Despite free-falling energy prices and favorable economic news, markets could not string together much progress this week. The Dow Jones Industrial Average and the S&P 500 were flat for the week, while a string of earnings disappointments from big tech names weighed down the tech-heavy Nasdaq, which gave up 2.1%, to 2451.The University of Michigan's consumer sentiment index jumped to its highest level in three years. Both PPI and CPI were confusing, and housing data was mixed at best. Oh, and Ben Bernanke said we need to get our collective acts together. It's about that time... Editor's note: To access some of these stories, registration or a subscription may be required. Please check the individual links for the site's policy.
Old Man Winter has finally arrived: It's cold and blustery in the Northeast, and we even got some snow yesterday. (Take some photos to show your grandkids, in case they ever ask what snow is.) Stay Warm!
INVESTING & TRADING¿ Getting Picky on Tech: Is Sector a Bargain or a Trap? "The tech sector remains plagued by tepid corporate spending. Goldman Sachs and Forrester Research, among others, have issued surveys recently showing that CIOs, the corporate gatekeepers of tech purchases, are feeling gloomy about their budgets this year -- they will likely reduce spending from 2006 levels. Forrester notes global information-technology spending will grow 5% this year, down from 8% in both 2005 and 2006, making it the lowest growth rate since 2003." (Also, IBM Shares Decline as Hardware Sales Add to Concerns.) Cramer adds: "Tech's to be sold, not bought, right here. It can be traded. Not owned. Not until the dog days of August." ( Video) And Herb Greenberg weighs in on tech, too: How Expensing for Options Throws Analysts Off Course. ( The Wall Street Journal) ¿ Margin Debt Up 22%. While that's pretty big, it's still below the 2000 peak, although not by much. ¿ The Return of the Day Trader: Although day trading activity doesn't resemble the frenzy of the late 1990s, it is heating up again as rising stock prices renew interest. ( Los Angeles Times) ¿ Who Is Hurt By Oil's Fall? ( WSJ) "Oil companies that have generated the most enthusiasm during the past two years, such as those based in the Canadian oil-sands region, like Suncor Energy Inc. and Western Oil Sands, could be at risk." ¿ Is Yahoo! an acquisition target? (Video) ¿ Defense Reloads: ( WSJ) "Defense contractors have enjoyed surging profits in recent years as the government spent heavily to fight wars in Iraq and Afghanistan and combat terrorism in other parts of the world. Recently, some investors have worried that ballooning federal deficits could bring the flush times to an end. The latest Pentagon plans suggest that the long-expected spending plateau is still another year away." ¿ Market performance relative to "Earnings Season" over the past 17 quarters. It's quite surprising how much this matters. ¿ Earlier this week, we recommended two drug stocks as part of a defensive investment in an underloved sector. ( Email me for the report.) This week in Barron's, Mike Santoli tips the sector, while Motley Fool picks Pfizer ( PFE) as The Best Drug Stock for 2007. ¿ Hussman: Overvalued, overbought, and overbullish. ¿ Companies are rushing to pay top dollar to put their names on new stadiums and arenas. Three deals in the New York area alone have been announced in the past few months with the sponsorship dollars totaling nearly $1 billion. And potentially the biggest deal, naming rights for the new shared home of New York's Giants and Jets football teams, is yet to come: A stadium name bubble? ¿ Chet Currier says Strange Things Happen in the Era of Small Returns. ¿ A Financial Times twofer:The unease bubbling in today's brave new financial world: "I don't think there has ever been a time in history when such a large proportion of the riskiest credit assets have been owned by such financially weak institutions ... with very limited capacity to withstand adverse credit events and market downturns." Should Atlas still shrug? The threat that lurks behind the growth of complex derivative and debt deals.
