Weekend Reading: Ugly Data

Good Sunday afternoon, and welcome to another edition of Weekend Reading. First, a look back at the week that just finished, then a look forward to the week ahead, and finally, a summary of articles of papers worth reading.

It was the worst week on the major markets since late November. Demonstrating how much volatility has subsided since then, "worst" last week meant a Dow loss of merely 5%, as opposed to the double-digit losses we used to see. This week's catalysts were crummy economic and company data. Also, the markets frothy rise in preceding weeks helped set it up for a fall.

Turning to the week ahead, we can expect more awful economics news, plus nothing reassuring for companies exposed to consumers. The retrenchment continues apace, with consumers deleveraging and saving money in the biggest buckets they can find. Meanwhile, U.S. states and cities teeter on the edge of functional insolvency. California, for example, is now sporting a $41-billion budget deficit that must be closed.

On the other hand, we are marching fast to the Obama inauguration. There remains much confidence, however inexplicable, in a giant stimulus package, one approaching a trillion dollars, far larger than anyone could have expected even a few months ago. As recently as two months ago, I suggested that a package of "only" $500 billion was in the offing, and that was scoffed at -- yet here we are. On balance, optimism about stimulus is likely to trump economic weakness, at least for the next week or so.

Turning to economic indicators, it will be a busy week, with the producer price index, the consumer price index, December retail sales, consumer sentiment data and the Federal Reserve's Beige Book on tap.

As for earnings, next week we will see reports from Alcoa(AA Quote) and Intel(INTC Quote), as well as some possible hints from banks, which will be reporting shortly.

Finally, here are some articles and papers worth reading:

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• Barron's roundtable tries to make amends for a year of terrible picks. (Barron's)
• If Obama wants credibility, he needs to target entitlements, not earmarks. (The Economist)
• Texas Instruments(TXN Quote) TI and Qualcomm(QCOM Quote) power new Palm(PALM Quote) Pre. (EETimes)
• The health care industry was supposed to be recession-proof. So why is it in trouble? (Slate)
• Five pirates drown with loot from hijacked oil tanker. (Shanghai Daily)
• Economists see longest recession since World War II. (Reuters)
• China Risks the Madoff Treatment From Treasuries. (Bloomberg)
• The outlook for emerging markets. (The Economist)
• California's fiscal woes. (The Economist)
• Era of interest-free mortgages looms in U.K. (Telegraph)
• Information, Liquidity, and the (Ongoing) Panic of 2007. (SSRN)
• Columbia's Amar Bhidé and NYU's Nouriel Roubini. (BusinessWeek )
• Of boom, bust but maybe not the Black Death. (Reuters)
• China imports, exports tumble. (The Wall Street Journal)
• Contracts and bullsh*t promises. (SSRN)
• As deficit countries contract, can surplus countries be far behind? (Pettis)

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