Made my first long drive in my Mitz to Ruston over the weekend. It was amazingly fun driving a convertible on a highway, with the top down!
Pandu and Poornima were equally excited to drive around to a near by lake. Like always, it was fun being with them. :)
Tuesday, September 30, 2008
Bloody blood bath!!!!
Stock markets tanked with Dow slumping about 777.7 points about 7%, the BIGGEST single day loss ever, after the dumb politicians(Republicans) rejected the $700Bn bailout proposal.. Personally, I didnt see this coming, neither did my boss, nor did anyone in my opinion.. The market has priced in an approval of the bill, and the rejection came in as a BIG surprise for everyone. Today's loss wiped out about $1.2 Tn in market value, the first more-than-1Tn loss ever!!!
My view, the congress had done a stupid thing by voting the bill down.. Rather thinking with a rationale, hey politicized the whole issue. Republicans, especially, wanted to disaccociate themselves from Bush administration and do not want to take any blame if the bailout fails. They do not realize the fact that the wallstreet that is being rescued is not the same as what it used to be at the beginging of teh year. High bonuses to executives are no longer a norm.. Ibanking is no longer the buzz word.. failure of more than 5 BIG Ibanks did prove the fact that no bank is too big to fail.. Also, the politicians, I guess have no clue of the gravity of the situation.. They still percieve this as a bailut plan, where as, I [ersonally believe that this is a market stabilization plan. Though 700Bn is not an amount that would save the world from going under, but atleast it would give some sort of breathing space for investors, banks.. and if the plan should fail, it would a softlanding as opposed to what we have witnessed today.. A freaking blood bath across the global markets..
To give an understanding of the situation, here are some data points..
TED Spreads, which is the difference between three-month LIBOR (the London Inter Bank Offered Rate which is in euro dollars, also called The Euro Dollar Spread, thus TED) and three-month US Treasury bills. Three-month LIBOR is basically what banks charge each other to borrow money. Many mortgages and investments are based on various periods of LIBOR. Look at the chart below. Typically the TED spread is 50 basis points (0.50%) or less. When it spikes up, it is evidence of distress in the financial markets. The last time the TED spread was as high as it is now was right before the market crash of 1987.
Next chart is the amount of Tier 1 commercial paper issued. This is the life blood of the business world. This is how many large and medium-sized businesses finance their day-to-day operations. The total amount of commercial paper issued is down about 15% from a year ago, with half of that drop coming in the last few weeks.
And, this is just the tip.. corporate bond spreads, CDS spreads paint a similatr grim picture.. If only the politicians understood the consequences of what they have done...
But, well,, I have every reason to be happy again, at this very moment, for personal reasons though.. :)
My view, the congress had done a stupid thing by voting the bill down.. Rather thinking with a rationale, hey politicized the whole issue. Republicans, especially, wanted to disaccociate themselves from Bush administration and do not want to take any blame if the bailout fails. They do not realize the fact that the wallstreet that is being rescued is not the same as what it used to be at the beginging of teh year. High bonuses to executives are no longer a norm.. Ibanking is no longer the buzz word.. failure of more than 5 BIG Ibanks did prove the fact that no bank is too big to fail.. Also, the politicians, I guess have no clue of the gravity of the situation.. They still percieve this as a bailut plan, where as, I [ersonally believe that this is a market stabilization plan. Though 700Bn is not an amount that would save the world from going under, but atleast it would give some sort of breathing space for investors, banks.. and if the plan should fail, it would a softlanding as opposed to what we have witnessed today.. A freaking blood bath across the global markets..
To give an understanding of the situation, here are some data points..
TED Spreads, which is the difference between three-month LIBOR (the London Inter Bank Offered Rate which is in euro dollars, also called The Euro Dollar Spread, thus TED) and three-month US Treasury bills. Three-month LIBOR is basically what banks charge each other to borrow money. Many mortgages and investments are based on various periods of LIBOR. Look at the chart below. Typically the TED spread is 50 basis points (0.50%) or less. When it spikes up, it is evidence of distress in the financial markets. The last time the TED spread was as high as it is now was right before the market crash of 1987.
Next chart is the amount of Tier 1 commercial paper issued. This is the life blood of the business world. This is how many large and medium-sized businesses finance their day-to-day operations. The total amount of commercial paper issued is down about 15% from a year ago, with half of that drop coming in the last few weeks.
And, this is just the tip.. corporate bond spreads, CDS spreads paint a similatr grim picture.. If only the politicians understood the consequences of what they have done...
But, well,, I have every reason to be happy again, at this very moment, for personal reasons though.. :)
Thursday, September 25, 2008
The plan is approved.. and the market rallied!!!!! *applause*
Well, as expected the bail out plan was almost approved but yet to be put on paper. and the stupid markets pumped the markets up by ~200 points ( my prediction was 300 points, and at one point the markets were up 280) on the hope that it is going to bring the porblems to an end. But well, other data that was released today point the direction to the other way.
The reports on home slaes, weekly job less claims and durable goods were dismal.. Home sales - there were only 460,000 new homes sold at an annualized rate. Economists expected about 510,000 sales. July's report showed 520,000 and June showed 500,000. Durable goods - lets stop by saying that this months report was the worst durable goods report since Jan 08.. Job claims- weekly claims jumped by 32000 to 493000 - this marks the highest amonut of claims since sep'01. And teh economic bellwether GE, has cut its estimates for the next quarter and the year. My view, the markets are going to end red tomw and going forward.. ( I hope I am wrong, as I am not short any, but long in almost 8 securites)
Good taht I was out of gold (AUY). Technically, AUY and Gold spot prices should have traded up today, but they didnt. Time to buy them again - Gold might as well reach 950 levels again in couple of weeks.