ECONOMYThe Wall of worry continues to build: ¿ The Sordid Truth About Inflation: The Bank of England raised rates to 5.25% to cope with rising inflation, while inflation was reported on the decline in the U.S. The reality is that inflation is on the rise in both countries, but the U.S. CPI has been perverted. ¿ Euro displaces dollar in bond markets. ¿ Are Economic Gains Just Hot Air? The economy has benefited from warm weather. Energy prices have tumbled on reduced demand, ground-breaking on new homes increased in November and December. Fewer construction workers are losing their jobs. While some of the boost from the weather is real, much of it is economic activity that's just been borrowed from the spring months: Economy is stronger, but is it just the weather? ¿ Signs of Economic Resilience Seen and Q1 and 2007 Growth. ¿ I have no idea why this got so popular: Countries' GDP as U.S. States. It's just a cool little graphic, but it got picked up by everyone from DIgg to Reddit to who knows what. ¿ What Boosted Consumption on a Temporary Basis in Q4. ¿ David Leonhardt of The New York Times on What $1.2 Trillion Can Buy. ¿ Workers' Ire Mounts, Share of GDP Shrinks During a Profit Boom. Also: Upper Class: Why the Rich Are Heading Back to School. (free WSJ) ¿ Invented Silicon Valley Employment "Statistics."
HOUSINGHousing remains the Achilles heel of the economy. The data and news are mixed to poor: ¿ Weak Forecasts Mount In Housing Industry. See also: Pulte Homes pre-announces, takes a huge charge for 2006 Q4. ¿ The high end of the market wasn't immune, as evidenced by the lackluster sales of the homes highlighted in the Wall Street Journal's "House of the Week." Given the free advertising, you would have thought that of the 46 houses featured between October 2005 and September 2006, more than 18 would have sold (14 closed, 4 in contract). Most moved at steep discounts -- an average of 16% below the asking price published in the WSJ. (free) ¿ Recent News About Housing. Score: 3 Good Ones Versus 19 Bad Ones. ¿ Foreclosure rates up big in December. See also: For foreclosures, Nevada No. 2 (after Colorado). ¿ Which naturally leads us to Mortgage-Trapped: Homeowners With New Exotic Loans Aren't Always Aware Of the Risk Involved. ¿ Condo prices reveal housing trends: One follower of San Francisco real estate advises to watch prices on the same building six or eight months after the first sales were made. With condos, you can't add floor space or make other big improvements. If you see a price change, it's appreciation -- or depreciation. See also Buyers Scarce, Many Condos Are for Rent. ¿ Sales of New and Existing Homes Will Continue Their Slide in 2007. ¿ Fixed-Mortgage Rates Expected Rise to 6.5%.
FEDERAL RESERVELots of Fed-speak this week, and commentary also: ¿ Fed Chair Ben Bernanke kicked up storm this week:- Bernanke Raises Prospect of 'Debt Spiral.' (Greg Ip, WSJ) - Fed Chief Warns That Entitlement Growth Could Harm Economy. ( NYT) - Fed chief says U.S. on crash course. - Did Someone Say Personal Savings Accounts? (Kudlow) - Aging Boomers Are the "Calm Before The Storm."¿ "The risk that core inflation surges again, or does not subside as desired, clearly remains the predominant macroeconomic policy risk." Fed's Lacker: Inflation is top threat. See also: Fed Officials Say Inflation Is Key Risk as Economy Gathers Pace. ¿ FOMC member battle (Videos):Lacker of Fed Says Inflation Still 'Predominant' Economic Risk. Hoenig of Fed Says 'Inflation Will Continue to Recede' in 2007.¿ Yen Drops to Lowest in Four Years Versus Dollar on BOJ Outlook.
SENTIMENT/PSYCHOLOGY¿ The value of doing nothing: One of the most profound lessons is that you don't always have to be doing something in your portfolio in order to make money. Indeed, constant fine-tuning is done more for psychological reasons than rational investment purposes. ¿ BORROWING LARGE: "Just as the rich control a disproportionate share of national wealth, they also account for a disproportionate share of debt. The richest 1% now hold 7% of the nation's debt, with a total of $650 billion in borrowings, up from 5% in 1998. Debt for this group grew faster than for any other group in the Fed survey. Total debt held by the top 1% increased 150% between 1998 and 2004, compared with growth of about 100% for those in the 50th-to-90th percentile wealth range." ¿ U.S. Economy: Confidence Rises to a Three-Year High. ¿ Are you suffering from affluenza? It leads to a consumptive lifestyle of Earn more, spend more, want more. (I'm guilty of this, especially with cars and timepieces.)
