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.
After a week filled with subprime thrills and chills, the major U.S. indices finished in negative territory. Most markets saw four days of declines, followed by one day of gains on the back of the Fed's discount-rate cut early Friday. The Dow and the S&P 500 ended the week down 1.2% and 0.5%, respectively, while the Nasdaq gained 1.6%. It was one of the most tense weeks in the markets in some time. For much of it, there was a sense that we were teetering on the edge of a precipice, but by week's end that had changed to a feeling that the crisis had been avoided -- at least temporarily. With many critics muttering about moral hazard, the Fed's move (however symbolic it really is) seemed to convince investors that the central bank is watching market events closely and prepared to act in all ways it can, including a September fed funds rate cut. While the markets didn't set any records in Friday's relief rally, it was clear that most investors saw the Fed news as highly positive, especially for the beleaguered mortage/credit sector. Looking forward to next week, developments will be highly news-driven. So long as nothing surprises investors -- an unexpected bankruptcy, news of greater subprime exposure in strange places, radically slowing growth in export markets, etc. -- the markets could climb the wall of subprime worry. There is a growing sense out there that last week may have marked something like a bottom, and it will take the truly unexpected to shake that feeling. Turning to economic indicators, Friday will bring July new-home sales data, as well as durable-goods orders for July. The other major piece of data comes on Monday, in the form of the Conference Board's index of leading economic indicators. As for earnings, we have oodles of retailers reporting, including Lowe's- Gulf oil and natural gas companies are shutting small amounts of production in preparation for Hurricane Dean. (Reuters)
- Countrywide
is at the mercy of banks and forced to sell top-rated mortgages. (Reuters) - Swiss central bank chief calls U.S. credit crunch "unbelievable." (interactive investor)
- China is look at expanding its hedge fund and private equity holdings. (Reuters)
- Hong Kong stocks will gain the most from a Fed rate cut. (Bloomberg)
- Fed Chair Bernanke is applying lessons learned from studying the Great Depression. (Bloomberg)
- Funny fake apology letter from subprime-struck hedge fund to Investors. (Bloomberg)
- Analyzing the spate of hedge fund apology letters. (iGreed)
- The president's "plunge protection team" gets a workout this week. (New York Post)
- Following Robert Olstein into top turnaround stocks like Boston
Scientific
. (Forbes) - Forbes has major report on solar power. (Forbes)
- Warren Buffett, Jim Rogers, Bill Miller and others on the credit crisis. (Fortune)
- Tumbling markets are causing IPO jitters, at least for offerings other than VMware
. (EETimes) - More knowing ex post facto analysis of the mortgage meltdown. (It misses the point that it's hard for many to get out of a trade until it stops working.) (The New York Times)
- The prime brokerage arms of Wall Street firms represent a concentration of hedge fund risk. (The Economist)
- Barron's picks on Jim Cramer and touts battered
financials like Countrywide and mortgage insurer Radian
. (Barron's) - Last week investors shifted $20 billion from equities to money markets. (Financial News)
- The S&P 500's P/E makes stocks cheap, or expensive, or neither, or something. (Bloomberg)
- Companies are getting caught messing with their own and competitors' Wikipedia entries. (The New York Times)
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