Otherwsie, nothing much is happening in the market.
Breakin news: WM was acquired by JPM.. biggest bank going down ever. S&P futures are down and gold is up!!
The reports on home slaes, weekly job less claims and durable goods were dismal.. Home sales - there were only 460,000 new homes sold at an annualized rate. Economists expected about 510,000 sales. July's report showed 520,000 and June showed 500,000. Durable goods - lets stop by saying that this months report was the worst durable goods report since Jan 08.. Job claims- weekly claims jumped by 32000 to 493000 - this marks the highest amonut of claims since sep'01. And teh economic bellwether GE, has cut its estimates for the next quarter and the year. My view, the markets are going to end red tomw and going forward.. ( I hope I am wrong, as I am not short any, but long in almost 8 securites)
Good taht I was out of gold (AUY). Technically, AUY and Gold spot prices should have traded up today, but they didnt. Time to buy them again - Gold might as well reach 950 levels again in couple of weeks.
Otherwsie, nothing much is happening in the market.
Breakin news: WM was acquired by JPM.. biggest bank going down ever. S&P futures are down and gold is up!!
Wednesday, September 24, 2008
The lul before the storm!! I guess!!
Market today has been pretty volatile (DJI shuttled over the unch mark about 20 times and S&P swung about 40 times around the unchanged level), and ended relatively flat. It would continue this trend until the bail out proposal issue is resolved... If the porposal is approved, markets would rally +300 , otherwise, it would go by the same in the other way.
My view that the markets would rally on Buffet news was proved wrong. Most of the financials went down but GS. However, as I expected, the solar (alt-energy) companies had their rally today (spwr, fslr, ener, eslr, tsl..) on teh news that the govt extended a 17Bn tax credit for solar companies.
and .. whatelse.. Bank of East Asia, the third largest bank in Hong Kong had a run-on-the-bank on the rumor that either the govt is taking it over or taht it is too much exposed to Leh and AIG. Officials denied the rumors saying that the assets held in AIG and LEH are just 2% of their asset base.
Thats about it.. I was confined to reading stuff and watchign Bloomberg vidoes on Commodities for most part of the day.. Put money in APWR options.. I think the company has strong fundamentals.. wind energy and power distributiion play in China. 50% YOY growth, currently trading at about 7x 09 EPS. It better see the $15 mark by december, or I'd be royally screwed!!
Pic of the day: Is the glass half empty or half full?
Ben baba at Capitol Hill pitching his plan to Senators!!
My view that the markets would rally on Buffet news was proved wrong. Most of the financials went down but GS. However, as I expected, the solar (alt-energy) companies had their rally today (spwr, fslr, ener, eslr, tsl..) on teh news that the govt extended a 17Bn tax credit for solar companies.
and .. whatelse.. Bank of East Asia, the third largest bank in Hong Kong had a run-on-the-bank on the rumor that either the govt is taking it over or taht it is too much exposed to Leh and AIG. Officials denied the rumors saying that the assets held in AIG and LEH are just 2% of their asset base.
Thats about it.. I was confined to reading stuff and watchign Bloomberg vidoes on Commodities for most part of the day.. Put money in APWR options.. I think the company has strong fundamentals.. wind energy and power distributiion play in China. 50% YOY growth, currently trading at about 7x 09 EPS. It better see the $15 mark by december, or I'd be royally screwed!!
Pic of the day: Is the glass half empty or half full?
Ben baba at Capitol Hill pitching his plan to Senators!!
Tuesday, September 23, 2008
There is no Plan B or Plan C... We SHOULD get this right!!
Over the first half of the day, the market struggled to find a direction, and the Senate Banking Committe meeting provided it,,.. Down, ofcourse..
Anways, he bailout plan came under fire by both Democrats and Republicans in todays Senate meeting. Paulson and Ben spent as much time listing out the loop holes in the plan, as pushing the plan. Both Paul and Ben debated that the financial markets are in quite fragile condition and without this action they will surely get worse. THough the argument seems pretty assuring, both the parties voiced wide range doubts over the plan. Senate expressed its concerns over whether the plan would work or not, and how burdened the tax payer be. Besides, Senate wanted more tranparency/details over the plan and would want to additional add-ons, like an equity stake in the companies, changes to the banruptcy law, Cut down executive compensaton and modifying the loans underlying the mortgages. For Ben and Paul, this seems to be the last and best resort and their desperation is voiced in Paulson's comments - "You've not heard me say there's not risk to the taxpayer. You've heard me say there's less risk to the taxpayer with this course. What the cost to the taxpayers will ultimately be will depend upon how the economy recovers, what happens in the housing market and how we execute this program."
My opinion, long term (or even short term) the consequences of the Fed and Tresaury actions would weigh heavy on the economy and the financial stability. The ban of short selling on 900 odd financial stocks was intened to stop the price fall, but on the flip side, it will reduce the liquidity of the markets whihc eventually might lower the prices even further. Proof: Bloomberg has cretaed an Index with the short-sale-restricted stocks.. On the day of the enactment, the index shot up by 11%, and the next day (yday) the index was down 6%, and today it was down 0.25%. And the bailout- though in short term this might seem to stabilize the markets, long term it might create a high interest rate, higer tax, and higher inflation economy.