ENERGY/COMMODITIES/WAR/POLITICS¿ High Prices Prod Developed World To Curb Oil Use. ( WSJ) ¿ Thomas Friedman is calling is for a Green "New Deal." ¿ Eagles of IEA Says: Oil Supply 'Tightening' Even as Demand Falls. (Video) ¿ Jim Rogers Likes Agricultural Commodities, Cotton, Sugar. (Video) ¿ The 3 Keys to the State of the Union Speech: Energy, Immigration and Iran. ¿ Mistakes Were Made?' Euphemisms Were Employed. "Politicians are notorious for saying one thing when they mean something else, for couching outcomes in the best possible light to deflect attention from their own failures," writes Bloomberg's Caroline Baum. "Some have perfected dissemblance to such a fine art that the average person may need a political dictionary to understand what our elected representatives and other public figures are saying." ¿ Why the Pentagon's toughest Internet crime fighter likes hanging out with blackhat hackers. ( Wired) ¿ Fewer Yuan in Wallets Is China's Next Headache
TECHNOLOGY & SCIENCE¿ How to opt out of just about everything: Don't Call. Don't Write. Let Me Be. See also: Five ways to clean up your snail mail. ¿ How Yahoo Blew It: "Yahoo would go out and buy its own top-notch search engine and its own search-advertising technology, and it would beat Google in the emerging arena of little text ads that pop up next to search results. Semel's decision to opt for this plan B was a fateful one. It was a smart play -- but Yahoo fumbled, bungled, and mishandled its execution at every step. (More on that in a moment.) As a result, Google today controls nearly 70 percent of the search-related advertising market, an industry worth more than $15 billion a year and growing at roughly 50 percent a year. It's these ads that are the source of Google's riches and the basis for its expanding power." Ouch. See also Yahoo! Sharpens Research Edge. ¿ Let's hope this is true: Cheap, safe drug kills most cancers. ¿ Damned with faint praise: Walt Mossberg sez Vista, the Windows XP successor, doesn't break new ground on ease of use, but it's the best Windows yet: Worthy, Largely Unexciting. The New York Times has a good slide show on the new MS Office. ¿ Can red wine help you live forever? ¿ Doug Kass asks some valid questions about the iPhone; I agree with his comments about speculative excesses, but don't overlook the fact that in addition to expanding into phones, they also created a new Ultra Luxe category of iPods: the touchscreen iPod. By the end of this year, we can expect Apple ( AAPL) to have a non-PC line of products will span nearly every price point from $50 to $600. See also: iPhone Fans and Foes Clash Online and How Apple kept its iPhone secrets. ¿ It ain't 1999: Tech Start-Ups Have Money to Burn, But Choose to Thrift. ¿ Hacking TiVo: 23 Tips to Turbocharge Your DVR. ¿ How Thinking Can Change the Brain. ¿ 15 surprises ahead in 2007. ¿ Are London-Style Traffic Charges The Answer for U.S. Traffic Congestion? ¿ Digital Music Up 80% but Shy of Lost Revenue.
MUSIC, BOOKS, MOVIES, TV, FUN!¿ The Dave Brubeck Quartet: Terrific jazz for relaxing after a hectic week (like the past one). Check out a few of the videos and songs here. ¿ Idiocracy is now out on DVD. The film was barely released in theaters by 20th Century Fox, and conspiracy theories abound ( one thesis: the hilarious sendup of Fox News in the movie). The Washington Post's reviewer writes: "Like 'Borat's' dark twin, 'Idiocracy' indicts American culture with a combination of scathing humor and barely concealed rage, as Judge projects what the country will look like 500 years from now." The bottom line: "The film is just too savage in its brutal skewering of modern society for mass consumption." ¿ Two books that look interesting:- In Spite of the Gods: The Strange Rise of Modern India. (reviewed here). - The Utility of Force: The Art of War in the Modern World. It looks at why the strongest armies may lose the newest wars (and is reviewed here).¿ Movie Star Memorabilia ( Video) ¿ Hmmm, Meth Coffee. ¿ 100 impressions in four minutes. ¿ Let it snow. We actually got a little of the white stuff, but nothing like these poor folk and these. ( Who are these idiots that jump out of a car to avoid a 15mph collision?) ¿ Ducati, BMW show off new Bikes. Click on the "Pursuits" tab at the top to find it. (Video) ¿ 20 short animations you need to see before you die; Not right before you die, as a pre-mortem event -- but rather, sometime -- years even -- in advance of the actual occurence...