As always, RealMoney's bloggers were all over the market action this week, and we'd like to share the best of their recent commentary with readers of TheStreet.com. These posts best capture the intent of these blogs, which is to provide intelligent discussion on the issues each writer sees as most pressing that day.
Let's take a look at
on logic and the market,
on questionable option activity in the markets and
on the potentially weakening consumer.
Click here for information on
, where you can see all the blogs -- and readers' comments -- in real time.
Rev Shark's Blog: The Market's Foolishness Can't Be Fought
Originally published on 7/6/2007 at 7:46 a.m. EDT
If fifty million people say a foolish thing, it is still a foolish thing.
-- Anatole France
One of the great frustrations of the stock market is that being right about big macro themes like housing, the economy or interest rates won't necessarily make you any money. The market simply doesn't care about logical thinking, no matter how compelling it may be. The market moves to its own beat and may even seem downright foolish to us as it persists in going up in the face of a host of negatives that seem painfully obvious to us.
There are even market commentators who make a good living constantly pointing out the foolish nature of the market. "It is wrong for the market to go up" they argue with a laundry list of explanations and reasons. Ironically the longer and more wrong they are the more confident they become that they will eventually be proven right.
The big problem is that when they do eventually get it right, as the cyclical nature of the market guarantees they will, the damage that is done due to their poor timing is so great that the ultimate triumph merely serves to stem the damage that has been done. Arguing with the market beat is a very tough way to make a living. He demands great respect and crushes those who are arrogant enough to believe that they can predict what he might do.
So how do we deal with? By making sure that we get out of the way quickly when things aren't going our way. If we think we have the market figured out but we are racking up losses we shouldn't sit there stubbornly because we know we are right. We should get out of the way and make sure we keep our capital intact so we can come back and try it again when conditions are more hospitable.
Presently we are at a juncture once again where there are plenty of great reasons why the market should correct. High oil prices, increasing interest rates, weak housing and extended technical conditions seem like a pretty potent combination to slow down this market. But it isn't happening and we need to respect that fact. Although it may need a rest, the market is acting well and we shouldn't waste our time arguing about whether that is foolish or not.
The market is on hold waiting for the monthly jobs report. We are at one of those times now where a strong report may actually be a market negative because of the increased concern about inflationary pressures and interest rates. Even the indices were flat yesterday the underlying action had some pockets of very positive action and that could spill over to the broader market under the right conditions.
Overseas markets are strong on good economic data. Oil is up again and gold is down.
Steven Smith's Blog: Hilton Option Activity Raises More Questions
Originally published on 7/5/2007 at 9:01 a.m. EDT
Once again, there was unusual and very prescient option activity in a name just prior to the company receiving takeover offer. After Tuesday's close,
agreed to be acquired by
for $47.50 a share, a 32% premium to Tuesday's close, in which Hilton shares gained 6.5% to end at $36.05 on heavy volume.
There was no apparent news to prompt the activity, although Hilton did have a board meeting scheduled for Tuesday. Also, there had been unusual activity
back in May, suggesting talks may have been underway, but might have been sidelined as interest rates rose and Blackstone prepared for its initial public offering.
On Tuesday, the most active strikes were the July 35 and 40 calls, which each traded over 5,800 contracts. The prior open interest in the $40 call was just 120 contracts trading around 70 cents; this morning those will be worth around $6 per contract.
The increasing frequency of unusual activity ahead of news is becoming a very noticeable black eye on the financial markets. After years in which electronic trading -- and rules creating wider and fairer disclosure of information -- had helped level the playing field, individual investors are beginning to view trading in stocks and options as once again being rigged in favor of the professionals.
This is unfortunate, especially for the options market, which had made tremendous headway in creating a more level playing field and becoming more accessible to retail investors.
In the past, it was the perception that the market makers and specialists were taking advantage of customer orders though front-running and wide markets, but now it's a lack of oversight and enforcement by the exchanges themselves, and their self-regulating bodies, that is hurting the industry's reputation.
Tony Crescenzi's Blog: Sluggish Chain-Store Sales
Originally published on 7/3/2007 at 9:42 a.m. EDT
Data through May indicate that personal spending was running at a 1.5% paceduring the second quarter. If realized, that would be the slowest pace since the fourth quarter of 2005, when it came in at 0.8%. Except for that quarter, personal spending is on track to have posted its weakest quarter since the fourth quarter of 2002, which was 1.4%.
These figures have been tipped off by weakness in weekly chain-store sales, which continues throughout June, according to data from both the InternationalCouncil for Shopping Centers (ICSC) and Johnson Redbook.
On a year-over-year basis, ICSC reported that in the week ended Saturday, sales at the 51 chains it surveyed were up 2.5%, the best showing in five weeks but still more than a percentage point below normal. These numbers are in nominal terms, meaning that real growth has been even weaker.
Redbook reported today that "some retailers" are saying that their seasonalinventory is "slightly higher than they would prefer at this point in the cycle."
A continuation of this trend of sluggish spending and unintended inventory buildups will eventually weaken factory activity, dragging lower figures such as the ISM index. In turn, expectations for a
rate cut would return.
With July a clearance month, it will be difficult to judge accurately whether consumers are buckling, but the signals will still be useful. If no buckling happens, the bond market could go full swing in the other direction and price in rate hikes instead.