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Linkfest: Week in Preview

A Web look at the week ahead.

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Yesterday, we looked at the

week that was

. Today, we preview the coming week.

We have a very light calendar of economic releases. All eyes will be on the

FOMC

, which meets on Tuesday. Few are expecting any change in the agency's stance (Goldman Sachs is forecasting a change in "bias" from inflation-fighting to a neutral stance). I am looking for some acknowledgment in either the statement or the minutes as to the recent credit crunch and market turmoil.

Earnings releases continue this week: On Tuesday,

Cisco Systems

(CSCO) reports results; company CEO John Chambers has proven himself to be the master of "beat by a penny."

Marsh & McLennan

(MMC) reports before the open;

Tyco International

(TYC) also reports. We should also hear about earnings from leveraged buyout target

TXU

(TXU) -- what's $44 billion amongst friends?

On Wednesday,

American International Group

(AIG) will release earnings, and may provide some insight into how much subprime-mortgage-backed securities its sitting on. On the same day, I expect

Toll Brothers

(TOL) to be somewhat circumspect as we hear how much revenue, contracts and backlogs have been hit even in the luxury home market. We also hear from media heavyweights

News Corp.

(NWS) and

Cablevision Systems

(CVC).

Thursday looks like retailers' day:

Macy's

(M),

Sears Holdings

(SHLD) and

Wal-Mart

(WMT) will release earnings and preview back-to-school season. We will also learn how much consumers may be feeling the effect of higher gas prices and the closing of the housing ATM window. Also on Thursday:

Sprint Nextel

(S) and

Vonage Holdings

(VG).

Pour yourself a strong cup of joe -- it's that time:

Investing and Trading

¿

Why Global Stocks Make Sense

Richards strikes the deepest chord with readers. His interviews seem to be the ones that get tacked to walls or saved in a desk drawer, treasures of insight and wisdom. People who have benefited from his calls on gold (2002) and energy (2004) or just plain enjoy hearing a smart man put the global economy in perspective ring us asking whetherwe plan to talk to him again. His time running public money at two respected firms, Primecap Management and Capital Research & Management, may be over, but he still puts in long days of research and travel, particularly as a member of the Rand Corporation's Center for Middle East Public Policy advisory board. During a conversation in his Deer Isle, Maine, barn looking out to the waters of near Penobscot Bay, we found him most bullish, excited by the cheap valuations on many big-cap U.S. stocks with extensive international operations. (

Barron's

)

¿ On Monday morning, I posed the following question:

Is the Bull Market Over, or Are Stocks Cheap?

¿

When It Comes to Rebalancing, a Little Means a Lot

It's a question that has been on many investors' minds since the stock market hit the skids two weeks ago: Should portfolios be rejiggered in light of rising market volatility? (

New York Times

)

¿

"Some People Worry about Peak Oil. I Worry More about Peak Grain."

So says Niall Ferguson in a commentary in the

UK Telegraph

--

Worry about bread, not oil

: "Can world food production keep pace? Plant physiologist Lloyd T. Evans has estimated that 'we must reach an average yield of four tons perhectare... to support a population of 8 billion.' But yields right now are, as we have seen, just three tons per hectare. And a world of eight billion people may be less than 20 years away."

¿

The Coming Oil Plunge

:Here's the long and short of oil: Prices of crude will remain high through 2008, helped by a falling dollar and production shortfalls in Mexico and Venezuela. But eventually, oil will take a hard fall, maybe as early as 2009. And when oil's swan dive finally does arrive, it willbe disastrous for Washington's twin pets -- ethanol and wind power.

Despite generous government tax subsidies, the two sources of "clean" energy can't go head-to-head with lower-priced petroleum. Car buyers might want to think twice before plunking down money on a hybrid.(

Barron's

)

¿

Macro Analysis and Market Application

: Getting the analysis right is barely half the battle. You then have to apply it to the stock market -- a much trickier task than you may have imagined...

¿

Grantham Says Hedge Funds, LBO Funds to Collapse

: Jeremy Grantham, the money manager who oversees $150 billion as chairman of Grantham, Mayo, Van Otterloo & Co. LLC, said credit-market declines may force as many as half of all hedge funds to close in the next five years. The loss of investors' appetite for risk also may cause at least one global bank and "one or two" of the largest private-equity firms to go out of business, Grantham, knownfor his pessimistic outlook, said yesterday. The 68-year-old investor said he's still bullish on emerging-markets stocks. (

Bloomberg

)

¿

With Asset Boom Essentially Over, Is It Time to Buy?

The more timely question is whether it's time to buy. The answer: not yet. The Common Sense approach, reiterated often in this column, is to buy lower, sell higher, and stocks are now indisputably lower than they were just a week ago. I buy at intervals of 10% declines in the

Nasdaq Composite

, which peaked at 2720 on July 19. A 10% decline would take it to 2450, which is my new buying target. Even though we're not there yet, you should begin to map out a buying strategy. At this rate it may not be long before it's time to implement it. (

Smart Money

)

¿

Getting in the Skin Game

: An entrepreneur tries to make it easier for everyone to profit from one of the economy's dirty little secrets: the $12 billion-a-year porn industry. (

Business 2.0

)

¿

HomeBuilder Myths Meet Reality

:It wasn't supposed to happen like this. Today's homebuilders were thought to be better-capitalized, savvier and more geographically diverse than many of their predecessors in the last downturn, in the early 1990s. While many are expected to weather the slump, concern ismounting about the balance sheets of a growing number of companies. (

The Wall Street Journal

)

See also

The Stunning Failure of Responsibility

.

