Linkfest: Week in Review

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Following last week's rough patch, markets regained their footing this week, as bonds stabilized. The 10-year Treasury settled for the week with a yield of more than 5.1%.

Overall, the economic numbers were not great. Retail sales gained 1.4% in May, but that was mostly due to higher gas prices. The consumer price index jumped 0.7%, its biggest increase since April 1999 (excluding Katrina). Mortgage foreclosures rose to an all-time high. And oil passed $68, gaining 5% on the week. It wasn't just oil, though, that helped push commodity futures up 3.9%. Wheat, copper, gold, cotton, corn and soybeans all contribued to the rise.

But as Barron's Trader column observed, that was not what mattered most:

"In a liquid world, and compared with real estate, bonds or metals, the stock market manages to look ... somewhat safe and chaste. That honor may seem as dubious as being called the least-ugly contestant in a beauty pageant, but it was enough for a winning performance."

And the winners could be found worldwide: The big gainers were the emerging market stocks (up 4.2%) and the global stocks (up 2.2%). The Nasdaq was right behind, tacking on 2.1%. The S&P 500, Dow and Russell 2000 added 1.7%, 1.6%, and 1.5%, respectively. Bonds were the big loser, with REITs getting hit also.

And now for your clicking pleasure, here is the week that was:

INVESTING & TRADING

• Chet Currier asks the question the markets seem to have been wrestling with: If Bonds Hit Bad Patch, Must Stocks Also Suffer? "There are several plausible reasons why higher rates look like bad news for stocks. But all that is theory. In practice, does a bad year for bonds automatically mean trouble for stocks as well? The short answer is no." (Bloomberg)

• The terms oversold and overbought get tossed about quite often. Unfortunately, many glib pundits and talking heads use them incorrectly: A fast primer: Oversold!

• Bond Yields Were Too Low Anyway: "What's behind this battering of bonds? The usual suspect that has been rounded up by the press has been inflation. But that doesn't square with the facts: Gold is down, as are industrial metals, while the dollar is firmer, all disinflationary signs. Meantime, Treasury Inflation Protected Securities also don't evince any increased worries about rising prices." (Barron's)

• LowRisk Investor Sentiment at Extreme Bearishness.

• Jim Rogers and Bill Gross on Bloomberg: "Billionaires Jim Rogers and Bill Gross were on Bloomberg Video yesterday. It sounds like Rogers is doing his best to unload his New York mansion so he can move to China and, since he shaved off his mustache and hired Alan Greenspan as a consultant, Bill Gross hasn't made all that much sense."

• An era of cheap money - gone: "This month's rise in global interest rates is probably a sign of the beginning of the end of an era of supercheap money - a change with profound implications for the recent record-setting stock rally, the buyout boom and economic growth worldwide." (CNNMoney.com)

• End of the uptick rule-- S.E.C. Ends Decades-Old Price Limits on Short Selling: "The Securities and Exchange Commission voted yesterday to end price restrictions on short selling, meaning that investors seeking to sell a share that they do not own will no longer be barred from doing so because the price of the stock is falling." (The New York Times)

• With sentiment toward the dollar almost universally bearish, it's no wonder that the market appears to be setting up for a major rally in the greenback. Some fundamental factors that might be behind the move: Dollar Breakout?

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ECONOMY

The Wall of Worry continues to build:

• A Tale of 2 Inflation Rates: Inflation rates are terrific. Or terrible. It depends upon what you look at. See also: Inflation? Food, energy costs' exclusion debated

• Rising Rates Squeeze Consumers and Companies: "The unusually low interest rates of the last three years have been an enormous boon to almost every corner of the American economy." (The New York Times)

• Retail sales snap back - and then some: Retail sales snapped back with surprising strength in May from a weak April, the government said Wednesday, news that could ease growing worries about a possible consumer spending slowdown in the months ahead. The Commerce Department said sales jumped 1.4 percent in May, boosted in part by higher gasoline prices, after falling 0.2 percent in April. (CNNMoney.com)

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HOUSING

• How are Housing Analysts like the Dot Com Analysts? Henry Blodget observes, "Those of you who had the misfortune to live through the dotcom crash will recall that I and other analysts correctly predicted that there would be a slowdown and shakeout, but drastically underestimated its severity and duration. All the way down, we kept revising forecasts (read: cutting estimates) to previously inconceivable levels, and each time we cut them, we reiterated our expectation that the inevitable trough and upturn was about six months away. It wasn't until two years after the shakeout began, when half of online advertising revenue had evaporated and more than 75% of the companies in the sector had keeled over that the downturn finally ended... And by that time, most of us were so demoralized that we'd stopped predicting that there would ever be an upturn." (The Huffington Post)

• Toll Brothers Has a Secret: "In recent weeks, the homebuilder slashed prices by nearly 20% to sell a block of condo units that have less-than-desirable views in the first tower of Northside Piers, TheStreet.com has learned. What's more, the company appears to be having trouble selling the remaining 11 units that also suffer from poor views at North 8, a nearby project that has had these units on the market since October 2006." (TheStreet.com)

• U.S. Mortgages Enter Foreclosure at Record Pace: "The number of Americans who may lose their homes because of late mortgage payments rose to a record in the first quarter, led by subprime borrowers pinched in an economy that grew at the slowest pace in four years." (Bloomberg)

TECHNOLOGY & SCIENCE

• The wet planet: There was life on Mars (probably): "Scientists now say that an ocean several miles deep once covered a third of the surface of the planet, enough water to support the origin and evolution of life. The red planet, they said, had once been a deep blue, just like Earth." (The Independent)

• Top 25 Most Popular Blogs June 2007.

• Fascinating look at how mankind spread out from East Africa through the Middle East, Asia, Oceania, Europe, and the Americas over the past 150,000 years. Especially interesting are the interaction of migration and climate, and the effects of geological events, such as the eruption of Mt. Toba in Sumatra.

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MUSIC BOOKS MOVIES TV FUN!

• Outstanding video series on the making of some classic albums: I was blown away by The Making of Steely Dan's Aja and ordered a bunch of other DVDs by the same producers.

• Rocco DeLuca & The Burden have put out the most interesting new rock album I've heard in some time: I Trust You To Kill Me. Their sound is original -- jangly roots-rock romp laced with bluegrass and countrified leanings. Cole's expert production brings those mapled vocals -- but is flavored with dollops of Jeff Buckley, Coldplay and most of all, Bron-Y-Aur Led Zeppelin (Videos are here. The band's Myspace page has four songs to stream.)

• The two most interesting wrapups of the Sopranos finale that I've seen: Sopranos Watch: Don't Stop and DISSECTING 'SOPRANOS' FINAL SCENE: QUESTIONS ABOUND.

I must admit: I am relieved to be finshed with the Sopranos, and I am looking forward to the new season of Entourage, starting Sunday night.

Enjoy your weekend!

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