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Kedrosky's Weekend Reading

Paul Kedrosky

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

The major U.S. indices were up last week for the first time in three weeks. While it may have felt worse than it was, the reality is that the markets only saw losses two days last week, and those weren't enough to offset gains. The Dow and the S&P 500 ended the week up 0.4% and 1.4% respectively, while the Nasdaq gained 1.3%.

Nervousness remains rampant, so next week is likely to be another highly skittish one in the markets. All eyes remain on subprime-lending issues, and the main concerns are whether things are worse than we know, and whether subprime's effects will spread more consistently beyond housing into the broader economy. Assuming so, most investors seemingly believe the Federal Reserve will ride to the rescue, even if in a sense it already has, providing the banking sector with more liquidity this week than any time since the September 11 terrorist attacks. It should be an entertaining week.

Turning to economic indicators, on Wednesday we will see inflation data via the core consumer price index, or CPI. On Friday we will see the Reuters/University of Michigan Consumer Surveys' preliminary August reading, which is expected to slip slightly. Investors will also be watching July U.S. retail sales data, which come out Monday. Finally, on Thursday we will see July housing starts, which will see further decline.

Turning to earnings, next week we will see results Tuesday from Wal-Mart(WMT Quote) and Home Depot and on Thursday from Hewlett-Packard(HPQ Quote) and Nordstrom(JWN Quote).

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

• Large mortgages are growing more costly, causing new problems. (New York Times)
• Overview of some of the private equity deals most at risk in new lending environment. (Washington Post)
• Restoring faith in the U.S.'s mortgage markets is the real challenge. (Economist)
• Central banks in the developed world no longer control global money supply. (Economist)
• Margin calls and similarities in black-box quant strategies helped drive markets lower. (Telegraph)
• Gold bugs having a merry time planning for a big 2008. (Telegraph)
• Investors need to avoid the temptation to do too much in response to current market issues. (Washington Post)
• Research: GDP, GDI and noise in getting the current health of the economy. (Federal Reserve Bank)
• VMware has upped the price range for its impending IPO. (Byte & Switch)
• The origins of the U.S. subprime mortgage market. (IMF)
• A new book on the U.S. credit market panic of 1907 seems increasingly timely. (Amazon)
• Central bankers need more information and faster to prevent runs on the bank. (BusinessWeek)
• Pop! goes the credit bubble. (IDD)
• U.S. oil drilling hits 21-year high. (O&G Journal)
• World oil supply is lagging demand in worrisome way. (IEA/Financial Times)
• Goldman's(GS Quote) Global Alpha fund has fallen 26% so far in 2007. (Bloomberg)
• Venezuela's Hugo Chavez says oil is headed for $100 a barrel. (Reuters)
• Retail investors are bearing up better than professionals in the current market volatility. (Reuters)
• Cerberus is set to succeed or fail very publicly. (Fortune)
• On BNP Paribas: "The world almost ended last night." (Fortune)
• Jim Simons at Renaissance warns on recent results. (DealBreaker)
• Higher oil prices may push off peak oil. (CSM)
• iPhone customers say there are dead spots on the device's touch screen. (EE Times)
• Democrats are still having trouble with trade issues in Congress. (Washington Post)
• U.S. 12th-graders are doing better than expected in economics tests. (New York Times)
• Insiders aren't as bearish as many seemingly think. (New York Times)
• Global economy and financial markets: Where next? (IMF)
• Managers suffering as quant similarities revealed. (eFinancial)
• Barron's does lots of bottom-fishing, including at Bear Stearns(BSC Quote). (Barron's)