¿

Mortgage Mania Didn't Grip Everyone

: It is never pretty, watching a mania come undone. Unless you are one of the folks who never bought into the madness in the first place. Michael A. J. Farrell, chief executive of

Annaly Capital Management

(NLY), a high-grade mortgage real estate investment trust, is one such man. And with a perspective on the residential mortgage and credit markets extending back to the 1970s, he is an excellent person to consult on what is likely to happen next. (

New York Times

)

¿

Poole Says Subprime Investors Deserved to Lose Money

: (WOW!) Federal Reserve Bank of St. Louis President William Poole said investors who lost money buying subprime mortgage-linked securities got what they deserved. (

Bloomberg

)

¿ Here's a derivative two-fer:

How does a CDO work?
How does a Credit Default Swap (CDS) Work?

¿

New contest: Pick one big tipping point

. Paul Farrel invites readers to decide which of 20 triggers will end "aging bull" -- Folks, that's the "Law of Unintended Consequences" at work. Pentagon generals call it "Blowback." The Irish know it as "Murphy's Law." If anything can go wrong, it will. The future's unpredictable. Best-laid plans can screw up. The law baffles humans, but it works. Sometimes it's comic, like the consequences triggered by Jerry's innocent joke. Sometimes it's tragicomic, like Congress' agri-subsidies for corn farmers, designed to encourage ethanol production and make America energy-independent. Guess what: Subsidies drove up corn prices so high pigs and cattle are eating cheaper stuff, like trail mix, cheese curls and candy bars. Seriously. Now both gas and meat prices are rising, as Congress debates an wasteful new $260 billion farm-subsidy bill. Meanwhile, Detroit's still pushing gas-guzzlers while lobbying against higher mileage standards." (

MarketWatch

)

¿

Get the Real Picture on Kodak

: The Business Press Maven gets paid by newspapers -- in addition to Web sites like this one -- so about the dumbest thing he can do is call those who run them a bunch of delusional dopes. Thing is, though, these delusional dopes are proving a good point about why we have to pay attention to the words that come out of the mouths of industry leaders -- and what is written about those words. (

TheStreet.com

)

¿

Credit Chill Freezes Leveraged Deals

: The big chill gripping global credit markets has caused 46 leveraged financing deals around the world to be pulled since June22, representing more than $60 billion in funding that companies had planned for mergers and acquisitions. The number of deals pulled last year? Zero. (

Wall Street Journal

)

See also

Buy-out deals may be on hold for months

(

Financial Times

and

$43bn of deals pulled in a fortnight

(

The Telegraph

)

¿ DJ FiniFinito has some fun with Jim Cramer's

CNBC

rant Friday: Mashup: Cramer/Crystal Method --

Right Here, Right Now (No Idea Mix)


Economy

The wall of worry continues to build.

¿

America's Economic Mood: Gloomy

: Americans are feeling decidedly sour about the economy and those in charge of it, fueling Democratic efforts to target business interests in the 2008 election campaign.

More than two-thirds of Americans believe the U.S. economy is either in recession now or will be in the next year

, a new Wall Street Journal/NBC News poll shows. That assessment comes despite the fact the economy has experienced sustained growth with low inflation and unemployment and generally rising stock values ever since the recession that ended early in President Bush's tenure. (

Wall Street Journal

)

¿

Tuesday's Fed Meeting: Saladin (Fed's use of prose) vs. Richard (The Fed Funds Rate)

TheStreet Recommends

.

¿

Rubin Should Teach Paulson Secret PPT Handshake

: Where is the PPT? If that acronym, short for Plunge Protection Team, doesn't immediately conjure up images of government officials and representatives of large Wall Street banks (think Goldman Sachs) conspiring to support the stock market, you don't spend enough time with the black-helicopter crowd. (

Bloomberg

)

See also

Market Volatility Won't Affect Fed's Decision

.

¿ And just how good was that

Non-Farm payroll report?

¿

Minsky Has His Moment

: The Minsky Moment is important because it means the beginning of forced selling. Buying driven by ever-increasing leverage stops, and selling to decrease leverage begins. The deleveraging sellers are there because they must sell.

¿

In a Maze of Indexes, Finding Prices to Live By

: How fast is the cost of living rising? Few questions about the economy are more important. Nearly every policy decision, every investment decision and every retirement decision hangs on the answer. Inflation today influences our expectations about inflation tomorrow. If people anticipate accelerating price increases, they tend to buy in advance of current needs, often causing those increases to happen now instead of in the future. That process could end up like the great inflation of the 1970s, cured only by a terrible blast of unemployment and financial failure. (

New York Times

)

See also

Where costs will rise (or fall) in 2007

. (

CNN Money

)


Housing

¿

Slate's

Daniel Gross points us to The Real Morons of Orange County

Why America's most reckless real estate investors come from Irvine, Calif

.

