Investing
Weekend Linkfest, Part 2
Barry Ritholtz
05/13/07 - 03:09 PM EDT
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Yesterday, we looked at the week that was. Today, lets preview the week that will be.
With first-quarter earnings season all but over, the focus will be on a number
of economic releases. Given the market's reaction to the PPI data Friday, the consumer price index on Tuesday will be especially important.
Although food prices (up 7.7% year-over-year) and energy (up 3.4% year-over-year) both rose in a big way, the core rate was unexpectedly flat, mostly due to an unexpected drop in prescription drug prices, and a not-unexpected drop in both car and truck prices. Inflation in the pipeline remains robust, as intermediate goods
(that is, excluding food and fuel) rose 0.8% -- the biggest gain since last year.
Tuesday's CPI should reveal the extent to which inflation is being passed along to consumers. The consensus is for it to rise 0.5%. Core CPI (a.k.a inflation ex-inflation)
is expected to increase about 0.2%. The ICSC/UBS chain-store sales snapshot is also scheduled for release Tuesday, but given last week's retail data, expectations for it are rather muted.
On Wednesday we get housing starts for April (The consensus is for 1.475 million.) and mortgage applications from the Mortgage Bankers Association. (Note that the day before, we get the National Association of Home Builders' monthly Housing Market Index. It's hovering near 15-year lows.) Wednesday will also see the release of industrial production for April. (The consensus is for a 0.2% gain).
Improving factory activity is the second quarter's best hope for bettering the first quarter's anemic GDP.
Thursday brings jobless claims, which have been pretty
good, but full of odd quirks. On the schedule Friday is the University of Michigan's Consumer Sentiment Index.
Also on the coming week's agenda: Changes by FASB to the rules for reporting profit. Expect to hear more about this in coming weeks.
Plenty of speeches this week also, with Fed Chair Bernanke discussing derivatives (Tuesday) and subprime lending (Thursday). Neither is expected to move markets -- but ya never know.
Meanwhile, here are a few tidbits to help get you prepped for the coming week:
That's all from what looks like another glorious weekend in the Northeast. Happy Mother's Day, Mom!INVESTING & TRADING
• Positive Surprises Leading to Upward Estimate Revisions: "We are more than three-quarters done with earnings season and earnings continue to surprise to the upside. As things stand now, it's about an even money bet that the median S&P firm will post double-digit year-over-year earnings growth. That would make it the 19th straight quarter. While the 9.8% growth is still lower than previous quarters it is much better than expected. The surprise ratio now stands at 3.5:1, down from 3.8:1 a week ago, and 5:1 two weeks ago but still very strong. Positive surprises have been widespread, with every sector showing more positive surprises than disappointments with the exception of Utilities." (Zachs) vs. • How cheap debt overinflates stocks: Since 2003, IBM has purchased 203 million of its own shares at a total cost of $30.7 billion. That's a huge percentage -- about 52% -- of the company's total operating cash flow of $59.5 billion during the period. It looms even larger if you add in the $17 billion IBM spent during this period on capital expenditures, the $8.8 billion it spent acquiring businesses and the $5.3 billion it spent paying dividends to investors. All that -- added to the spending on buying its own shares -- comes to 104% of operating revenue. (MSN Money) • Forget Murdoch: Yahoo! Should Buy Dow Jones: Yahoo!'s"market-cap is more than $41 billion, so the company could easily absorb Dow Jones in an all-stock deal, matching Murdoch's $5 billion offer. They would also be a white knight much more acceptable to the major and minor family shareholder groups." (TheStreet.com) • Smart ways to play the M&A boom: "With so many deals in the news, it's only natural for investors to wonder which company will be bought next -- and which stock will be next to see a pop. Before you start chasing rumors, though, bear in mind that you may already be profiting from the action. That's because the M&A wave has buoyed stock prices across the board, a number of market watchers say, by adding another source of demand for shares." (Fortune) • Metals Bubble Poised to Burst on Increasing Supplies: "Copper, nickel and lead, the best performing commodities in the past four months, may be the worst by year-end. On Wall Street, the chorus is getting louder that rising metal supplies are outpacing demand. From Goldman Sachs Group Inc. to JPMorgan Chase & Co. to Societe Generale, there are warnings of a mania that is showing all the signs of a climax." (Bloomberg) Counter argument:
Investors Mine For More Deals In Commodities. (The Wall Street Journal) • Tech Investors Cull Start-Ups for Pentagon: "The nation's military, in its search for the next surveillance system, bioterror vaccine or robot warrior, has decided to take a peek into the garage. Through a program that recently emerged from an experimental phase, the Defense Department is using some of the nation's top technology investors to help it find innovations from tiny start-up companies, which have not traditionally been a part of the military's vast supply chain." (The New York Times) • Weak Dollar? Currency, at 10-Year Low, May Fall More: "Anyone who says the dollar is weak after it fetched a record-low $1.3681 against the euro and the fewest pence against the pound in 25 years is expressing a euphemism. The currency may decline at least another 10 percent by the end of 2008." (Bloomberg) • China's irrational exuberance: "Since its February hiccup, the Shanghai A-share market has now moved back up 40%, buoyed by a series of successful initial public offerings as the ranks of investors swell at over 200,000 a day. There are now more than 91 million accounts held at brokers or mutual funds. But some critics argue the way the mainland IPO market is being run systematically fans the irrational expectations of these novice investors with the promise of easy money, storing up trouble ahead." (MarketWatch)
ECONOMY
The Wall of worry continues to build: • Retail Sales = Hard Landing ? See also, slowflation. • Fed Will Keep 5.25% Until Definitive Data Shift: "Unless there's a definitive shift in economic data before Federal Reserve officials meet next month, they might just as well issue the same statement they put out yesterday when they left the interest rate at 5.25 percent." (Bloomberg) • Borrowing Binge Fuels U.K. Economic Worries: "With inflation at a 10-year high and interest rates set to rise as soon as today from their current 5.25%, concerns about Britain's borrowing binge are gathering momentum. Personal insolvencies in England and Wales last year hit a record 107,288, up almost 60% from 2005." (The Wall Street Journal) • Recession '07: 'Black Swan' or ugly duckling? "Recession 2007? Improbable? Totally unpredictable? So why are most economists predicting it won't happen? And can you trust anything you read in the news about a coming recession? One trader says it's just 'noise.'" (MarketWatch)
HOUSING
• Borrowers, Beware. James Grant, writing in the Washington Post, writes: "Easy credit financed the bull market in houses and the flood of home refinancings. Americans felt richer and spent as though they were. It stands to reason that the withdrawal of this manna will lead them to spend less -- with substantial collateral damage to the housing-centered U.S. consumer economy, and, perhaps, well beyond. Our captains of industry owe as much to their lenders' leniency as does any subprime, or high-risk, home buyer. They, too, have been able to raise money on terms unimaginable only four years ago." • Home-price forecast: First ever decline. "Home prices are expected to finish down for the year, the National Association of Realtors (NAR) said Tuesday, which would mark the first drop since the group started tracking values in 1968. NAR projects a 1 percent decline in the median price of an existing single-family home, to $219,800. The group, in a forecast made a month ago, had previously been expecting a 0.7 percent decline. Prior to that, it had expected a gain of 1.2 percent." (CNNMoney.com)
TECHNOLOGY & SCIENCE
• How the Wii is creaming the competition: "A year ago it looked like game over for Nintendo's storied console business. The Kyoto-based gamemaker--whose Nintendo Entertainment System ushered in the modern age of videogames--was bleeding market share to newer, more powerful systems from Sony and Microsoft." (Business 2.0) • Profit in Motion: Tiny Sensors Take Off The Key to Wii's Controller and New iPhone, 'Mems' Are a Hot Product. (free in The Wall Street Journal) • The New Business Contrarians: 11 business leaders who achieved success by zigging while the rest of the world zagged. (Business 2.0)
MUSIC BOOKS MOVIES TV FUN!
• Are CD Prices Coming Down? (Surprisingly, yes.) • Last week, we mentioned one of my favorite new singers, Amy Winehouse. I noticed she got lots of ink this week from publications that inclued The Wall Street Journal ("A New British Invasion?") and The New York Times ("Disillusioned Diva With Glimmers of Soul"). • Malcolm Gladwell on the Colbert Report.
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