The Greek's Week Ahead - Jan 8

The Greek's Week Ahead is designed to provide you with a weekly stock market-moving event planner, so that you and your portfolio are prepared for macro events that have the potential to move the market in the week ahead. Well, after a week like the last one, I wonder if we might be better off stuffing all our money under the mattress and hibernating until 2008...

Emerging markets created a great deal of wealth last year, and it seems appropriate for some profit-taking to take place here in January. This applies for everywhere but mainland China, where a report was recently published that forecasts capital inflows for the mainland that should exceed those into Hong Kong. This combined with news that many companies currently listed on the exchange in Hong Kong are showing interest in listing on the mainland, sent mainland shares soaring this past week and again on Monday. There is an increasing comfort level around mainland Chinese investment, and we see that fueling a continuation of the rising trend of the past week.

Outside of China, shares in Bulgaria and Romania are benefiting significantly from the entry of the two nations into the EU. The same thing happened to Greek shares when Greece was admitted into the union, but the exuberance led to the creation of a speculative stock market bubble that eventually burst, leading to great loss of wealth within Greece. Mistrust of the market has plagued Greek shares since.

There is another form of turbulence that comes in the early days of EU status. Unsophisticated small businesses tend to adapt to the new playing field at a lag, raising prices behind the rise in their costs. This impacts spending, and in markets where foreign capital inflows like that from tourism in Greece, are less significant, as in Romania and Bulgaria, GDP could suffer initially. Still, lower costs of labor and sea access could attract manufacturing, especially since these nations are not seeing the kind of Russian pressure recent Soviet fallouts, Georgia and the Ukraine are.

My focus on emerging markets here is not without plan. Sunday saw the reemergence of the Iranian nuclear crisis on the geopolitical hot list. A Sunday Times article raised global awareness that Israel will likely have the final say, should the U.N. fail to resolve the Iranian nuclear threat. And, guess what, Israel does not typically shy away from hurting global political feelings or collateral damage in accomplishing its mission, as evidenced in Lebanon. According to the article, Israel plans to use tactical nuclear weapons to break deeply entrenched Iranian facilities. This would mark the first use of nuclear weapons since 1945.

Reports are that even the Democrats agree that a nuclear Iran is unacceptable, so maybe Israel will not be forced to make that critical decision. Still, I think it's safe to say that oil should rebound dramatically this week. And how long do you think it will take for energy investors to realize that a hotter winter may portend a hotter summer, which in turn should translate into more electricity usage to run air conditioners. It also takes more gasoline to run an automobile that is employing an air conditioner. Also, at some point, natural gas markets should realize that reduced draw in winter does not increase storage capacity. Since our storage capacity mostly exists in the form of underground salt mine cavities, not a resource easily expanded, we run the risk of running short come September as the summer runs long and hotter. The point here is that energy markets should recover sooner rather than later, and equities and the dollar should find pressure, while gold should strengthen as the Iranian crisis comes to a head over the next year or two. Enough long-term discussion for now, let's take a look at the week ahead.

Monday kicks off the International Consumer Electronics show in Las Vegas, and new product introductions could help the shares of producers of these new and exciting toys. The ailing auto industry will attempt to renew product enthusiasm as the International Auto Show runs in Detroit.

The most important economic data release on tap for the day is the 3:00 p.m. EST posting of November consumer credit. A poll conducted by Bloomberg News shows that the consensus expert opinion on credit sees a rise of $6.4 billion of consumer credit for the month, compared to October's decrease of $1.2 billion. Also Monday, the Treasury will announce the 10-year TIP's auction, and Fed Vice Chairman Donald Kohn is scheduled to address a group on the economic outlook.

In international events, EU officials are scheduled to meet with President Bush in Washington. Markets in Russia are closed for the Russian Orthodox calendar celebration of Christmas, which was this past Sunday. Japanese markets are closed for "Coming of Age Day," and the Columbian market is closed as well.

Tuesday launches the December-ended quarterly earnings season, with the report from Alcoa. Also reporting earnings on Tuesday are Supervalu Inc., Volt Information, Emmis Communications, Wd-40 Company, Ruby Tuesday Inc. and Audiovox. Needham & Company kicks off its always exciting growth stock conference in New York, where presidential hopeful Rudy Giuliani will be a key speaker.

In other corporate news, H&R Block will have its regular analysts meeting and union representatives of Alitalia will meet with a group of investors intending to make a bid for the airline. This could reignite the wire and the tickers of airline companies. Finally, rumors abound that Tuesday could be the day President Bush formally announces his new strategy for Iraq.

The economic calendar is more populated on Wednesday, with the 8:30 a.m. EST report of the November trade balance. November international trade is seen posting a $60 billion deficit, compared to a deficit of $58.9 billion in October, based on Bloomberg News data. November wholesale inventories will also be reported Wednesday, with the consensus view seeing an increase of 0.4%, compared to a 0.8% rise in October.

Wednesday brings the regular oil and distillates inventory report, which OPEC is expected to watch closely. Rumor has it that OPEC is considering an emergency production cut in light of last week's price activity. However, with high pressured geopolitical news likely benefiting oil bulls this week, OPEC may not need to act.

In corporate news, Tiffany will hold its annual holiday sales conference call before the market open Wednesday. Also, Volkswagen CEO Martin Winterkorn is expected to provide his restructuring plan to the board of directors. Ashworth Inc. is the only company scheduled to report fourth quarter earnings on Wednesday.

Thursday brings two key European market catalysts, as the European Central Bank renders its decision on interest rates. Expectations are that the bank will keep rates steady this time around, but could provide insight into its future bias. The Bank of England is scheduled to make a similar decision on interest rates this same day.

The Senate Federal Budget Committee will hold a hearing on the long-term budget outlook. At the same time, the monthly federal budget report is expected to show a surplus of $22 billion, twice as much as the year earlier figure.

New York Federal Reserve President Timothy Geithner is on tap to speak about the global economy at the Council on Foreign Relations in New York. In company specific news, General Mills will provide its outlook for the second half of its fiscal year. Scheduled to report earnings on Thursday are M&T Bank, Magic Investment Corp., and Stride Rite Corporation.

Friday will greatly intensify in economic focus, as December retail sales are reported. Retail sales are seen rising 0.6%, compared to a 1.0% rise in the November period, according to Bloomberg's poll. Excluding autos, gasoline and building materials, Lehman Brothers sees retail sales rising 0.7%. Lehman sees the aggregate number rising just 0.5%, compared to the 0.6% consensus. Also on tap for Friday, December import prices will be reported at 8:30 a.m. EST, and the consensus view is for an increase of 0.7%, versus a 0.2% rise in November. At 10:00 a.m. EST, November business inventories will be reported, and the consensus view is for a 0.3% increase, compared to a rise of 0.4% in October.

The bond market closes at 2 p.m. Friday, in advance of the Martin Luther King holiday. On Saturday, Condoleezza Rice works on her own legacy and possibly works on better setting the stage for a confrontation with Iran, as she begins a trip to the Middle East. We hope our weekly planner provides you with value-added preparatory material for the week ahead. (disclosure)