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.Another wild week on Wall Street. Markets climbed back into record territory, as signs abounded that the credit crunch may be over -- or at least is easing. The big winners for the week were REITs, which exploded upward 6.2%. Right behind were the Russell 2000 small-caps, up 4.9%. These gains reflected a newly rediscovered taste for speculation. Big-cap tech stocks lit up, jumping 2.9%. European and global stocks were up 2.4 and 2.1%, respectively, while the S&P 500 gained 2%. By comparison, the Dow seemed almost sedate, tacking on 1.2%. Commodities were the week's loser: CRB futures lost 1.4%, with oil down half a percent and gold marginally negative. The dollar slipped only 0.1%. While some people saw conspiracy theories, we will merely note the convenience of the latest revisions to the nonfarm payroll report: Payrolls were so awful in August that the Fed had to slash 50 basis points off of the federal funds rate -- but it turned out to be a counting error of school teachers. A few weeks ago, we were in an economy so bad as to need emergency Fed CPR ( Get me the paddles! Clear!), only to be told that the economy is doin' just fine after all. I like the image of central bankers as Emily Litella: Nevermind!. (We don't advise holding your breath waiting for the Fed to take back that 50-basis-point panic cut anytime soon.) Barron's "The Trader" column had this to say:
In all, it took the S&P 500 a mere 27 days to skid 12% from its mid-July peak to its Aug. 16 low, and 51 days to rebound to another new high. Previous corrections of 5% or more during this bull market have resulted in a stronger market at least in the short term, with the S&P 500 rising roughly 2.4% in the month after that rebound high, according to the researchers at Bespoke Investment Group.There's lot more to cover, and the open road is calling my name. Let's get busy:
But the recent stock grab may have front-loaded the anticipated fourth-quarter rally. "I don't think the market will fall apart as earnings are still growing, but upside is likely very modest from here," says Peter Dunay, Leeb Capital Management's investment strategist. Until then, the market will consolidate -- until fresh evidence shows the Fed's monetary stimuli have managed to spur economic growth.
That's all from what looks to be a lovely (almost beach weather) weekend in the Northeast. Got a comment, suggestion, link idea? Or do you just have something on your mind? The Linkfest loves to get email! If you've got something to say, then by all means, please do.
INVESTING & TRADING¿ Stocks ended a record-shattering week on a high note, powered by the jobs news: "The unexpectedly poor jobs report last month caused stocks to tumble, and may have spurred the Fed to slash rates by a bigger-than-expected half-percentage point in mid-September. After stocks hit record highs in mid-July amid a wave of deals and liquidity, the housing sector spiraled downward and credit markets froze in a general pullback from risk. The August jobs report, which arrived in early September when markets were still extremely fragile, seemed to indicate that the credit crunch was pushing the broader economy toward recession. Now, it looks as though the hand-wringing about those data may have been unnecessary." ( The Wall Street Journal) ¿ The bullishness is contagious. This is a genuine MarketWatch headline: Stocks headed ever upward. ¿ Merger Frenzy Winds Down After 6 Years: "The party is over. And what a party it was. Six straight years of a growing mergers-and-acquisitions market, culminating in a last, deal-heavy splurge in July. Between 2002 and Sept. 30, 2007, there were $15.5 trillion of transactions, the biggest stretch of deal making in history, even when adjusted for inflation." ( The Wall Street Journal) ¿ The Buffett Sell Signal. ¿ Innocents Abroad: Why European banks were the big losers in the U.S. subprime meltdown: "Some of the biggest names in continental finance have been laid low by U.S. subprime debt." ( Slate) ¿ Unlike Any Other (So Far) - A Look at P/E Ratios During Bull Markets. ¿ Citigroup ( C)? UBS ( UBS)? They may have just been the beginning: A tale of
