Paul Kedrosky
Good Sunday morning, and welcome to Weekend Reading. First a look back at the week that just finished, then a look forward to the week ahead, and then a selection of articles and papers worth reading.
It was a nasty week for the markets. About the only positive thing was that the damage felt even worse than it was, but that's scant consolation. For the week, the Dow Jones Industrial Average fell 1.5%, the S&P 500 index lost 0.7% and the Nasdaq Composite declined 2.6%. It was, of course, the third straight week of declines, and over that period the Dow has lost 6.3%, the S&P 500 is down 5.6% and the Nasdaq has fallen 9.4% (its worst run in more than five years). What made this happen? There are a number of factors, ranging from the broad -- growing fears of a recession -- to the specific -- American Express(AXP Quote - Cramer on AXP - Stock Picks) and Capital One(COF Quote - Cramer on COF - Stock Picks) said consumer credit card delinquencies and defaults are mounting. Markets are busily rediscounting the likelihood of a downturn, and many people are concluding that we're already in one. Looking forward to the coming week, stocks likely will see-saw wildly. Big financial firms like Citigroup(C Quote - Cramer on C - Stock Picks) and Merrill Lynch(MER Quote - Cramer on MER - Stock Picks) are reporting earnings and could cause market gyrations. Perversely, bigger-than-expected writedowns from these companies -- within reason -- may not be greeted negatively, because investors already expect them to unburden themselves of losses related to the subprime meltdown and credit crisis. Turning to economic indicators, the government plans to release the December producer price index Tuesday. It's expected to increase 0.2%. Also Tuesday: December retail sales, which are expected to be flat. Wednesday will bring the December consumer price index, which is forecast to rise 0.2%. Also that day, the Fed plans to release its Beige Book survey of economic conditions. On Thursday, the Census Bureau plans to release its report on housing starts and building permits. As for earnings, Reuters estimates that fourth-quarter profits will fall 8% from the year-ago period. As I mentioned, all eyes will be on the banks and brokerages reporting next week. In addition to Citi and Merrill, we'll get reports from JPMorgan Chase(JPM Quote - Cramer on JPM - Stock Picks), Washington Mutual(WM Quote - Cramer on WM - Stock Picks) and others. Outside the financial sector, big companies reporting include GE(GE Quote - Cramer on GE - Stock Picks), Intel(INTC Quote - Cramer on INTC - Stock Picks) and IBM(IBM Quote - Cramer on IBM - Stock Picks). Finally, here are some articles and papers worth reading: Editor's note: To access some of these stories, registration or a subscription may be required. Please check the individual links for the site's policy.- Barron's roundtable panelists are universally negative about 2008, and the magazine picks Terex(TEX Quote - Cramer on TEX - Stock Picks). (Barron's)
- Riding the volatility cycle in the markets: It never ends. (The Economist)
- Boston's Big Dig tunnels have sprung 237 leaks, and Bechtel is taking heat. (The Boston Globe)
- Fed Speech: Governor Frederic Mishkin says don't listen to Fed, unless you listen to Fed. (FRB)
- Interview with VMware(VMW Quote - Cramer on VMW - Stock Picks) CEO Diane Greene. (CMP Channel)
- This Week In Petroleum. (EIA)
- As housing slumps, realtors quit. (Christian Science Monitor)
- Why the Countrywide(CFC Quote - Cramer on CFC - Stock Picks) deal makes sense. (Fortune)
- Taxpayers to help foot Bank of America's(BAC Quote - Cramer on BAC - Stock Picks) $4.1 billion Countrywide bill. (Fortune)
- Research In Motion(RIMM Quote - Cramer on RIMM - Stock Picks) downgraded on U.S. worries as stock declines. (Reuters)
- Countrywide employees are nervous. (Los Angeles Times)
- Japan recession fears on the rise. (BBC)
- American credit card debt is growing at the fastest rate in years. (The New York Times)
- Lengthy profile of Merrill CEO John Thain. (Bloomberg Markets)
- Lehman(LEH Quote - Cramer on LEH - Stock Picks) and JPMorgan sold instant-default subprime securities to Florida. (Bloomberg Markets)
- Spy photos show there's "something in the air" at Apple's(AAPL Quote - Cramer on AAPL - Stock Picks) big event in San Francisco. (MacRumors)
- Tax Rate Cuts and Tax Compliance -- The Laffer Curve Revisited. (IMF)
- The rise of the CME(CME Quote - Cramer on CME - Stock Picks). (Forbes)
- Intel's Andy Grove's is suffering from Parkinson's Disease and driving research money toward a treatment/cure. (Forbes)
- Synchronoss has done well via Apple, but it needs more. (Forbes)
- Ken Fisher argues we're too gloomy about 2008. (Forbes)
- The R-word (recession) index is sounding alarms. (The Economist)
- Boston Scientific(BSX Quote - Cramer on BSX - Stock Picks) is feeling good about Guidant again. (The Boston Globe)
- Buyers are being forced to put down more cash in declining real estate markets, making things worse. (The Washington Post)
- Research: Stock-Based Compensation and CEO (Dis)Incentives. (NBER)
- Summary of new therapies in hair regrowth. (San Francisco Chronicle)
- Research: Do Hedge Funds Arbitrage Market Anomalies? (SSRN)
- Research: How Option Traders on Value and Growth Stocks React Differently to New Information (SSRN)
- The coming food crisis: spiraling prices ahead. (Financial Post)
- What will happen to profits in a period of lower GDP growth? (Investment Postcards)
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