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Linkfest: Week in Review

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Happy Anniversary!

Or perhaps, not so happy. Markets digested some punk economic releases and disappointing earnings data, along with some ugly guidance. Blunt statements this week from Fed Chair Bernanke on housing didn't help, nor did his first mention of the weak dollar.

Markets did not like what they heard. By the numbers, the big winners were crude oil (up 5.9%), gold (up 2%), Treasuries (up 1.6%) and investment-grade bonds (up 1.5%). Commodity futures tacked on 1.3%.

The losers? Pretty much everything else. REITs got shellacked for a 6.8% loss. They are now down 2% over the past 52 weeks. The Russell 2000 also got pasted and lost 5%. The Dow and the S&P 500 gave up 4.18% and 3.9%, respectively. The Nasdaq held up the best of the major U.S. indices, sliding a mere 2.9% for the week, nearly all of it on Friday, when it fell 2.65%.

Here's something to chew over: The S&P and Dow industrials have given back all of their gains since the 9/18 rate cut. The Nazz remains a few hundred points -- about 4% -- above its Sept. 18 levels.

Barron's "Streetwise" column had this to say:

Pulling back to view the action in context, what's most clear is that the indexes have pulled back a few percent after a straight-up, two-month rally whipped up too much frothy investor sentiment and got expectations too high for earnings season. This should nicely skim away a good deal of the short-term bullish froth that's been noted here the past couple of weeks, while raising the adrenaline level of the recently frustrated bear camp. These are positives.

Earnings, simply, have not been good enough to offer continued excuses to buy stocks near all-time highs, given near-$90 oil and a Dow component, Caterpillar (CAT), invoking the possible onset of recession.

Enough sexy banter. Let's get clicking:

INVESTING & TRADING

¿ Fears of Falloff In Profits Send Markets Lower: "A slew of weak earnings reports stoked fears that profits in the next few quarters will fail to hit lofty expectations, sending the Dow Jones Industrial Average down 2.64% Friday. While investors have known for weeks that profits for the third quarter would suffer from turmoil in financial markets, many reassured themselves that a sharp turnaround would come in the current quarter, helped by a strong global economy."  (The Wall Street Journal)

¿ Gamma Gamma Hey! As we warned Tuesday, this week's options expiration was likely to accelerate the move downward if Monday's lows were breached. That's pretty much what happened.

¿ The Blow-Up: How the financial engineers known as "quants" contributed to Wall Street's summer of scary numbers. (MIT Technology Review)

¿ Some terrific charts of the '87 crash from the WSJ: intraday, the full month of October  and in comparison with other crashes. There's also a rather surprising look at how various Dow components have performed since the '87 crash here. (Guess what's been the top-performing stock. Wrong!)

¿ Margin Debt -- and Risk -- Is Growing: "Even after a recent drop, margin debt remains within spitting distance of the all-time high it hit in July, and 43% higher than it was a year ago. It's become a source of concern to some investors who worry that it makes the stock market more vulnerable to a nasty tumble, particularly if equities' resurgence continues." (If no Barron's subscription, go here.)

¿ Companies That Make Buybacks Lag the Market.

¿ Large Stock-Options Grants May Hurt Investors: "A large stock option may motivate a chief executive officer to such great risks that he ends up making decisions that can backfire for shareholders. That's the conclusion of two business school professors." (Bloomberg)

¿ Oil-Stock Drawdown Fuels Price Rise:  "Amid the record run of oil prices lies a troubling trend: Western nations, particularly in Europe, drew down their oil tanks during the summer months -- a time when they would normally build them up. That is triggering fears that global stocks could dwindle to exceedingly low levels this winter just as demand for fuel peaks -- driving high crude prices even higher." (The Wall Street Journal)

¿ Slate's Dan Gross goes off on Hank Paulson in Protecting Paulson's Pals: "The subprime collapse didn't bother the Bush administration, until Wall Street bankers started whimpering. The subprime mess has been spreading like toxic mold since the housing market peaked last year. So why did it take until now for the government to decide it should do something about it?"


ECONOMY

The wall of worry continues to build:

¿ Strange Inflation News.   

¿ GMAC, FMCC may suffer on auto loan delinquencies: "Rising delinquencies by borrowers of prime auto loans may cut into profits at GMAC LLC and Ford Motor Credit Co (FMCC), and potentially hinder improvement in the credit spreads of the auto financing companies. The percent of borrowers of prime auto loans that are more than 30 days delinquent on the debt has risen to more than 2.5 percent, according to JPMorgan." (Reuters)   

¿ Oil and food are at record prices, and we get the smallest increase in Social Security COLAs in years: These are the Real World Consequences of Core Inflation Focus


WAR/MEDIA/POLITICS/ENERGY

¿ American Lawbreaking: the laws we are allowed to break in America and why.  

¿ Ready or Not, Here Comes the Fox Business Network: "One minute Fox was doing a segment that included a $1 million diamond; the next it was giving tips on how to avoid foreclosure. It would home in on the stock market and then report on the death of a teenager in Virginia from a staph infection, reports that included several truly silly efforts to frame the tragedy as a business story. On Tuesday afternoon, while CNBC was dissecting Intel's earnings, Fox was running its 'Happy Hour' show, which is set in a bar. A co-host named Cody, a dude so hip he doesn't tuck his shirt in, was interviewing a random customer about his plans for Christmas spending. 'Expensive chocolates,' was the man's reply." (The New York Times)      


TECHNOLOGY & SCIENCE

¿ How Google (GOOG) maps the world.

¿ Apple (AAPL) vs. Everyone: "Every media conglomerate wants to start its own online venture. Will iTunes survive? Since the iTunes Store opened in 2003, Apple and the world's top media companies have happily shared the profits from consumers' increasing appetite for downloadable songs and videos. This summer, the four-year honeymoon ended." (Slate)

¿ Led Zeppelin saves the world.


MUSIC BOOKS MOVIES TV FUN!

¿ Everything in the music industry is up! (except those plastic discs)   

¿ 'Daily Show' Archives Appear Online: "Beginning today, eight years of episodes of 'The Daily Show with Jon Stewart' are fully accessible on the show's Web site. Videos of every skit, every joke and every guest are available for free, fully searchable on TheDailyShow.com. According to Comedy Central, 13,000 videos will be stored in the database."

¿ Writer tapped for Kurt Cobain biopic.

That's all from the Northeast, where we're enjoying another gorgeous fall weekend -- but beware of wet leaves!

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
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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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