (MON) and International Paper (IP)," we should not read too much into them. "There are reasons to believe the quarter will still be positive and beat expectations, even if not by as much in the past."

They add:

"It's true that estimates have come down hard. Analysts' quarterly S&P 500 earnings-per-share projections have dropped, thanks mainly to subprime-mortgage losses at financial companies and home builders. Including those that have reported as of early Friday, the consensus is for S&P 500 third-quarter profits to fall 1.3%, says Morgan Stanley analyst William Smith. That's a notable swing from a projected 5.5% rise at the beginning of the third quarter, and the lowest expectation since 2002. From the 41 S&P 500 members reporting by midday Friday, earnings have missed expectations by 0.3%, says Smith.

Hold the phone. There are important factors that suggest the gloom is misplaced.

It's very early in the season, and so far the headline number has been skewed lower by a small part of the S&P 500, Smith says. For example, take out the $800 million or so in losses from two mid-cap homebuilders and the earnings growth of the remaining 39 companies is a much more robust 6%. And the median growth rate, including those already reporting, is 7.8%, according to Zacks Investment Research."

Interesting take. This week is heavy with bellwether earnings reports (nmore on this tomorrow) so we will know much more soon enough.

Where to begin this week? Market Rally? The Dollar? Housing? No matter -- we got it all covered. Its linkfest time!

INVESTING & TRADING

• BusinessWeek's Gene Marcial says This Market Rally Has Legs: Recession fears are misplaced, and despite some sluggish sectors in the U.S., worldwide growth should keep pushing the numbers up.      

• Strong Gains in U.S., Except by Comparison:   Of the 83 countries for which records of a major stock index were available, the American share price increase in the five years after Oct. 9, 2002, was better than those of only four. All four are small countries, either in the Caribbean or Latin America. (New York Times) see also Yeah! We're #78! (of 83 global bourses).   

• Spoilsports on the rally:

-As Tech Heats Up, Sages Dust Off Bubble Indicators
-Some Warning Flags Fly As Stocks Continue to Soar

• Meanwhile, the Fear & Greed Index is neutral

• Earnings season casts long shadow on rally: The unexplained rally in shares of the search engine giant up more than 30% in the past seven weeks and some 7% in the past five trading days, can only mean tech-crazy investors are gearing up for another blockbuster quarter. But behind the traditional pre-earnings rally in Google, which this time has helped propel the Nasdaq Composite Index to within shouting distance of 3,000 for the first time in almost seven years, dark forces are gathering. (MarketWatch)

• Good visuals: Romping Through the Biggest M&A Year in History (free Wall Street Journal)

•  The very erudite Dr. John P. Hussman and I see things very differently on the Liquidity question:

-The Bag Will Not Inflate, And Liquidity Will Not Be Flowing (Hussman Funds)

-Money Supply Growth: 24.3%! (Big Picture) 

• WSJ QUIZ: How Well Do You Know Municipal Bonds?

• The startup king's new gig: After more than a decade of launching dotcoms, Gross has rediscovered the pleasures - and profitability - of the physical world. Idealab's current lineup is crowded with companies that make actual products: robots, 3-D printers, electric cars, rooftop solar collectors. As Gross puts it, he's much more interested today in "atoms businesses" than "bits businesses." He recently sat down with Business 2.0 Editor-at-large Erick Schonfeld to talk about why (Business 2.0)

• Fortune's India, Inc.

• Why Google should invest in Microsoft: Of course Google's not investing in Microsoft or Yahoo. Buy as a big and growing problem that more successful competitors and a more balanced market could help it solve - an ever-growing swath of the world's businesses are becoming dependent on its services.That's a recipe for regulation. To stave that off, Google needs strong competitors. Google may be too good for its own good. Or maybe its competitors, especially Microsoft and Yahoo, are just inept at copying its successes. The company has taken an overwhelming lead in Internet search, with a corresponding advantage in search advertising. It commands about 50% of the market for Internet search in the United States.  (Fortune)   

• Barron's asks: "How Has Bush's Stock Market Done?"