In energy sector, Chesapeake, a major oil and gasplayer, has decided to cut down on its capital expenditures by 3.2Bn over the next 10 quarters. CEO expected the rig count to drop from 400 to 200.. Months back when Nat gas was trading at $13 range, the yields supported the drilling activity, but now as the proces came down to $7 range, and the crdit crunch - it makes sense that the drilling would be cut down to half.
Goog unvieled its first Andriod based phone.. priced at about $179, selling through TMobile, available in stores from 29th Sep. The phone named G1 (not Gphone), was manufactured by HTC and looks pretty appealing. I read some of the reviews; weighing either way. Though it might seem like Goog is competitng with AAPL in hand set market, it infact is pushing its platform and betting on mobile traffic rather than encroach on the market share of AAPL. Not good for AAPL.
Buffet is going to invest 5Bn dollars in GS. Did Buffet, a famous value investor, make his call for a bottom in financials? Tomw the financials are going to rally, hopefully. Also, I was reading this interesting snippet from MS analyst report. It seems Investment banks (LEH, GS, MS ) were (should be) agressive in taking the write offs, where as BIG bank holding companies (C, JPM, BAC) are conservative in wrting off losses. Now, as GS and MS are deemed to be bank holding companies, I guess, all the write offs (about 4Bn for GS) are going to reverse.. and that might also drive the financials up.
WAMU - downgraded to "E" (I never knew such a rating existed) and yet breathing.. It is up for sale since two weeks or so, but no one seems to want the whole on WM.
Well,, tahts as much I can write for today.. Pretty tired tweaking Bloomberg on my lappie. The application is freakin robust and HUGE!!! Will take forever to get my hands around it.. I guess...
Anways, he bailout plan came under fire by both Democrats and Republicans in todays Senate meeting. Paulson and Ben spent as much time listing out the loop holes in the plan, as pushing the plan. Both Paul and Ben debated that the financial markets are in quite fragile condition and without this action they will surely get worse. THough the argument seems pretty assuring, both the parties voiced wide range doubts over the plan. Senate expressed its concerns over whether the plan would work or not, and how burdened the tax payer be. Besides, Senate wanted more tranparency/details over the plan and would want to additional add-ons, like an equity stake in the companies, changes to the banruptcy law, Cut down executive compensaton and modifying the loans underlying the mortgages. For Ben and Paul, this seems to be the last and best resort and their desperation is voiced in Paulson's comments - "You've not heard me say there's not risk to the taxpayer. You've heard me say there's less risk to the taxpayer with this course. What the cost to the taxpayers will ultimately be will depend upon how the economy recovers, what happens in the housing market and how we execute this program."
My opinion, long term (or even short term) the consequences of the Fed and Tresaury actions would weigh heavy on the economy and the financial stability. The ban of short selling on 900 odd financial stocks was intened to stop the price fall, but on the flip side, it will reduce the liquidity of the markets whihc eventually might lower the prices even further. Proof: Bloomberg has cretaed an Index with the short-sale-restricted stocks.. On the day of the enactment, the index shot up by 11%, and the next day (yday) the index was down 6%, and today it was down 0.25%. And the bailout- though in short term this might seem to stabilize the markets, long term it might create a high interest rate, higer tax, and higher inflation economy.
In energy sector, Chesapeake, a major oil and gasplayer, has decided to cut down on its capital expenditures by 3.2Bn over the next 10 quarters. CEO expected the rig count to drop from 400 to 200.. Months back when Nat gas was trading at $13 range, the yields supported the drilling activity, but now as the proces came down to $7 range, and the crdit crunch - it makes sense that the drilling would be cut down to half.
Goog unvieled its first Andriod based phone.. priced at about $179, selling through TMobile, available in stores from 29th Sep. The phone named G1 (not Gphone), was manufactured by HTC and looks pretty appealing. I read some of the reviews; weighing either way. Though it might seem like Goog is competitng with AAPL in hand set market, it infact is pushing its platform and betting on mobile traffic rather than encroach on the market share of AAPL. Not good for AAPL.
Buffet is going to invest 5Bn dollars in GS. Did Buffet, a famous value investor, make his call for a bottom in financials? Tomw the financials are going to rally, hopefully. Also, I was reading this interesting snippet from MS analyst report. It seems Investment banks (LEH, GS, MS ) were (should be) agressive in taking the write offs, where as BIG bank holding companies (C, JPM, BAC) are conservative in wrting off losses. Now, as GS and MS are deemed to be bank holding companies, I guess, all the write offs (about 4Bn for GS) are going to reverse.. and that might also drive the financials up.
WAMU - downgraded to "E" (I never knew such a rating existed) and yet breathing.. It is up for sale since two weeks or so, but no one seems to want the whole on WM.
Well,, tahts as much I can write for today.. Pretty tired tweaking Bloomberg on my lappie. The application is freakin robust and HUGE!!! Will take forever to get my hands around it.. I guess...
Monday, September 22, 2008
.. finally a figure on the bail out.. $2 Trillion!!
