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Linkfest: The Week That Was

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Goldilocks has left the building.

That was the key takeaway of Friday's god-awful jobs report. The odds of a recession ticked higher, as did the odds of a Fed rate cut bigger than 25 basis points. (Goldies' economists declared a 50-basis-point cut "the most likely outcome.")

The weak jobs data capped off what was an already tumultuous week. And as Friday's trading made clear, reports of the death of volatility turned out to be premature.

Gold, oil and U.S. Treasuries gained, anything equity-related got hit. By the numbers, gold popped 4.1%, while crude added 3.6%. Treasuries gained a solid 1.1%, as the dollar slipped 0.6%. Global stocks fell 1.1%. For the week, the Nasdaq lost 1.2%, the S&P 500 1.4%, and the Dow 1.8%. The Russell 2000, REITs and Europeans stocks gave up 2.2%, 2.6% and 2.8%, respectively. It's hard to draw any conclusions about which of those markets are best situated to ride out a U.S. slowdown.

Barron's "The Trader" column observed:

Traders had been hoping for a weak number -- for job growth wan enough to spur the Federal Reserve to cut interest rates -- and stingier economists were expecting 20,000 or 30,000 fewer new jobs than the 100,000 most had penciled in for August. But the negative number -- and sharp downward revisions to June and July data -- caught the Street off guard, and raised the specter that the credit crunch has triggered a broader and more insidious economic downturn.

Suddenly analysts are debating not whether the Federal Reserve will cut interest rates to prop up the economy, but how extensive those cuts will be.

My name is Barry, and this is what I clicked this week:

INVESTING & TRADING

¿ Bullishness by the numbers: Stock volume has triggered 3 rare technical events:  "But there is one aspect of the volume during the stock market's recent rally that is quite bullish: On three of the past dozen trading sessions, stock market volume triggered a bullish technical signal known as a 'Nine To One Up Day.'" (MarketWatch)

¿ Bearishness by analysis: Nine Reasons the Feds Can't Save Stocks. Doug Kass questions the continued rise in equities. (TheStreet.com

¿ Deals Boom Fizzles: "The global mergers-and-acquisition boom that began in 2003, the greatest deal frenzy in history, is winding down." (The Wall Street Journal)

¿ Two side-by-side Bloomberg articles show why this market is so challenging:

- Cheapest Stocks in 12 Years Greet Investors After Summer Swoon: "U.S. investors are returning from summer vacation to the cheapest stock market in almost 12 years, and some of the biggest fund managers say they're ready to load up on shares of technology, energy and industrial companies."

- Recession Risk Rises as Consumers Feel Pain of Tighter Credit: "The pain from higher borrowing costs may be spreading as consumers and businesses follow investors in shying away from risk, increasing the odds of a recession."

¿ 50 Ways You Know You Are an Emotional Investor.   

¿ How Market Turmoil Waylaid the 'Quants': "Quant strategies have been around for decades, but in recent years they have really come into their own, thanks in part to technology that has lowered the costs of their trading-intensive methods. Whereas investors like Warren Buffett and Peter Lynch defined an era of common-sense 'value' investing in the 1980s -- and swashbuckling hedge funds betting on everything from metals to the British pound typified the 1990s -- quants have scaled the heights of the investing world in the past decade." (The Wall Street Journal)

¿ Smart hedge funds that capitalise on dumb money: "'Dumb money' is a pejorative label commonly used to describe uninformed or misguided investors. Unfortunately, this label applies to many hedge fund investors who have poured money into hedge funds, with assets more than doubling over the past five years to more than $1,500bn. If people carefully considered the structural deficiencies of hedge funds before investing, most would never invest. Hedge funds are not designed to serve the best interests of investors. They are designed to serve the best interests of hedge fund operators." (FT)

¿ The Tao of Junk: "Economists make a big deal out of all the junk we import from China: tainted pet food, lead-laced toys, and enough cheap plastic tchotchkes to load up a landfill the size of Montana. And American industries are clearly being drenched by the rising tide of Chinese imports, which totaled $288 billion in 2006. But as imports from China loudly rise, American exports to China are quietly rising at an even more rapid pace. Would it surprise you to learn that a lot of those exports are ... junk?" (Slate)

¿ Unsafe at Any Rating: CDO Speeds to CCC from AAA: "Watching the rating cuts trickle out of the derivatives forest is akin to searching for elephant dung on a path to try and work out how many pachyderms are in the jungle. There's clearly a herd in there. And it's probably much bigger than the ordure you have seen so far would suggest." (Bloomberg)


ECONOMY

The wall of worry continues to build:

¿ Fed May Cut to 5 Percent Without Promising More: "If Federal Reserve officials cut their 5.25 percent target for the overnight lending rate when they meet on Sept. 18, it will be by only a quarter-percentage point with no promise of more to come. Officials have already disappointed many market participants by refusing to cut the target in response to turmoil in financial markets. And they will surely disappoint those hoping for a half-point cut at the next meeting of the Federal Open Market Committee." (Bloomberg)      

¿ A Closer Look at Unemployment.

¿ The Economist asks Does America need a recession? "But should a central bank always try to avoid recessions? Some economists argue that this could create a much wider form of moral hazard. If long periods of uninterrupted expansions lead people to believe that the Fed can prevent any future recession, consumers, firms, investors and borrowers will be encouraged to take bigger risks, borrowing more and saving less."


WAR/MEDIA/POLITICS/ENERGY

¿ Please, Not Another M.B.A. President: "Willard Mitt Romney knows that the urge to have someone run the country like a business is a strong one in American politics. Periodically, this yearning attaches itself to a nutty object of desire. Lee Iacocca was one such love interest, talked up for the White House in the '80s. That he's once again made the bestseller list, almost three decades after the historic accomplishment of accepting a federal bailout for Chrysler, tells us that we'll adhere this yearning to any C.E.O. with West Wing swagger. In the '90s, Ross Perot got a fifth of the vote even though he was, um, odd. Today, Michael Bloomberg has the virtue of sanity, but his appeal is the same: He's the executive who, as one C.E.O. who wants a C.E.O. president tells me, 'gets things done ... without all the bullshit.'" (Portfolio)

¿ In Holland, Some See Model For U.S. Health-Care System: "The Netherlands is using competition and a small dose of regulation to pursue what many in the U.S. hunger to achieve: health insurance for everyone, coupled with a tighter lid on costs." (The Wall Street Journal

¿ We knew Saddam had no WMD: Sidney Blumenthal writes: "According to two former CIA officers, on Sept. 18, 2002, CIA director George Tenet briefed President Bush in the Oval Office on top-secret intelligence that Saddam Hussein did not have weapons of mass destruction, according to two former senior CIA officers. Bush dismissed as worthless this information from the Iraqi foreign minister, a member of Saddam's inner circle, although it turned out to be accurate in every detail. Tenet never brought it up again." (Salon) See also: U.S. terror law 'unconstitutional.'


TECHNOLOGY & SCIENCE

¿ How to Dump a Cellphone Contract: (The Wall Street Journal)

¿ By now, you know that Apple (AAPL) introduced a slew of new iPods and dropped the price on the iPhone. Our forecasts for these changes -- first made in January of this year -- were surprisingly accurate:  iPod Update.

As to the brouhaha over the iPhone price drops, I find myself in total agreement with Michael Slavitch, who wrote:  "Nobody forced anyone to buy an iPhone. The buyers weren't buying a phone, they were buying status and the envy of others. Every buyer got the opportunity to show off their new toy, brag. The iPhone provided a high quality narcissistic supply. Now that the price has been sullied and the status is gone you can hear the sound of egos deflating as that brief bubble of exclusivity popped. The dealer cut the price of their junk."

¿ Look who's blogging: Alan Greenspan



MUSIC BOOKS MOVIES TV FUN!

¿ Call me Ishmael Oprah: I previously mentioned A Demon of Our Own Design in a Linkfest a few weeks ago. I enjoyed the book a great deal and almost finished it over the long Labor Day weekend. With the author's permission, I posted the entire first chapter here, in text and PDF form. Enjoy!

¿ Award-winning online columnist Mark Morford prints his hate mail. Hilarity ensues.

That's all from the Northeast, where it is definitely a top-down kind of day.

Got a comment, suggestion, link idea? Or do you just have something on your mind? The Linkfest loves to get email! If you've got something to say, then by all means, please do.

RealMoney Barometer Poll
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?
3 Which of these sectors do you think is set to move down in the coming week?


View the results without voting

At the time of publication, Ritholtz had no positions in stocks mentioned, although holdings can change at any time. Barry Ritholtz is the chief market strategist for Ritholtz Research, an independent institutional research firm, specializing in the analysis of macroeconomic trends and the capital markets. The firm's variant perspectives are applied to the fixed income, equity and commodity markets, both domestically and internationally. Other areas of research coverage also include consumer, real estate, geopolitics, technology and digital media. Ritholtz is also president of Ritholtz Capital Partners (RCP), a New York based hedge fund. RCP is driven by the analysis performed by Ritholtz Research. Ritholtz appreciates your feedback; click here to send him an email.

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