• This is circulating via email around trading desks: Market Cheat Sheet: How to respond to new data (very amusing)

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ECONOMY

The Wall of worry continues to build:

• Money Supply Growth: 24.3%! The most recent data out of the St. Louis Fed shows the printing presses are running 24/7. see also U.S. Affects a Strong Silence on Its Weak Currency (NYT) 

• Why G-7 should stick to the bromides: It has been a long time since

meetings of the Group of Seven finance ministers were newsworthy events. Though economics reporters dutifully continue to log the air miles in pursuit of some elusive hint of a global crisis, their hearts aren’t really in it. The discussions are over before any of the officials has even arrived and amount to a series of bromides about the importance of global economic stability. While currency traders scan it as though it were some archaeological discovery, the communiqué issued after each gathering is as predictable as a telephone directory, only not as interesting.  (London Times)

• Alan Greenspan on The Daily Show   

• Study Says Wal-Mart Often Fights Local Taxes: Wal-Mart doesn’t believe just in lower prices — it believes in lower property taxes, too. The big discount chain has sought to reduce the property taxes it pays on 35 percent of its stores and 40 percent of its distribution centers, according to a report to be released today by Good Jobs First, a group that is critical of Wal-Mart (New York Times)   

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HOUSING

• For the eighth consecutive month, the National Association of Realtors revised their Housing forecast downwards; its now a steeper than previously anticipated drop of 10.8%.

• The United States of Subprime: As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs. The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket. (free Wall Street Journal)

• Desperate Seller Unloads Miami Condo -- by the Inch    

• And what of the Home Builders?

-Housing: That Sinking Feeling? (BusinessWeek)
-Home builders trying to design a comeback? (Atlanta Journal-Constitution)

• When Borrowers Face Foreclosure: THE interest rates on some two million adjustable-rate mortgages will be reset over the next two years, according to an estimate from the Department of Housing and Urban Development, and of them, about 500,000 are expected to go into default. FHASecure, the plan announced by President Bush in September, is expected to help about 240,000 of those borrowers, but the rest may well find themselves on their own.  (New York Times)    see also Median Rises, but Sales Fall   

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TECHNOLOGY & SCIENCE

• The Blog Distributed Content Advertising Model   

• Google's Evil Eye: Does the Big G know too much about us?  A few months ago, a friend told me that he had stopped using Gmail. This seemed crazy. Gmail is free, it looks good, and you never have to delete anything. He thought it was a bad idea to entrust your personal communication to one company: "You don't know what they do with your e-mail. Even if you delete it, it still exists on their servers." Another friend, a lawyer, told me how Gmail exists in a murky privacy area. Because the Google servers "read" your e-mail to place the ads that appear next to it, a note sent via Gmail may not be a protected communication in the same way that a letter sent through the postal service is. (Slate)    

• The CommSec iPod dollar index   

• Death special: How does it feel to die?  (newscientist.com)   

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MUSIC BOOKS MOVIES TV FUN!

• Fun discussion at Friday Night Jazz on Frank Zappa

• "Disintermediation Blues” shoots up the charts:     “How fast will the music industry model come tumbling down." (Good Morning Silicon Valley)

• Video: Bill Murray Gets His Facts Checked (very funny)

• Is the net good for writers?

That's all from the lovely NorthEast, where Autumn has finally arrived, and the leaves are on the edge of turning . . . enjoy your weekend!

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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.

Saturday, October 13, 2007 | 06:30 PM | Permalink | Comments (11) | TrackBack (0)
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Comments

As for earnings, what exactly IS the situation with banking? How much risk are we talking about?

It's beginning to have the feel of panic below the surface and an actual risk of systemic collapse.

Bringing a little of another topic forward, the Fed has exempted a number of large banks from regulation 23A, which waived the 10% reserve requirements on conduits.

As Karl pointed out, there is more to it as this also bears on regulation W and removes safeguards placed into effect from the Great Depression Era to keep a systemic collapse from occuring - but now these very safeguards have been waived.

Now there is this from Forbes: http://www.forbes.com/business/2007/10/13/banks-siv-treasury-biz-wallst-cx_pm_1013citicorp.html

What is Treasury doing in bid with these banks?
How big of crisis is just below the surface?

Posted by: Winston Munn | Oct 13, 2007 9:07:10 PM