Over the weekend, Paulson & Ben have com eup with a 700Bn rescue plan to buy toxic assets from US financial institutions, ,and plan to include foriegn banks with oprtations in US. Interestingly, Bloomberg reports that this might not be enough. "If the mortgages of every man, woman, and child are to be saved along with their credit card debt and car loans, and new bank losses are to be financed as well, the size of the pool of capital required could move closer to $2 trillion." thats just about 1/5 th of US National debt. If home equity (housing prioces) of consumers does not rise and boost the consumer confidence, even $2T would fall short of a bailout.. Since the assets Treasury buying in are toxic waste, it not going to do any good for US dollar either.. No matter whose balance sheet they sit on, as long as they stay in US, no bailout is good for their currency. Afer all "privatization of profitsand socialization of losses" sholud have its own after effects!!
Till a couple of days back, most of the analysts have trended oil downward, attributing it to a global slowdown and demand destruction. Today, though, Oil at one point of time reached $130 level, up $25.. The move is quite irrational but blame it on the drop in the dollar and the squeeze. My guess, if the winters are going to be cold, oil might reach a new high, around $150, tha peak in June being $147. Since Oil is up, typically airline stocks, transportation stocks should edge down and Alt-energy, oil & gas stocks should trend up (Well, the market does trade on fundamentals, but over a short term, it trades on news and sentiment).. However, interestingly today, most of the alt energy stocks were down. When oil droped from its peak, most of the alt-energy stocks were off from their peaks too. With todays action in mind and the short interst in these names, I guess, there should be a quick rebound in these alt-energy stocks ( FLSR, APWR, ENER, TSL, ESLR, LDK )
Oh.. the news that made the headlines on Sunday night was - GS and MS were made to give up the investment Bank status and became bank holding companies.. Maane, GS and MS would be subjected to stringent rules and regulations that a retail or commercial bank does. No more 40 to 1 leverage, no more taking risk, and the end result - profitability of both is drastically reduced. On the good side, they would bceome financially stable, have a FED saving net underneath them, and importantly, they would have access to the $700Bn bailout program.. Would GS see the 200 mark again.. I think not..
Next in line for a bail out would be the auto makers.. GM and F.. GM has drawn down 3.5bn from its revolving credit facility. Message between the lines - things not good... Think about it.. There are 100,000 jobs in the U.S. at Chrysler (its website figure), GM employs about 266,000 workers globally (its website figure), and Ford employs about 229,000 workers globally (its website figure). With these many employed, they are no smaller than any Ibank.. and its not good for already-getting-screwed economy if they go belly up!
An interesting snippet from Accrued Interest:
"Now, I've got no problem with enforcing some basic short-selling rules, but it won't make a difference until something changes in the credit-default swap (CDS) market.
Let's stipulate that speculation and manipulation is part of the problem here. Let's stipulate that John Mack is right and that if Morgan Stanley were to go down, it would be solely because of short-selling.
To make that claim, you have to assume that pressure from short-sellers is feeding upon itself. That Morgan's falling stock price is creating panic, bringing out more sellers and causing more panic. But if you really want to create panic, the CDS market is a better choice. In stocks, you can always offer a stock below the current price, and that may spook people. But the CDS market is traded over the counter. The trading volumes are unknown. Bid and offer sizes are unknown. In such an environment, anyone can throw any bid or offer out there and move the market.
In addition, buyers and sellers need to be matched in this market. In a time when there are few sellers of protection (the seller is effectively long a credit), eager buyers of protection can move the CDS market wider extremely rapidly. The general lack of knowledge about the CDS market doesn't help either. Media reports suggesting that a particular "expected" default rate is predicted by a certain CDS trading level shows a complete misunderstanding of the CDS market.
Today, I had a good profit on my gold options.. But a technical glitch had limited my porfits and I was pretty pissed by my trading broker. I knew today was going to be a good day for gold stocks, as the dollar is pretty much diluted ( weak) with the 700bn bail out. When I came in today I could not change/cancel the trade I put on Friday.. Minutes afte the market opened, the unwanted trade got executed. I had to settle for +60% instead of +90%. Well, I guess tomw or day after the stocks are going to track back giving up the gains.. I should buy them back.
Yday night, me Harish and Sammie witnessed a Toyota bang Harish's car, parked in the parking lot. His one-year old Acura was badly whacked. I feel so sorry for him...
Till a couple of days back, most of the analysts have trended oil downward, attributing it to a global slowdown and demand destruction. Today, though, Oil at one point of time reached $130 level, up $25.. The move is quite irrational but blame it on the drop in the dollar and the squeeze. My guess, if the winters are going to be cold, oil might reach a new high, around $150, tha peak in June being $147. Since Oil is up, typically airline stocks, transportation stocks should edge down and Alt-energy, oil & gas stocks should trend up (Well, the market does trade on fundamentals, but over a short term, it trades on news and sentiment).. However, interestingly today, most of the alt energy stocks were down. When oil droped from its peak, most of the alt-energy stocks were off from their peaks too. With todays action in mind and the short interst in these names, I guess, there should be a quick rebound in these alt-energy stocks ( FLSR, APWR, ENER, TSL, ESLR, LDK )
Oh.. the news that made the headlines on Sunday night was - GS and MS were made to give up the investment Bank status and became bank holding companies.. Maane, GS and MS would be subjected to stringent rules and regulations that a retail or commercial bank does. No more 40 to 1 leverage, no more taking risk, and the end result - profitability of both is drastically reduced. On the good side, they would bceome financially stable, have a FED saving net underneath them, and importantly, they would have access to the $700Bn bailout program.. Would GS see the 200 mark again.. I think not..
