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Weekend Reading

Paul Kedrosky

Good Sunday morning, and welcome to Weekend Reading. As always, here are some articles and papers worth reading. First, however, a look back at the week that just finished, and a look forward to the week ahead.

The major U.S. indices were mixed last week, as the euphemism goes. For the week, the Dow rose 0.5%, and the S&P 500 basically stood still. The Nasdaq actually fell, losing 0.4%.

Looking forward to next week, it seems likely that we're headed for some sort of pullback. Granted, it may not be precisely next week, but after this kind of advance you would have to be an ether-inhaling optimist to believe that we're not going to see at least a 5% pullback, just on basic market principle. Your guess is as good as mine as to what precisely might bring about such a correction. Four-dollar gas? A new hostage-taking in Iraq? Crummy job data? Whatever it is, it will happen sooner rather than later now that the wheels are off the perpetual rally.

Turning to economic indicators, the Labor Department releases consumer price index data on Tuesday, and the core CPI (excluding food and energy) is expected to be up 0.2%. On Wednesday, we will see housing data from the Commerce Department, and housing starts are expected to fall slightly. Finally, on Friday we will get the latest Reuters/University of Michigan consumer confidence survey.

Turning to earnings, next week we will see numbers from Wal-Mart, Home Depot(HD Quote), Applied Materials(AMAT Quote) and Hewlett-Packard(HPQ Quote).

Finally, here are some articles, papers, and books worth reading:

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• 15 reasons stocks should be falling. (TheStreet.com)
• Barron's picks hard drives, Annaly(NLY Quote) and steel stocks. (Barron's)
• Why higher share prices aren't good for everybody. (The Economist)
• Greenspan says he sees 2-to-1 odds against a U.S. recession. (Bloomberg)
• Good look at why most investors can't earn the market rate of return. (Efficient Frontier/ William Bernstein)
• Insider case elicits yawns in Hong Kong. (Los Angeles Times)
• The real threat to the current M&A boom. (The Economist)
• Fears of gasoline shortages raise prices. (Oil & Gas Journal)
• Four-dollar-a-gallon gas spotted in San Francisco. (AP)
• The Federal Reserve is totally focused on the unemployment rate. (Bloomberg)
• Seth Klarman contines to stomp the market, despite having 50% of his $8-billion portfolio in cash. (The New York Times)
• Research: Where do alphas really come from? (SSRN)

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting