Linkfest: Week in Review

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And that's the bell!

At the end of the quarter, we see the scoreboard is rather different than many imagined just a few short volatile weeks ago.

The leader for the third quarter is the Nasdaq, which added a solid 3.8%. The Dow industrials were right behind, gaining 3.6%. Leadership continues to come from tech and very big-cap. The S&P 500 was held back by the financial sector and gained less than half of what the Dow did: a mere 1.6%. The big loser was the small-caps, with the Russell 2000 sliding 3.4%. Since the Fed cut the discount rate on Aug. 16, the S&P 500 is up 11%. Both the Dow and the Nasdaq gained 4% in the month of September.

For the week, the big winners were emerging market stocks, which gained 3.8%. That's as much as the Nasdaq added for the quarter! Gold added 1.5% this week, while REITs saw a gain of 1.4%. The dollar continued its slide, falling 0.6% against a trade-weighted basket of currencies.

Barron's "The Trader" column noted that the "Dow Jones Industrial Average has climbed in the fourth quarter for nine consecutive years, and in 24 of the past 27 years. The Standard & Poor's 500 has produced fourth-quarter rallies in 13 of the past 15 years."

Will the coming fourth quarter be as market-friendly as fourth quarters gone by? Perhaps not. Again, Barron's "The Trader" column:

But for all the hopes, there are plot twists that could thwart this year's happy ending. For a start, last year's economic rot was well-contained within the housing market and proved meaningful enough to push rates lower but not enough to dent S&P 500 earnings. So even as housing slumped, consumer spending managed to improve 3.3% over last year's second half, due to the twin tailwinds of declining rates and waning energy costs.

"This year, things look different," says Goldman Sachs economist Jan Hatzius. Consumer-spending growth has already slowed to 2%, which could affect a greater swath of consumer-dependent companies and retailers. "Rates have eased, but credit is tighter." A reprieve from high oil prices also looks unlikely, with crude oil up 34% this year and gas-refining spreads threatening to widen.

The key will be third-quarter earnings. If they stay strong, the bulls will keep the rally going. If they fall precipitously, then recession talk will begin in earnest, and investors may seek more defensive asset classes.

But that's still weeks away. For now, we have some links to click!

INVESTING & TRADING

• U.S. Stocks Have Biggest September Gain Since 1998 on Rate Cut: "U.S. stocks rose this week to complete the steepest September advance since 1998 as the Federal Reserve's interest-rate cut helped energy and raw-material companies lead the market's recovery from a summer rout." (Bloomberg)

• Tech Stocks Get Giddy :) "Technology stocks are posting big gains, after a long period when they were scoffed at by the market, and some money managers say the recent rally is just the beginning." (The Wall Street Journal)

• Bear Stearns(BSC Quote) snookered The New York Times, CNBC and a lot of other folks the other day with a far-fetched story about Warren Buffett. The very next day, the company issued a few billion dollars worth of new debt. I was having absolutely none of it: Buffett to Buy Bear? Bull$%*#.

• Merrill Lynch's 10 major macro themes of the past week. (PDF) 

• Most hedge fund strategies lost money in August: "Most hedge fund strategies lost money last month as the effect of the credit crisis swept through the $1.7 trillion industry, according to firms that track manager performance." (MarketWatch)

• Fed's Rate Move Slows Nasdaq Bears: "Short-selling activity fell sharply on the tech-stock-led Nasdaq Stock Market in the latest monthly reporting period, which included a rally in tech shares as investors placed their bets ahead of the Federal Reserve's latest interest-rate cut." (The Wall Street Journal)

• Brokers' Fictitious Gains: Most on the Street applauded earnings by the big brokers. They shouldn't have: The earnings gains, which were due to a new accounting rule, don't exist.  See also: Why I Distrust Goldman Sachs' Good Fortune. (New York Post)

• Papers Study August Crisis, From First Wave to Last Ripple: "Smart investors love crises. People panic, everything gets out of whack, securities get cheaper, and the world gets more interesting. Academic types also love crises because they produce data, which prompts questions and every once in a while produces some answers." (The New York Times)

• How Wal-Mart(WMT Quote) accidentally became "green": "The 'Wal-Mart environmental moment' starts with the C.E.O. adopting a green branding strategy as a purely defensive, public relations, marketing move. Then an accident happens -- someone in the shipping department takes it seriously and comes up with a new way to package the latest product and saves $100,000. This gets the attention of the C.E.O., who turns to his P.R. adviser and says, 'Well, isn't that interesting? Get me a sustainability expert. Let's do this some more.' The company then hires a sustainability officer, and he starts showing how green design, manufacturing and materials can save money in other areas. Then the really smart C.E.O.'s realize they have to become their own C.E.O. -- chief energy officer -- and they start demanding that energy efficiency become core to everything the company does, from how its employees travel to how its products are manufactured." (The New York Times)

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ECONOMY

The wall of worry continues to build:

• We have long argued that CPI Inflation Data Are a 'Lie'. For the most part, the media have dutifully reported the nonsensical CPI reports as if they were scripture. This drumbeat of criticism -- both here and elsewhere --  has begun to penetrate the mainstream media. We've seen a few critical columns over the past year or so. But I never expected to see this kind of critical reporting in a mainstream outlet such as Bloomberg.

• In Sequel, Fears Of Stagflation Haunt Economy: "Like the movie fiend who can't be killed off, talk of stagflation re-emerges just about any time the economy slows or inflation perks up. Such fears are making another appearance." (The Wall Street Journal)

• Is the Fed Deflating?   

• Fed Bank Presidents Warn Against Assuming an October Rate Cut: "Four Federal Reserve bank presidents warned investors against assuming the central bank will lower interest rates in October, indicating that weaker economic data would be needed to justify the move." (Bloomberg)

• The Econoblogosphere!

• Inflation rates in China are very high. For example, food inflation is running 18.2% year over year.

• Housing Chill Grows Worse, Bites Consumers: "The housing market is going into a deeper chill, and consumers are starting to shiver. Sales of existing homes in August fell sharply, and home inventories by one measure soared to an 18-year high, according to data released yesterday." (The Wall Street Journal)

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TECHNOLOGY/MEDIA/SCIENCE

• CNBC reshuffles its lineup: 'Fast Money' to 5:00 p.m.; 'Kudlow & Co.' to 7:00 pm.

• Apple(AAPL Quote) iTunes killer? Not quite but, Amazon's(AMZN Quote) DRM-Free MP3s are quite interesting.

• GovTrack.us "is a nexus of information about the United States Congress. Bringing together information on the status of federal legislation, voting records, and other congressional data from official sources, and turning it into an understandable and trackable free information resource for everyday citizens, GovTrack aims to narrow the divide between the public and our government."

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MUSIC BOOKS MOVIES TV FUN!

• One of the all-time great science fiction movies is finally restored to its director's original specs: Blade Runner: Final Cut makes its big screen debut in NYC Saturday night. The Q&A we mentioned last week with director Ridley Scott is now online. Also, BR Movie is an utterly massive Blade Runner fan site.

This week, we end with a quote: 

The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait. - G. K. Chesterton

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.

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