Next in line for a bail out would be the auto makers.. GM and F.. GM has drawn down 3.5bn from its revolving credit facility. Message between the lines - things not good... Think about it.. There are 100,000 jobs in the U.S. at Chrysler (its website figure), GM employs about 266,000 workers globally (its website figure), and Ford employs about 229,000 workers globally (its website figure). With these many employed, they are no smaller than any Ibank.. and its not good for already-getting-screwed economy if they go belly up!
An interesting snippet from Accrued Interest:
"Now, I've got no problem with enforcing some basic short-selling rules, but it won't make a difference until something changes in the credit-default swap (CDS) market.
Let's stipulate that speculation and manipulation is part of the problem here. Let's stipulate that John Mack is right and that if Morgan Stanley were to go down, it would be solely because of short-selling.
To make that claim, you have to assume that pressure from short-sellers is feeding upon itself. That Morgan's falling stock price is creating panic, bringing out more sellers and causing more panic. But if you really want to create panic, the CDS market is a better choice. In stocks, you can always offer a stock below the current price, and that may spook people. But the CDS market is traded over the counter. The trading volumes are unknown. Bid and offer sizes are unknown. In such an environment, anyone can throw any bid or offer out there and move the market.
In addition, buyers and sellers need to be matched in this market. In a time when there are few sellers of protection (the seller is effectively long a credit), eager buyers of protection can move the CDS market wider extremely rapidly. The general lack of knowledge about the CDS market doesn't help either. Media reports suggesting that a particular "expected" default rate is predicted by a certain CDS trading level shows a complete misunderstanding of the CDS market.
Today, I had a good profit on my gold options.. But a technical glitch had limited my porfits and I was pretty pissed by my trading broker. I knew today was going to be a good day for gold stocks, as the dollar is pretty much diluted ( weak) with the 700bn bail out. When I came in today I could not change/cancel the trade I put on Friday.. Minutes afte the market opened, the unwanted trade got executed. I had to settle for +60% instead of +90%. Well, I guess tomw or day after the stocks are going to track back giving up the gains.. I should buy them back.
Yday night, me Harish and Sammie witnessed a Toyota bang Harish's car, parked in the parking lot. His one-year old Acura was badly whacked. I feel so sorry for him...
Last weeks historic market move!!!!
.. and the history still is in the making!! In the light of the 700Bn bailout news I guess, this week would be equally action packed!
Saturday, September 20, 2008
Thursday, September 18, 2008
F***!! They are rigging the game!!!
Markets action today was outright frustrating. For most part of the day, the market was moving as I expected. Financial stocks down, Gold up decently (Yday was an amazing day for gold.. the price gain was the biggest single day move in 29 years). At one point, I was up 60% on my gold stocks and I was excited for being so pinpointed right. Post lunch, the whole action reversed, as if the while world conspired against the normal course of fundamental action. I lost all the gains I had, could have put a stop limit on my profits..
These are the actions that changed the whole game:
Central banks pumped money into the market. - Fed had authorized a $180 billion expansion of its temporary reciprocal currency arrangements, known as swap lines, to allow banks to borrow more dollars in markets at a lower rates.
Regulators change rules to soothe the markets - SEC came out with a rule restricting naked short sale of stocks. short sellers and brokers must deliver borrowed shares three days after the transaction or face trading restrictions.
Managers with more than $100 million invested in securities would be required to begin public reporting of their daily short positions.
Eased restrictions that had prevented regulated companies from transferring money to less regulated and more risky affiliates. Now a commercial bank can move the cash from the deposit accounts to its investment baking arm.
Eased the accounitng principles for goodwill impairment.
UK Financial Services Authority imposed a temporary ban on short-selling financial stocks on Thursday
investors with an existing short position of more than 0.25 percent of a financial company's share capital must disclose their holdings every day from Sept. 23
Treasury Secretary Henry Paulson is working on setting up a government facility to take on bad debts from financial institutions to prevent a worsening of the global credit crisis.
Calpers, the nation's biggest pension fund, along with other Pension Funds & Mutual Funds would no longer lend out Morgan Stanley or Goldman Sachs shares to short-sellers.
Result of these announcements (extended over yday and today) is clearly reflected in the price action of GS. Opened at 106, hit a low of 86, made a high of 120, ended at 108. a freaking 50% move between intraday low and high. and AUY (my gold stock) on the other hand, traded relatively strong for most part of the day, giving up its gains in the last hour of the trading... We, indeed, are going through some weird times, and its a crime to have a conviction. The question still is whether these government actions attack the root cause of the trouble or merely help the largest financial institutions to stay in business.
S&P today relased the revision of writedown estimates. I could not figure out the math, but the bottom line is the structured finance instruments are about to hit hard again by two powerful headwinds: first, the consequences of the LEH bankruptcy, deteriorating CDS spreads, and second, a continuing deterioration in the fundamentals (loss assumptions) underlying the structures. Ex: At origin, S&P rated ‘AAA’ approximately 80%, or $960 billion, of the $1.2 trillion in subprime RMBS issued 2005 through 2007, now the revised number is 50%.
In other news, Detroit Auto firms (F and GM) are positive that they would be provided much needed capital to stay afloat.
The " fear index" shot through the 30 level faster than anytime before. Yesterday it had reached a high of 36.40. This morning the VIX crossed above 40 and briefly went north of 42.00.
My inidustry is at stake!! more than 350 hedge funds closed in the first half of the year..!!
These are the actions that changed the whole game:
Central banks pumped money into the market. - Fed had authorized a $180 billion expansion of its temporary reciprocal currency arrangements, known as swap lines, to allow banks to borrow more dollars in markets at a lower rates.
