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By Jason Stipp | 07-01-2010 12:21 PM

This Week's Declarations of Independence

Morningstar markets editor Jeremy Glaser on Google, Housing, Banking and Dollar Tree's search for independence.

Jason Stipp: I am Jason Stipp for Morningstar, and welcome to a special Independence Day Edition of the Friday Five. Here with me as always, with a special July 4th Friday Five is Morningstar Markets Editor, Jeremy Glaser. Jeremy, thanks for joining me.

Jeremy Glaser: Jason, it's my pleasure.

Stipp: So, what do you have for the Special Independence Day Five?

Glaser: This week we'll see if Google can find independence in China, if consumer spending is going to be fireworks or fizzle, if the housing recovery can be independent from stimulus, how long banks are going to remain independent from regulation, we'll take a look at Dollar Tree's independent take on the American flag.

Stipp: Well, Google was in the news a while ago, its comeback recently with China specifically. What's going on there?

Glaser: Sure. Google had a very public policy statement. They're going to stop censoring their Google.cn search results as the Chinese government required them to. So, in the meantime, they have been redirecting users who go to Google.cn to their Hong Kong site, where the results aren't censored. Now, the Chinese government was not thrilled with this idea and instead they are now going to send people to the regular Google.cn site, but give them a link back to the Hong Kong site.

And no one knows that this will allow the Chinese government or the Chinese government will allow this and will let Google stay as an Internet operator in the country. No one is really sure how they are going to react. This is kind of Google's last ditch effort to stay in the country.

A lot of people think that if they lose that Google.cn domain, which is possible, if the government is not happy with what they are doing, they are going to lose basically all the market share that they have there. It's not an entrenched brand. It could be something to watch out for. It could be big benefit for Baidu if all those users end up going there.

Stipp: Also, in the news this week there were some consumer spending data; it was positive. It didn't blow the doors off or anything. But it seemed to be a good trend. But recently also this week, our consumer analysts said that they are expecting mediocre results. So, what's going on with this consumer? I mean, can we expect anything of note from them for the back half of the year?

Glaser: We saw a lot of consumer data this week. On one hand, you are right, the consumer spending data looked not great but a little bit better than it had before. I wouldn't exactly call fireworks, but it wasn't a complete fizzle. But on the other hand, consumer confidence just completely sunk. People are not very excited. No one is ready to quite go out there and spend a ton of money on anything really, except for the absolute bare essentials.

I think our consumer team certainly has a point that it's going to be very challenging for people to continue spending at the rates before. I think people had put off a lot of purchases they had to make in the first half of the year. And right now, they are, kind of, sitting and doing a wait-and-see approach. It could be a challenging environment ahead.

Stipp: Certainly a lot of the market volatility that we saw didn't help consumers' confidence any, and it may have maybe hindered some of that spending. So, for the third piece, housing, I think, is another important part of the recovery and it still is also looking lackluster and maybe like a little bit of a wet fuse on the economy. What's the story there?

Glaser: It certainly has been the story of really this entire upturn and downturn has been housing. And the S&P/Case-Shiller Index that was released this week showed that, yeah, housing prices actually did increase, but they believe that almost all of that was due to the government stimuluts. That being written a check for your first home or to trade up to another home, got people out there, brought forward a lot of housing purchases, but they don't think that this is a sustainable trend.

There was a lot of talk that once this expires, which it already has, that we are going to see the numbers look increasingly worse. Now, there is a chance that people who don't close right on time are going to get a little bit of extension, you know, maybe that gives us another month or another couple of weeks of a generally better supported housing market. But it could be really challenging. I think the fact that a lot of people are having trouble closing on these housing purchases shows just how difficult the market is. And we really haven't seen that final all clear that the housing market has stabilized and it only has room to go upwards.

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