Friday, August 29, 2008
Market news Aug 29
As I expected yesterday, the market is shaking off its gains following the consumer spending & personal income report.. Consumer spending grew by 0.2%, the slimmest gain since feb, definitely not enough to support the 3.3% GDP growth taht came out yday..
Thursday, August 28, 2008
Market News - Aug 28
With all the bad news surrounding the capital markets, Investment banka, Private Equity, Real Estate who would have thought that there would be surge in demand for MBA. this article proves otherwise. I guess what must have happened is taht all the undergrads and non grads who were laid off are returning back to school as they could not park any where else..
If you had caught the bottom of FNM and FRE as Harish did you would be sitting with a 75% increase in your portfolio now. Today both the stocks were up more than 10%, with the analyst report from Lehman, reiterating what Citi had to say about their liquidity. Well, they do not need any core capital, but how do they intend to tackle rolling over +200 B within the next one month.. Lets face it, if at all the bail out happens, its a wipe out of equity holders and Preferred stock holders stake and the bond holders would be holding secured debt with higher yields.. and the FED or who ever it is, would pay the tax payers money as interest on these bonds.. My take - though it might be tempting to be long on these stocks, its better to stay short or even better - stay out of it..
Next in line to bring ARS onto their balance sheet is BAC.. They bought back 43 Bn of ARS that they sold as highly liquid and safe investment. They are no longer liquid - evident by the fact that there is no market for ARS.. Safe - lets see how much how it would be written off by BAC!! C, WB, MER had bought back about 55Bn of ARS on to their balance sheets prior to BAC. they are now faced with the reality that the bonds are only worth about $.80 on a dollar. The means the firms who were forced to take them off shareholder hands will probably have to account for $10 billion in losses.
Seems Hedge funds have come to terms with the volatility in the financial stocks.. Short financials and long commodities is no longer the theme of the trade. That does not mean that there is no room for financials to go any lower. In the next two-three months the trend would revert back to the same I guess..
I never have imagined that any business selling gas/fuel is a money losing proposition.. But I was wrong. Firms are fleeing refining business as there seems to be no margins in refining. The problem seems to be the same.. Input costs ( crude oil) remains at above 100 levels and this owuld require the gas to be at +$4 level. And the gas consumer do not wish to spend 4 bucks on a gallon and changes his/her travelling habits there by reducing the demand for the end products.. Result - refiners are squeezed.. But my opiion - this is a short term trend.
Predictions are that Gustavo is set to Gulf of Mexico, which is the oil and nat gas hub of US, producing about 10% of US nat gas and 1.3 million barrels a day. Bad news is that the infrastructure is not so reinforced to withstand the hurricane. If it does, oil is going to spike again - all the oil and gas companies, are going to spike. Airlines and retailers would lose some of the gains they had, alt energy plays would be in the spotlight again, dollar probably weakens and the gold shoots up, commodities would see the light again!!!!
If you had caught the bottom of FNM and FRE as Harish did you would be sitting with a 75% increase in your portfolio now. Today both the stocks were up more than 10%, with the analyst report from Lehman, reiterating what Citi had to say about their liquidity. Well, they do not need any core capital, but how do they intend to tackle rolling over +200 B within the next one month.. Lets face it, if at all the bail out happens, its a wipe out of equity holders and Preferred stock holders stake and the bond holders would be holding secured debt with higher yields.. and the FED or who ever it is, would pay the tax payers money as interest on these bonds.. My take - though it might be tempting to be long on these stocks, its better to stay short or even better - stay out of it..
Next in line to bring ARS onto their balance sheet is BAC.. They bought back 43 Bn of ARS that they sold as highly liquid and safe investment. They are no longer liquid - evident by the fact that there is no market for ARS.. Safe - lets see how much how it would be written off by BAC!! C, WB, MER had bought back about 55Bn of ARS on to their balance sheets prior to BAC. they are now faced with the reality that the bonds are only worth about $.80 on a dollar. The means the firms who were forced to take them off shareholder hands will probably have to account for $10 billion in losses.
Seems Hedge funds have come to terms with the volatility in the financial stocks.. Short financials and long commodities is no longer the theme of the trade. That does not mean that there is no room for financials to go any lower. In the next two-three months the trend would revert back to the same I guess..
I never have imagined that any business selling gas/fuel is a money losing proposition.. But I was wrong. Firms are fleeing refining business as there seems to be no margins in refining. The problem seems to be the same.. Input costs ( crude oil) remains at above 100 levels and this owuld require the gas to be at +$4 level. And the gas consumer do not wish to spend 4 bucks on a gallon and changes his/her travelling habits there by reducing the demand for the end products.. Result - refiners are squeezed.. But my opiion - this is a short term trend.
Predictions are that Gustavo is set to Gulf of Mexico, which is the oil and nat gas hub of US, producing about 10% of US nat gas and 1.3 million barrels a day. Bad news is that the infrastructure is not so reinforced to withstand the hurricane. If it does, oil is going to spike again - all the oil and gas companies, are going to spike. Airlines and retailers would lose some of the gains they had, alt energy plays would be in the spotlight again, dollar probably weakens and the gold shoots up, commodities would see the light again!!!!
Wednesday, August 27, 2008
Market News - Aug 27
Last couple of days action in FRE and FNM has been overwhelming.. some days, you just are not sure whether you know any thing of certian about equity markets. My guess is that they are sliding up beacuse of the optimism by Citi. But this article made me think on whose interests are best served by the upgrade.!! Citi ofcourse!!! Trade: Buy PUTS on FNM and FRE!
Ever wondered why it was JPM who came to the rescue of BSC?? Well, this proves the point.. BSC was the counter party for most of the credit derivative swaps on JPM balance sheet!!
Ever wondered why it was JPM who came to the rescue of BSC?? Well, this proves the point.. BSC was the counter party for most of the credit derivative swaps on JPM balance sheet!!
Tuesday, August 26, 2008
Market News - 26 Aug
One year into the subprime - mortgage crisis, the consensus is taht we are not even half way through. Wallstreet analysts have been cutting the estimates and the writeoffs of other banks pushing the stocks of the banks to new low levels every day. Todays article in FT has additional information regarding the health of the wallstreet firms. Play - short financials..
Interesting article on the bail out of the Detroit Auto industry. Everything makes sense, but would the US govt be able to bear the brunt of 35000 odd employees that would lose their jobs if the bail out does not happen. Besides, why would Ford, 40% stake holder of F, keep mum when his stake is headed to zero. My take - Buy calls on F. In the current market, no news is good news. If the clouds are cleared, every thing that ford would do would drive the price up. Afterall, its the AMR of Michigan.
Interesting article on the bail out of the Detroit Auto industry. Everything makes sense, but would the US govt be able to bear the brunt of 35000 odd employees that would lose their jobs if the bail out does not happen. Besides, why would Ford, 40% stake holder of F, keep mum when his stake is headed to zero. My take - Buy calls on F. In the current market, no news is good news. If the clouds are cleared, every thing that ford would do would drive the price up. Afterall, its the AMR of Michigan.
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