Good Saturday morning! Another week of up/down/all around slamma-jamma trading. Markets did not have a lot to show for all their exertions, ending pretty much where they began. I guess we can thank China, Microsoft, Gentle Ben, oil, gold and silver for our trials and tribulations this week. All in all, it's been pretty nuts, and nothing sums it up better than this cartoon: It's now official -- we have no idea what's going on.
Ah, but enough frivolity. Once again, it is another gorgeous weekend in the Northeast, and rather than fritter away the time chitchatting, let's plow headlong into this week's linkfest:
¿ China tightened rates this week, and we were about to head into a nasty selloff. That was averted by Fed Chairman Bernanke's dovish testimony before Congress. The markets reversed when he said, "Even if in the Committee's judgement the risks to its objectives are not entirely balanced, at some point in the future the Committee may decide to take no action at one or more meetings." Thus, we keep getting reminded that it's the data, stupid. ¿ File this under "Uh-Oh": After the previous week's big 200-point one-day rally, I wrote (on April 19th) that the worst-case scenario for the markets was a pause-resume scenario. Guess what? That is precisely what the Fed chairman implied in the above quote. Such a scenario is now increasingly likely. Jim Jubak, writing before Bernanke's testimony, explained why interest rates will march higher. ¿ In other economic news, The Wall Street Journal reports that GDP is up, but wages are stagnant. (If you don't have a WSJ subscription, go here.) GDP and durable goods data are a perfect example of why you must look at the series, and not rely on a single data point. ¿ Follow the bouncing email: In a related but amusing item, a reader sent me the the Columbia Business School Follies clip for " Every Change of Rate," a terrific parody of Bernanke and Glenn Hubbard, the business school's dean. I dutifully blogged it, The Wall Street Journal's Marketbeat picked it up and I forwarded it to Larry Kudlow's producers, who put it on his show that night. The Columbia grad students who produced the spoof ended up on CNBC's "Power Lunch" the next day. I'm telling you, this Internet/email thingie is gonna be big one day. ¿ As bad as things may be for Detroit, product remains the key to success in the car biz. Proof: the hot Ford Mustang. ¿ With gasoline costing more than $3 a gallon (blame Congress for the poorly thought-out ethanol plan), there were lots of interesting energy stories. Some have proposed global cooperation as a way to bring prices down (Ha!). Some companies are allowing workers to telecommute as a way to deal with high gas prices -- and it seems to be working. BusinessWeek writes that these are surprisingly Dark Days For Energy Efficiency. It's not only gasoline, but electricity too -- the deregulation of electric markets is pinching consumers. ¿ One of my favorite blogs looks at what it costs to fill up big SUVs in California. (Note: The prices are for regular gas, but many of these big trucks require premium.) The New York Times blames a "trading frenzy" for adding to the rise in oil prices. ¿ No wonder the White House is hoppin': Charts from several sources (including our own Paul Kedrosky) note the correlation between Gasoline Prices & Presidential Approval. ¿ After Bernanke's congressional testimony, I opined, "I think gold -- and most of the commodities -- just got a whole lot sexier." We saw gold jump almost $20 the next day, copper is at record levels (some think the cycle may last years) and the silver ETF traded 2.342 million shares on its first day. ¿ The longer-cycle perspective comes from Marc Faber, who says Gold May Rise 10-Fold If Dow Triples.Or not: Veteran S&P-beating fund manager Bill Miller warns that the sudden enthusiasm for commodities is very late in the cycle. It reminds him of the love of tech, circa 1999. ¿ Slate's Dan Gross writes that Globalization used to drive down prices. Not anymore.¿ Meanwhile, in the Middle East: It appears the military is in Iraq for the long haul. Iraqi Strife is seeping into Saudi Arabia. Troublesome Iran dealt two blows to the U.S. at global oil talks. ¿ Cornell's Walter LaFeber has trained three of the last four national security advisers, plus a top member of Dick Cheney's staff. So I sat up and paid attention when he penned an article explaining Why Condi Rice's Foreign Policy Approach Is Flawed. ¿ More than a dozen links and no mention of housing? Let's rectify that: ¿ Lots of news from China this week (notice a trend?). It seems that Google has a China problem, and vice versa. Jon Markman explains How China is winning the oil race. Lastly, the International Herald Tribune looks at the huge imbalances in the U.S. current account with China, in the amusingly titled Bubble, schmubble - foil or trouble. ¿ This week saw the long-awaited return of the "Apprenticed Investor" series with Seven Steps for Handling Stock Tips. It was motivated by the ginormous spike in bulletin board