Regulators change rules to soothe the markets - SEC came out with a rule restricting naked short sale of stocks. short sellers and brokers must deliver borrowed shares three days after the transaction or face trading restrictions.
Managers with more than $100 million invested in securities would be required to begin public reporting of their daily short positions.
Eased restrictions that had prevented regulated companies from transferring money to less regulated and more risky affiliates. Now a commercial bank can move the cash from the deposit accounts to its investment baking arm.
Eased the accounitng principles for goodwill impairment.
UK Financial Services Authority imposed a temporary ban on short-selling financial stocks on Thursday
investors with an existing short position of more than 0.25 percent of a financial company's share capital must disclose their holdings every day from Sept. 23
Treasury Secretary Henry Paulson is working on setting up a government facility to take on bad debts from financial institutions to prevent a worsening of the global credit crisis.
Calpers, the nation's biggest pension fund, along with other Pension Funds & Mutual Funds would no longer lend out Morgan Stanley or Goldman Sachs shares to short-sellers.
Result of these announcements (extended over yday and today) is clearly reflected in the price action of GS. Opened at 106, hit a low of 86, made a high of 120, ended at 108. a freaking 50% move between intraday low and high. and AUY (my gold stock) on the other hand, traded relatively strong for most part of the day, giving up its gains in the last hour of the trading... We, indeed, are going through some weird times, and its a crime to have a conviction. The question still is whether these government actions attack the root cause of the trouble or merely help the largest financial institutions to stay in business.
S&P today relased the revision of writedown estimates. I could not figure out the math, but the bottom line is the structured finance instruments are about to hit hard again by two powerful headwinds: first, the consequences of the LEH bankruptcy, deteriorating CDS spreads, and second, a continuing deterioration in the fundamentals (loss assumptions) underlying the structures. Ex: At origin, S&P rated ‘AAA’ approximately 80%, or $960 billion, of the $1.2 trillion in subprime RMBS issued 2005 through 2007, now the revised number is 50%.
In other news, Detroit Auto firms (F and GM) are positive that they would be provided much needed capital to stay afloat.
The " fear index" shot through the 30 level faster than anytime before. Yesterday it had reached a high of 36.40. This morning the VIX crossed above 40 and briefly went north of 42.00.
My inidustry is at stake!! more than 350 hedge funds closed in the first half of the year..!!
Wednesday, September 17, 2008
cranky with the markets???
May be this will help keep the mood!!
http://www.youtube.com/watch?v=s9ZlxsEioUA
http://www.youtube.com/watch?v=s9ZlxsEioUA
Tuesday, September 16, 2008
in FED we trust!! .
AIG is literally bailed out, and the tax payers are the losers yet again!!!
I wish I could write more, but I was too hammered by PEOPLE to think!! Hope tomorrow would be a good day!!
Music: Creed -Don't stop dancing!!
I wish I could write more, but I was too hammered by PEOPLE to think!! Hope tomorrow would be a good day!!
Music: Creed -Don't stop dancing!!
Monday, September 15, 2008
The S*** hits the fan!!!!!
AIG is downgraded by Fitch to start with and moody's and S&P followed the suit downgrading by three notches. A ratings cut would trigger more than $13 billion in collateral calls from debt investors who bought the swaps. AIG has already posted $16.5 billion in collateral through July 31. A downgrade could also set off early termination of swaps that may cause $4.6 billion in payments. Squeeze on the cash position on already liquidity deprived AIG.
And ironic, but CNBC is playing Sia's "Breathe Me" as it's cutaway music. I personally like the song for its lyrics and the video.
Help, I have done it again
I have been here many times before
Hurt myself again today
And, the worst part is there's no-one else to blame
Be my friend
Hold me, wrap me up
Unfold me
I am small
I'm needy
Warm me up
And breathe me
Ouch I have lost myself again
Lost myself and I am nowhere to be found,
Yeah I think that I might break
I've lost myself again and I feel unsafe
Be my friend
Hold me, wrap me up
Unfold me
I am small
I'm needy
Warm me up
And breathe me
Be my friend
Hold me, wrap me up
Unfold me
I am small
I'm needy
Warm me up
And breathe me
And ironic, but CNBC is playing Sia's "Breathe Me" as it's cutaway music. I personally like the song for its lyrics and the video.
Help, I have done it again
I have been here many times before
Hurt myself again today
And, the worst part is there's no-one else to blame
Be my friend
Hold me, wrap me up
Unfold me
I am small
I'm needy
Warm me up
And breathe me
Ouch I have lost myself again
Lost myself and I am nowhere to be found,
Yeah I think that I might break
I've lost myself again and I feel unsafe
Be my friend
Hold me, wrap me up
Unfold me
I am small
I'm needy
Warm me up
And breathe me
Be my friend
Hold me, wrap me up
Unfold me
I am small
I'm needy
Warm me up
And breathe me
A VERY BAD, yet long awaited day for financials!!
The stock market suffered its worst daily drop in almost seven years, as the Leh bankruptcy, MER buyout, AIG woes are sunk in the market. Oil back at 95 levels, dollar gaining against Euro, Federal Reserve widening the range of assets eligible as collateral for loans of Treasuries, ECB and Bank of England providing extra short-term liquidity facilities, China cutting its interest rates to 7.2% from 7.47% (first time in six years) - nothing had any positive effect on the markets. Absence of the news, the market would have lost more than 1000 points, i guess..