¿

The Loan Comes Due

: Suddenly it's not so easy to borrow. That is true for homeowners, and it is true for companies. Only two months ago, it seemed as if almost any company could borrow money at low interest rates. Now loans seem to be drying up everywhere. What had seemed like a contained problem, involving home loans to people with poor credit, has suddenly mushroomed into a rout that threatens to make life difficult for everyone who needs to borrow money. Home buyers are likely to pay more for mortgages, and some with less-than-pristine credit or an inability to come up with a down payment may find they no longer can borrow at all. (

New York Times

)

¿

Foreclosure rates could soar

: Moody's Economy.com forecasts that defaults won't peak until 2008 due to ARM resets and falling home prices. (

CNN Money

)

¿

Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits

: Insurers often pay 30-60 percent of the cost of rebuilding a damaged home -- even when carriers assure homeowners they're fully covered, thousands of complaints with state insurance departments and civil court cases show. Paying out less to victims of catastrophes has helped produce record profits. In the past 12 years, insurance company net income has soared -- even in the wake of Hurricane Katrina, the worst natural disaster in U.S. history. (

Bloomberg

)

¿

Countrywide Financial

(CFC) shows all of its lender-owned property, also referred to as a REO (real estate owned) on their books. It created

a tool to search for Countrywide owned properties for sale in your state

.

¿

Subprime's Other Victims: The Yacht-Owners

. (

Dealbook

)

War/Media/Politics/Energy

¿

A Family's Benign Neglect at Dow Jones

: "The primary reason I was in favor of the deal," said Elisabeth Goth Chelberg on Wednesday, "is because I did not think that family ownership was ever going to be in the best interest of the company." She paused for a second, and then offered a small, sad correction. "I mean this family ownership." (

New York Times

)

See also

Why Murdoch shouldn't change the WSJ

¿

McCain's Hail Mary

If John McCain wants to prove he's still committed to winning, it's time for him to throw his Hail Mary pass. That can only mean one thing: doubling down on his support for continuing the war in Iraq and taking on his opponents for being half-hearted about it. His big chance to do this will come in Sunday's early morning Republican debate, the first since the McCain campaign went into its graveyard spiral. (

Slate

)

¿

Economists look at Global Climate Change

¿

Doomsday Simulations Help U.S. Gird for Hurricanes, Terrorism

: The computer screen shows a toxic cloud rolling slowly over buildings, a visualization that permits scientists to record every lethal swirl and eddy and to calculate the toll for a city's residents. It's a far cry from "The Sims," an addictive computer game that lets users createa virtual universe. As displayed on computers nicknamed "Coyote" and "Thunderbird," disaster simulations conducted under a $25 million program run by Sandia and Los Alamos national laboratories are helping the U.S. government predict the impact of chemical or biologicalattacks, killer hurricanes or accidents such as the collapse of the bridge on the main highway into Minneapolis. (

Bloomberg

)

Technology and Science

¿

Biologists Helping Bookstores

, according to

kottke

, "is a guerilla effort to reshelve pseudo-scientific books (books on intelligent design, for instance), taking them from the Science section and moving them to a more appropriate area of the store, like philosophy, religion or religious fiction."

¿

The modern science of subliminal influence

¿

Report: Google Working on Cell Phone to Compete in Mobile Market

-- According to an article in the

Wall Street Journal

, Google has created a prototype cell phone (GPhone?) and the company plans to give free subscriptions to consumers by bundling ads with its search engine, Web browser apps and Gmail.

See also

Google shows phone prototype to manufacturers

. (

Washington Post

¿

Debunking third-world myths with the best stats you've ever seen

.

¿

'Mashups' Sew Data Together

: Mashups essentially are a way to take data trapped in separate software applications and combine them into new, hybrid applications. At most companies, data typically have been stored in silos -- customer information is in a customer-management system, for example, andinformation about order status is in an inventory-management system. (

Wall Street Journal

)

¿

Robots and Robotics

¿

Firms accused of trying to mislead consumers on rights

: An association of computer and communication companies, including

Google

,

Microsoft

and

Yahoo!

, on Wednesday accused several professional sports leagues, book publishers and other media companies of misleading and threatening consumers with overstated copyright warnings.


Music, Books, Movies, TV Fun!

¿

Woody Allen on Ingmar Bergman

(

Time

)

¿

The Bourne Ultimatum

is garnering some

surprisingly terrific reviews

for an action flick.

¿

Joy ride with a genius

: Racingidol Michael Schumacher takes

Fortune

columnist Sue Zesiger Callaway out for the (face-sucking, tire-burning) ride of her life. (

Fortune

)

¿

How Do You Escape From a Sinking Car?

¿

HypoSurface

is a bizarre, undulating computer-controlled three-dimensional wall -- see

the video

.

That's all from the hot, sticky, disgusting Northeast, where I am heading to the beach -- waves, ho!

~~~

Got a comment, suggestion, link idea?

Or do you just havesomething on your mind?

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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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