The Day Ahead: The Free-Money Reality Check

Good luck trying to be a hero on Caterpillar (CAT): Is it really that dirt-cheap after the FedEx (FDX) and Norfolk Southern (NSC) warnings and the downtrodden Shanghai Composite Index? I will watch from afar as you calculate the present value of future cash flows in a spreadsheet. By the way, speaking of Norfolk Southern, I wonder how Buffett's Burlington Northern is doing if that former name is performing weakly -- and that makes me wonder whether Berkshire Hathaway (BRK.A) could be a negative surprise earnings story.

Macro

I remain on the prowl for favorable patterns in macroeconomic releases, specifically in the areas of new orders and employment. In no way am I looking for perfection -- I'm merely seeking a move out of contraction zones and a decent month-on-month improvement. If this starts to occur with consistency, it would provide greater comfort on October data, given the Fed's involvement in markets. But the more data I digest, it would appear that -- well, let me stop right there. I don't want to freak you out this early in the week.

If I were to venture a guess, I'd say this week is very apt to feel identical to last week -- missing a spark as investors peak across the room and see a bunch of boogeyman approaching.

Monday Quickies

• It's sort of silly to think the decline in oil prices gives the Fed scope to stay on the gas pedal longer. The Bernanke Fed is laser-locked on eradicating high unemployment just as inflation expectations have begun to climb. I have two side notes here. First, my view is that investors take for granted the extent to which inflation has been contained in recent memory -- using government data, not the food and oil bills. But the fact is that, regardless of any potential excess capacity in the job market, the Fed's balance-sheet party will eventually carry ramifications that will make owning gold a priority. My second note regards The Wall Street Journal's Weekend column about Harley Davidson's (HOG) sharpened manufacturing processes. This is a must-read, as it perfectly demonstrates the concept of "structural unemployment" that results from a recession.
• Be aware that, in a market awash with cash and chasers eager to chase, last week the strongest performers were defensive sectors such as telecom and healthcare were. Hmm.
• The Urban Outfitters (URBN) analyst day, on Sept. 27, is likely to support the bulls on the stock.
• Lost in the positive write-ups on Darden's (DRI) earnings was this: In order to reignite traffic, the company had to lower menu-price increases at its restaurants intra-quarter.

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