Tomorrow would be an interesting day, as FOMC meeting is scheduled. Market has already priced in a (50 bps) interest rate cut.. If Fed decides to keep the rates unchanged, I guess the blood bath will continue through tomw.
I guess my reasoning on Dollar gain was right this time.. Dollar was down when the asian and euro markets were open, and continued its loss into the US market trading session. But into the day, investors must have realized the fact that FED/Treasury has not bailed out or guaranteed either of MER or LEH, and the dollar ended green against euro.
Trading strategy for gold:
Bull case: typically during market turmoil, investors flee to safe investments, like Treasuries, AAA rated debt, GOLD or cash (dollars). Yields of treasuries have already comedown since the beginign of the collapse, AAA rated debt has lost its credibility with MBIA, Ambac, AIG under water, cash - dollar is off its peak, and the gold seems to be the only attractive oppurtunity, trading at about 800 levels, off from the peak of 1000.
Bear Case: Since liquidity is the concern for the financial institutions, they are shoring up the balance sheets with cash, and the highly liquid asset that they can sell to do so is gold. So I guess, the selling spree in gold is going to continue for some time.
Strategy: sit on the side lines buying in gold options as the price falls below 760 range. I should buy more AUY options though..
Leh bankruptcy is no doubt the largest ever bankruptcy, and it would remain so.. ( or may be not.. C or GS might b next in line!! ).. Enron had about 60 Bn of Assets, World Com had about 160Bn pf assets, whilc LEH had about 600 bn of Assets dwarfing both enron and worldcom.. In fine print, Leh also had about equal amount of liabilities.. :)
Acronymns that no longer are HOT!!
SIV: Structured investment vehicle.. A buzz word for off balance sheet financing. When the market for ABS. CDO has dried ou t, the financial institutions were forced to bring the assets onto their balance sheet, making the work outdated..
ARS: Auction Rate Securities, used to be a highly liquid (cash-equivalent) investment). Not sure of the numbers but, since the invention of theis financial instrument till Aug'07 only 7 auctions failed.. From Aug 07 till now, many (about 600) failed, and the auctions are no longer held.. and the acronymn is made obsolete..
CDS: Credit Default Swaps.. like an insurance to the credit. In the current market situation, where cash is scarce, the counter party risk in a CDS is magnified. With AIG on the death bed, the unwinding of CDS seems to be the next big shoe to drop. An interesting trade on CDS from here:
"Many credit derivative transactions don't simply involve two parties but are often times the risk is passed from one party to the next several times. When an event occurs it causes a careful examination of the complicated legal documents which spell out the specifics of solving a default event.
In a legal case from last year, Bear Stearns loaned $10 million to a development in the Philippines which was backed by a Philippines government agency. In order to protect itself from default, Bear Stearns purchased protection from AON for about $425,000. AON was then short exposure to the Philippines government agency, and so then purchased protection from Societe Generale for $328,000. Offsetting the risk gave AON an easy $97,000, right?
Well the project went bust, the developer did not pay and neither did the Philippines government agency. Bear sued AON for $10 million to reclaim their loss under the Credit Default Swap it had purchased from them and AON paid. AON then went and sued SocGen for $10 million asking for a summary judgment claiming that since the one CDS had been resolved it should automatically create a resolution for the second CDS. After several courts opined on the case, AON lost their case, and lost $10 million. The final court ruling was that the language in CDS1 and CDS2 were not identical and that the risk was not purely offset. So instead of making $97,000 they lost $10,000,000. Seems like documentation is a real counter-party risk."
Too bad a day for my personal portfolio, but I hope the yellow metal would be my saviour.
Tomorrow would be an interesting day, as FOMC meeting is scheduled. Market has already priced in a (50 bps) interest rate cut.. If Fed decides to keep the rates unchanged, I guess the blood bath will continue through tomw.
I guess my reasoning on Dollar gain was right this time.. Dollar was down when the asian and euro markets were open, and continued its loss into the US market trading session. But into the day, investors must have realized the fact that FED/Treasury has not bailed out or guaranteed either of MER or LEH, and the dollar ended green against euro.
Trading strategy for gold:
Bull case: typically during market turmoil, investors flee to safe investments, like Treasuries, AAA rated debt, GOLD or cash (dollars). Yields of treasuries have already comedown since the beginign of the collapse, AAA rated debt has lost its credibility with MBIA, Ambac, AIG under water, cash - dollar is off its peak, and the gold seems to be the only attractive oppurtunity, trading at about 800 levels, off from the peak of 1000.
Bear Case: Since liquidity is the concern for the financial institutions, they are shoring up the balance sheets with cash, and the highly liquid asset that they can sell to do so is gold. So I guess, the selling spree in gold is going to continue for some time.
Strategy: sit on the side lines buying in gold options as the price falls below 760 range. I should buy more AUY options though..
Leh bankruptcy is no doubt the largest ever bankruptcy, and it would remain so.. ( or may be not.. C or GS might b next in line!! ).. Enron had about 60 Bn of Assets, World Com had about 160Bn pf assets, whilc LEH had about 600 bn of Assets dwarfing both enron and worldcom.. In fine print, Leh also had about equal amount of liabilities.. :)
Acronymns that no longer are HOT!!
SIV: Structured investment vehicle.. A buzz word for off balance sheet financing. When the market for ABS. CDO has dried ou t, the financial institutions were forced to bring the assets onto their balance sheet, making the work outdated..