trading volume. On a related note, The Wall Street Journal advises how to tell if you're taking on too much risk. ¿ A "contrarian's contrarian" goes for Internet incubators CMGI and Internet Capital Group. ¿ Earnings have been coming in strong, and lots of folk say that's the basis for their bullishness. Not Marty Zweig or Ned Davis, who quantifiably show what you can expect from Earnings and Subsequent Market Performance. ¿ Microsoft stunk the joint up. Pick your analysis: modestly bullish, moderately bullish, very bullish. ¿ Thanks to the real estate boom, a lumpy recovery, and the dividend/capital gains tax cuts, your percentage of after-tax assets/net worth has likely changed significantly over the past five years. It depends upon where you are in the economic scale. I was surprised to learn that the bottom 25% had a negative net worth. ¿ Fascinating chapter in the book How People Learn about How Experts Differ from Novices. Experts think in terms of core concepts or big ideas, while novices are more likely to search for pat answers that fit their everyday intuitions. Consider the implications this has for investors and how they process information. ¿ Moving to the world of science, we learn: Black Holes are Actually Green (see this cool NASA black hole simulation); men and women have different emotional wiring (duh); and how experts assess the economic impact of a flu pandemic. ¿ On the tech side, some interesting reading: Bob Cringely thinks Apple will buy Adobe, and challenge Microsoft Office; Peter Abilla discusses his Google interview and job offer; we should expect some cool stuff on geodata from both Google and Microsoft; with Scott McNealy stepping down from Sun, perhaps it's time to get a grip 'hairball'; Gadgets for the Lazy; and, lastly, The sexy fun geeky Women of (Apple) Mac World Expo. ¿ Two interesting items on food and wine: The New York Times details the explosive growth of Australia's Yellow Tail winery (I'm a big fan of wines from Australia and New Zealand.); and a Mediterranean diet may repel Alzheimer's. ¿ So much music-related news: The Recording Industry Association of America sued a family that doesn't have a PC ( more here); the RIAA loses its attempts to force a guardian ad litem; this blog covers all the RIAA's lawsuits; the Allman Brothers Band and Cheap Trick sue Sony,claiming they are getting ripped off on downloads (How can the labels claim "breakage" of downloads as if they were physicalrecords or CDs? What weasels!); The Canadian Music Creators Coalition warns the RIAA that "Suing Our Fans is Destructive"; The Consumer Electronics Association finds its voice and finally asks, Who Are You Calling "Pirate"?; and measured in cost per minute, compact discs are not a good value. ¿ Bruce Springsteen hits the road once more after channeling Pete Seeger on his new CD (check out the video for the song "John Henry" on that page). Arriving this week was my copy of the 30th Anniversary 3-Disc Set of Born to Run, which I will update you on in the future. ¿ The Wall Street Journal calls In the Wee Small Hours the best album Sinatra made. While determining which of Ol' Blue Eyes' records is the best is an impossible task, you can't go wrong with that album. Any of the discs he recorded with Nelson Riddle are terrific. ¿ I've liked metacritic.com for years. It's a great way to get a sense of what is getting good critical reviews. United 93 scored very well. ¿ The Movie Timeline is the history of everything, taken from one simple premise: Everything you see in the movies is true, so long as it's reported in a movie somewhere... ¿ Hysterical: Christian rocker Dan "Southpaw" Smith makes a biblical parody of "Baby Got Back" (as seen on VH1's WebJunk). ¿ Sorta mixed reviews for James O'Shaughnessy's Predicting the Markets of Tomorrow. (I'm still interested, having liked his prior What Works on Wall Street.) Also interesting: American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century is getting good reviews. (I have read not it yet.) ¿ Finally, via Good Morning Silicon Valley, two for the sci-fi buffs: Spock gets his own MySpace page; and Jedi Breakfast (which is not suitable for the easily offended).
- Good overview from Wachovia: The Outlook for the Housing Market: The Music Has Not Ended, but the Beat Has Certainly Changed (pdf). - Consistent with that: Strength in the housing market has shifted to new regions. - A look at the Top 7 Coolest Real Estate Web 2.0 Sites. - The Wall Street Journal continues to mull whether the housing market is headed for a soft landing or a crash. - You know my views on the bubble issue, but I still found this interesting: Marching Through The Phases Of The Housing Bubble. - The Global Association of Risk Professionals (GARP) posted the following story from news site RiskCenter.com: Deciphering Smoke Signals in the US Housing Market in Today's Economy.
Now I'm off to enjoy the great outdoors! You should too!
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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