Barry Ritholtz
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It was a mixed week for the markets. The Dow rose for a sixth straight week, gaining half a percent. It's up a little less than 7% for the year. Over the past 29 trading days, the Dow has gained almost 8.0%. The Standard & Poor's 500 was flat and is now 1.4% from its March 2000 all-time high. The Nasdaq Composite and the Russell 2000 actually fell -- each by 0.4%. (Is that even allowed?) On Wednesday, the Fed made it clear that inflation remains its primary concern, and the odds remain low for a rate cut anytime before September. On Friday, flat core PPI and awful retail data made traders forget the previous sentence, with rate-cut hopes powering the Dow to a triple-digit gain for the day. Earnings season is nearly over (more on this tomorrow), and M&A activity shows no sign of slowing anytime soon. You have two things to do this weekend: Send Mom flowers, and get clicking!INVESTING & TRADING A superbear turns bullish. Richard Russell, a Dow theorist who has been bearish in recent years, writes that an "unprecedented world boom lies ahead." (MarketWatch) Another bear, not so much: Street Insight's own Doug Kass offers up 15 Reasons Stocks Should Be Falling. (TheStreet.com) M&A Frenzy Question: Why now? Money was just as cheap three years ago, while acquisition targets were much cheaper then... Munger Speaks on Berkshire's Success: "'I didn't set out in life to become the assistant leader of a cult.' That is how Charlie Munger welcomed shareholders to the 2007 Wesco annual meeting. The cult, of course, is the loyal throng of value investors that invade both Omaha, Neb., and Pasadena, Calif., each spring to learn at the feet at Warren Buffett and Charlie Munger, and as Munger noted 'to leave a little wiser than they came.'" (Morningstar) Where Have S&P500 Returns Come From? Dividends, inflation and capital gains -- in that order! Why investors are so glum with the market so high: "With the Dow Jones Industrial Average flirting with record highs -- and the broader Russell 1,000, 2,000 and 3,000 also at historic peaks -- investors should be positively giddy. Instead, they appear to be glum, their mood dictated by concerns over rising gas prices, falling home values, fluctuations in currency values and worries about inflation." (Marketwatch) China's P/E Ratio is Now About 50. (Nouriel Roubini's blog)That's all from the Northeast, where the last few Sopranos are slowly slipping away. I don't really mind -- so long as Entourage remains as good as it has been!
ECONOMY
The Wall of Worry continues to build: More on NFP: More Recognition of Disbelief. The BLS birth/death adjustment comes under attack from many different sources. Economy Is Clawing Back, but Not Much "The worst of the economic slowdown has passed, private economists said in the latest WSJ.com forecasting survey. But they don't see any reason to expect a significant acceleration. By a more than 5-to-1 margin, the economists said they believe the first quarter's 1.3% growth -- the weakest in four years -- marked the low point in the slowdown that gripped the economy much of last year. However, they expect growth to stay below 3% into early 2008, leaving 2007 on track to have the slowest economic growth since 2002." (free in The Wall Street Journal) The Tooth Fairy index is off 15% this year! (ABC) The Fed Has a Target. It's the Unemployment Rate: "'It makes me wonder why the Fed bothers to employ so many economists,' says Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York. 'They only need one guy, half a day a month, to monitor the unemployment rate.'" (Bloomberg)
HOUSING
Home Prices Fall in Rich New York Suburbs Once Immune to Slump: "The U.S. housing slump has hit New York City's richest suburbs. Wealth and excellent credit have until now spared bedroom communities in New Jersey, Connecticut and New York's Westchester County from declines in home prices. Now the tightening of credit in response to rising subprime defaults has disrupted the real estate food chain, bringing the national housing slump to Manhattan's doorstep." (Bloomberg) Reuters' subprime coverage page. Supply of Homes Continues to Grow: "The supply of houses and condominiums available for sale continues to grow quickly in much of the U.S., reflecting weak sales. The number of homes listed for sale in 18 major metropolitan areas at the end of April was up 7% from March, according to data compiled by ZipRealty Inc., a national real-estate brokerage firm in Emeryville, Calif." However, housing prices are rising in some areas of the U.S. that missed out on the boom. (Wall Street Journal)
TECHNOLOGY & SCIENCE
The Secret of Apple Design: The inside (sort of) story of why Apple'sindustrial-design machine has been so successful. (MIT Technology Review) You're a Nobody Unless Your Name Googles Well: "In the age of Google, being special increasingly requires standing out from the crowd online. Many people aspire for themselves -- or their offspring -- to command prominent placement in the top few links on search engines or social networking sites' member lookup functions. But, as more people flood the Web, that's becoming an especially tall order for those with common names. Type 'John Smith' into Google's search engine and it estimates it has 158 million results." (free in The Wall Street Journal) Enter your ZIP code, and MSN Auto will show you a map of gas stations your neighborhood and the prices they're charging. Incredible Tornado Video from May 4, 2007 Ellis County, Oklahoma
MUSIC BOOKS MOVIES TV FUN!
Weekend Jazz: Gerry Mulligan: "the most influential baritone saxophonist in jazz." Disney Sells 2 Million Movies on Apple iTunes. How to Slow Down a Ferrari: Buy It: "How long should the world's super-rich have to wait before they can buy a Ferrari? The answer has as much to do with how luxury-goods companies create an aura of exclusivity as it does with the global economy's shifting winds minting more millionaires in places like China, Russia and the Middle East." (free in The Wall Street Journal) Quiz: Do You Have a Bulls**t Job? (Stanleybing.com)
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