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!!!!