twofour banks:Washington Mutual ( WM) Says Third-Quarter Profit Fell 75%: "Washington Mutual, the biggest U.S. savings and loan, said third-quarter profit fell about 75 percent after the worst housing slump in 16 years caused more borrowers to default." ( Bloomberg) Merrill's ( MER) $5 Billion Bath Bares Deeper Divide: "Merrill Lynch & Co.'s announcement Friday that it would take a $5.5 billion hit to third-quarter earnings is exposing the weak oversight exercised by top Merrill executives as it became a big force in the mortgage-securities business." ( The Wall Street Journal)¿ Property Insurers Cheapest Since 2000 on Mistaken Subprime Link: "It's better to be lucky than smart, unless you're Travelers Cos., Ace Ltd. or any of the dozens of property and casualty companies that investors assume are so dim that they must have invested in subprime mortgage debt. Insurers traded at their cheapest stock market valuations since 2000 in the quarter ended Sept. 30 because of concern they are saddled with losing investments tied to the housing market slump. The truth is their holdings linked to U.S. mortgages for people with bad credit histories represent about 1 percent of fixed-income assets, according to Fitch Ratings." ( Bloomberg) ¿ Deal Is Complete to Take Archstone REIT Private: Can anyone please tell me why this private transaction was financed in part by Fannie Mae ( FNM) and Freddie Mac ( FRE)? Anyone? Anyone? ( The New York Times)
ECONOMYThe wall of worry continues to build: ¿ Two of my latest on inflation: Inflation: CPI, Core Rate, Inflation ex-Inflation and ECB on Core Inflation. ¿ Dollar Lifts Exporters, Blunting Housing Bust: "But as long as the dollar's decline is gradual, most economists see it as a modest plus overall. Joshua Feinman, chief economist at Deutsche Asset Management, wrote in a recent note to investors that the export upswing is one of the factors 'poised to help cushion the impact of the housing correction.' Real exports have grown faster than real imports for nearly two years, notes Mr. Feinman, and he expects this trend to continue. U.S. exports rose 2.7% to a record $137.68 billion in July, according to the Commerce Department. Mr. Feinman estimates stronger exports have contributed a half percentage point of added growth to gross domestic product since 2005." ( The Wall Street Journal) ¿ Friday's jobs report turned out pretty much the way I expected it. The reactions of the financial media, however, were not at all what I expected. ¿ When ever I start to wonder if I am being too cynical, I skip across the pond to see what the U.K. papers have to say. Their distance affords some objectivity -- or at least, less cheerleading -- that the U.S. media lack.US jobs figure that triggered Fed's rate cut 'was a mistake.' ( Independent) Fed based rate cut on false jobs data. ( Telegraph)¿ Dollar's double blow from Vietnam and Qatar: "Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets." ( Telegraph)
WAR/MEDIA/POLITICS/ENERGY¿ Are Sarah Silverman and Ann Coulter the same person? ¿ Shifting Targets: The Administration's plan for Iran: "In a series of public statements in recent months, President Bush and members of his Administration have redefined the war in Iraq, to an increasing degree, as a strategic battle between the United States and Iran. 'Shia extremists, backed by Iran, are training Iraqis to carry out attacks on our forces and the Iraqi people,' Bush told the national convention of the American Legion in August. 'The attacks on our bases and our troops by Iranian-supplied munitions have increased. ... The Iranian regime must halt these actions. And, until it does, I will take actions necessary to protect our troops.' He then concluded, to applause, 'I have authorized our military commanders in Iraq to confront Tehran's murderous activities.'" ( The New Yorker)
TECHNOLOGY & SCIENCE¿ So Bill Gates and I are chatting about the music industry... ¿ The iPhone Freedom Fighters: "Don't be afraid: Unlocking Apple's ( AAPL) superphone is legal, ethical, and just plain fun. Apple is not happy with its customers. Disobedient iPhone owners are unlocking their iPhones (modifying them to work with carriers other than AT&T) and installing 'unauthorized' third-party apps. Last week the company struck back with a software update that acts much like a virus. It wrecks the operation of third-party applications and can turn unlocked iPhones into 'bricks.' Is Apple on the right side of this fight? Is it really wrong or illegal to unlock your iPhone? Well, I figured, there's only one way to find out." ( Slate)
MUSIC BOOKS MOVIES TV FUN!¿ I posted a full chapter from a fascinating new investing book: Inside the Investor's Brain: The Power of Mind Over Money. Longtime readers know that I have been a big fan of books that seek to explain how are brains are wired, and how this wiring frequently sends us astray as investors. Way back in 2005, I wrote a column entitled
Know Thyself. Because human nature so often runs counter to successful investing, it's important to understand, and resist, many of your baser instincts. Inside the Investor's Brain helps you do just that. ¿ Every top 100 Billboard song for the past 60 years.