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That's the quarter!
While it might have been a bumpy week, it was a hell of a quarter for most asset classes. The
saw its best quarter since 2003, gaining 8.5%, while the
was right behind with a 7.5% increase. Despite the newfound love for many of the big-caps, the
was the laggard among the major indices, rising a still-respectable 5.8%.
Those numbers are even more impressive when you realize that the big indices failed to make any headway in the month of June: the S&P 500 gave up 1.8%, the Dow and the Russell 2000 both slipped 1.6%, and the Nasdaq chopped around, ending down 0.05%.
For this past week, the biggest gainer was crude oil, up 2.2% (hitting a 10-month high of $70.68 a barrel), followed by triple-A-rated bonds and Treasuries, up 0.7% and 0.6%, respectively. The Nasdaq kept even with Treasuries, while the Dow tacked on 0.4%. The S&P 500 gained less than a point. Emerging markets, REITs, non-oil commodities, junk bonds and gold all lost ground for the week.
The final numbers for the week do not describe how erratic the trading was: It is clear that the subprime/CDO mess had traders on edge. The indices repeatedly hit intraday highs only to fail those levels by day's end.
"Uneasiness over a potentially over-levered market was summed up recently by Punk Ziegel analyst Richard Bove, who outlined a wobbly inverted pyramid. At the bottom is real GDP growth of about 1.9% over the past year. On top of that is personal income growth of about 5.8%. But total credit outstanding has increased 8.7%, asset-backed securities have grown 18.7%, while debt held by broker dealers is up more than 26%."
So where will we begin? The iPhone? Quarter's end? FOMC Meeting? No, the dominant meme this past week was the
hedge fund implosion and its possible consequences:
INVESTING & TRADING¿ Wall Street Fears Bear Stearns Is Tip of an Iceberg: "The near-meltdown of two hedge funds at investment bank Bear Stearns Cos. last week underscored -- and in some ways aggravated -- a growingfear on Wall Street: that hard-to-trade investments may suddenly turnsouth and set off a broader market downturn." ( The Wall Street Journal) ¿ Hedge Funds laden with collateralized debt obligations have some surprising similarities with a certain well-known corporate debacle: CDO Hedge Funds = Enron ?¿ Who else is sitting with all of this toxic debt? You'll be quite surprised to see The Poison in Your Pension. ( Bloomberg Magazine) Moving on: ¿ Mutual funds up 6.3% in Q2, led by natural resources funds: "The 8,010 U.S. diversified stock funds tracked by Lipper showed an average preliminary return of 6.3% for the three months ended Thursday. They are up 8.6% for 2007." ( AP) ¿ Buffett Bets a Million: "Buffett said he makes $46 million a year in income and is only taxed at a 17.7 percent rate on his federal income taxes. By contrast, those who work for him, and make considerably less, pay on average about 32.9 percent in taxes - with the highest rate being 39.7 percent." ( CNNMoney.com) ¿ Rich investors shunned hedge funds for property in 2006 - study. ( Forbes) ¿ What Bubble? China's Analysts More Bullish Than Ever: "Analysts who cover Chinese companies ... are the most bullish they've been at any time in the past 10 years. Total buy calls on mainland shares from local and foreign analysts rose to 67.4 percent of all ratings this month, the highest since Bloomberg began collating the data a decade ago. The bullishness comes as the government is trying to cool a rally that's madeshares there the most expensive in Asia." ( Bloomberg) ¿ Quote of the Day: "We do think if you're dumb enough to buy a home builder (share), you ought to buy us." - R. Chad Dreier, Chairman and Chief Executive Officer of Ryland GroupInc to an investor audience at the JP Morgan Basics and Industrials Conference, held June 11-12, 2007. ( Reuters) Funny thing about The Wall of Worry this week: The backward-looking stuff is fairly positive, while tomorrow's forward-looking items are all negative...¿ Yield Curve Rights Itself Without Fed's Help. ( Bloomberg) ¿ Ranks of Rich in U.S. Grow at Faster Pace. (free in The Wall Street Journal) ¿ U.S. Deal-Making Topped $1 Trillion in First Half. ( The New York Times' DealBook) ¿ Housing Deterioration ContinuesA CNNMoney.com comparo: ¿ Critiques of Iraq War Reveal Rifts Among Army Officers: "The conflicting theories on Iraq reflect growing divisions within the military along generational lines, pitting young officers, exhausted by multiple Iraq tours and eager for change, against more conservative generals. Army and Air Force officers are also developing their own divergent explanations for Iraq. The Air Force narratives typically suggest the military should in the future avoid manpower-intensive guerrilla wars. Army officers counter that such fights are inevitable." See also: U.K. Bomb Plot Raises Questions. (both free in The Wall Street Journal) ¿ The Washington Post looks at Dick Cheney, the most influential and powerful man ever to hold the office of vice president. This series examines Cheney's largely hidden and little-understood role in crafting policies for the War on Terror, the economy and the environment. ¿ Forget the hype a moment, and consider the following: What Does the iPhone Teach Us About Technology & Commerce?¿ Overlooked in the iPhone hype: First Bacterial Genome Transplantation Changing One Species to Another. (This is pretty amazing stuff.) ¿ Life atGoogle - Perspective from a Microsoftie: A former Google (GOOG) - Get Report employee hired by Microsoft (MSFT) - Get Report sheds some light on what it's like to work for the search giant. ¿ Why are financial markets becoming more prone to crises even though the underlying economy has grown less risky over time? A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation looks at that very issue. It got a nice review from the CFA Institute. ¿ Rolling Stone reports on where the music business went wrong: The Record Industry's Decline.
TECHNOLOGY & SCIENCE
MUSIC BOOKS MOVIES TV FUN!
I am compelled to remind people that 1.0 of anything is usually problematic, and as much as I find the iPhone
, I know that 2.0 will be faster/cheaper/smaller, with more iPod capacity and all of the bugs worked out. Until, then feel free to keep me in the loop on
See y'all tomorrow.
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At the time of publication, Ritholtz had no positions in stocks mentioned, although holdings can change at any time. Barry Ritholtz is the chief market strategist for Ritholtz Research, an independent institutional research firm, specializing in the analysis of macroeconomic trends and the capital markets. The firm's variant perspectives are applied to the fixed income, equity and commodity markets, both domestically and internationally. Other areas of research coverage also include consumer, real estate, geopolitics, technology and digital media. Ritholtz is also president of Ritholtz Capital Partners (RCP), a New York based hedge fund. RCP is driven by the analysis performed by Ritholtz Research. Ritholtz appreciates your feedback;
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