Innovation Update
Weekend Reading: Temporary Cheer
Paul Kedrosky
01/04/09 - 02:24 PM EST
Good Sunday morning, and welcome to the first edition of Weekend
Reading of 2009. First, a look back at the week that just finished,
then a look forward to the week ahead, and finally, some articles and
papers worth reading.
It was the best beginning to a year in modern market
history. The major U.S. indices finished the week up more than 6%, the
sort of swing that used to happen on a daily basis back in November but now has become thankfully rare.
Investors have decided that the time for selling is over, and that
a recovery in the second half of 2009 looks plausible. As I have written several times over the past month, some sort of short-term rally was inevitable, but the strength of the current rally off the November market lows is impressive, with indices up more than 20% from intraday lows in that grim period.
Is this the end? Is the bottom in place? My current view is that
this rally, while inevitable, will sputter out sometime in March at the latest as it becomes obvious that a material recovery won't come until at least early 2010. Weakness in export markets will hold back recovery domestically, and there is ample opportunity for cascading sovereign defaults, a run on the dollar, and an entire bestiary of bad economic things that make the rally shorter-lived than
would otherwise be the case. Nothing is certain, of course, but that
seems the most plausible case now.
Turning to economic indicators, the big number coming next week is
retail same-store sales, which is due on Thursday. It is expected to decline 1.1%.
As for earnings, next week will see reports from Chevron(CVX Quote), Bed
Bath & Beyond(BBBY Quote) and Monsanto(MON Quote).
Finally, here are some articles and papers worth reading:
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- Britain to go broke in 2009. (Bloomberg)
- Barron's calls a market bottom and says Treasuries will pop. (Barron's)
- Demographics, aging and our economic future. (The Economist)
- 25 Years of Conventional Investing Wisdom, Down the Drain. (The New York Times)
- More Laptops Shipped Than PCs in Q3. (Byte and Switch)
- Dave Barry on 2008. (The Boston Globe)
- Industry calls for lowest Bank of England rate in 300 years. (Times Online)
- Evans says Fed needs to mimic below-zero rates. (Reuters)
- Fed has abandoned monetary policy, critic says. (Reuters)
- U.S. Debt Set to Soar This Year. (The Washington Post)
- Anxiety appears to be easing its stranglehold on Wall Street. (The Boston Globe)
- The Irish Economy's Rise Was Steep, and the Fall Was Fast. (The New York Times)
- Value-at-risk and the financial meltdown. (The New York Times)
- How Jim Grant saw around the corner. (The New York Times)
- Fatih Birol, chief economist of IEA, on when the oil will run out. (The Guardian)
- Wasting our power watts. (Time)
- At annual economist parley, idea of '09 U.S. recovery falls flat. (MarketWatch)
- Economist Martin Feldstein, a euro skeptic, sticks to his guns. (MarketWatch)
- Look to the U.K. to find some of China's Treasuries and Agencies. (Brad Setser/Council on Foreign Relations)
- Central Bank Liquidity Injections Made Crises Worse in Latin America. (Naked Capitalism)
- Out in Nevada desert, gambling runs dry. (Los Angeles Times)
- U.S. muni debt now priced as riskier than corporates. (Risk)
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