ARS: Auction Rate Securities, used to be a highly liquid (cash-equivalent) investment). Not sure of the numbers but, since the invention of theis financial instrument till Aug'07 only 7 auctions failed.. From Aug 07 till now, many (about 600) failed, and the auctions are no longer held.. and the acronymn is made obsolete..
CDS: Credit Default Swaps.. like an insurance to the credit. In the current market situation, where cash is scarce, the counter party risk in a CDS is magnified. With AIG on the death bed, the unwinding of CDS seems to be the next big shoe to drop. An interesting trade on CDS from here:
"Many credit derivative transactions don't simply involve two parties but are often times the risk is passed from one party to the next several times. When an event occurs it causes a careful examination of the complicated legal documents which spell out the specifics of solving a default event.
In a legal case from last year, Bear Stearns loaned $10 million to a development in the Philippines which was backed by a Philippines government agency. In order to protect itself from default, Bear Stearns purchased protection from AON for about $425,000. AON was then short exposure to the Philippines government agency, and so then purchased protection from Societe Generale for $328,000. Offsetting the risk gave AON an easy $97,000, right?
Well the project went bust, the developer did not pay and neither did the Philippines government agency. Bear sued AON for $10 million to reclaim their loss under the Credit Default Swap it had purchased from them and AON paid. AON then went and sued SocGen for $10 million asking for a summary judgment claiming that since the one CDS had been resolved it should automatically create a resolution for the second CDS. After several courts opined on the case, AON lost their case, and lost $10 million. The final court ruling was that the language in CDS1 and CDS2 were not identical and that the risk was not purely offset. So instead of making $97,000 they lost $10,000,000. Seems like documentation is a real counter-party risk."
Too bad a day for my personal portfolio, but I hope the yellow metal would be my saviour.
Trivia
The history of this firm parallels the growth of the United States. The firm began as a general store in the American South. Henry, who came from Germany, opened a shop in Montgomery, Alabama in 1844. In 1850, he was joined by brothers Emanuel and Mayer. Cotton was the cash crop of the day and the brothers accepted it from farmers as currency to settle accounts. The firm traded the cotton for cash or merchandise, becoming brokers of the crop. In 1858, they opened an office in New York, which was the commodity trading center of the country. As recent as Jan'08, this firm was the third largest financial services firm and it is active in investment banking, equity and fixed-income sales, research and trading, investment management, private equity, and private banking.
Lehman Brothers..
Sunday, September 14, 2008
End of Layman (Lehman Borhers)
Friday I went home with the hope that Lehman would still exist on Monday.. But well, I guess weekends are reserved for bailout/bad news on financial firms.
Saturday, Leh was in news that Fed and Treasury are in talks with couple of Ibanks(Barclays, BofA, and couple of PE firms) to strike a takeover deal. Sunday, Barclays was the only firm in the race. Sunday evening, even Barclays chickened out. So wahst ahead for Leh.. May be bankruptcy! I think the things on Monday are going to get worse. Finaicials are going to go down, as investors would be worried about the hidden skeletons in the closet. Dollar, (I never got it right) I guess would get strong. My argugment is that as Fed/Treasury did not put in any money in the bailout, the general notion is that dollar is not weakened. Well, that should push the gold stocks down.. I should buy in more Gold stocks!!
In other news on financials, is that Bank of America (BAC) will buy Merrill Lynch for $26 a share. The most recent information on the deal comes from The Wall Street Journal. While the $26 is a significant premium to $17 where it closed on Friday, it is well below the $28 where it opened last Monday. That leaves AIG whose fate is to be decided next!
Saturday, Leh was in news that Fed and Treasury are in talks with couple of Ibanks(Barclays, BofA, and couple of PE firms) to strike a takeover deal. Sunday, Barclays was the only firm in the race. Sunday evening, even Barclays chickened out. So wahst ahead for Leh.. May be bankruptcy! I think the things on Monday are going to get worse. Finaicials are going to go down, as investors would be worried about the hidden skeletons in the closet. Dollar, (I never got it right) I guess would get strong. My argugment is that as Fed/Treasury did not put in any money in the bailout, the general notion is that dollar is not weakened. Well, that should push the gold stocks down.. I should buy in more Gold stocks!!
In other news on financials, is that Bank of America (BAC) will buy Merrill Lynch for $26 a share. The most recent information on the deal comes from The Wall Street Journal. While the $26 is a significant premium to $17 where it closed on Friday, it is well below the $28 where it opened last Monday. That leaves AIG whose fate is to be decided next!
Friday, September 12, 2008
SALE SALE SALE !!! BUY AUY, BUY ACI!!!
:)
ACI up 8% AUY up 8%, ferts up good, dollar weak!!
I did say so!!! :)
Feels so good to be right!!!
ACI up 8% AUY up 8%, ferts up good, dollar weak!!
I did say so!!! :)
Feels so good to be right!!!
Wednesday, September 10, 2008
H2G2.. thats what I am!!!
Took a book quiz and the book that closely reflects my personality is H2G2.. Incidentally, it happens to be one of my all time favourites!!! Amazingly holarious, though the movie sucks!!
Reminds me.. I took my "About Me" description (Mostly Harmless), in my orkut profile from H2G2..
You're The Hitchhiker's Guide to the Galaxy!
by Douglas Adams
Considered by many to be one of the funniest people around, you are
quite an entertainer. You've also traveled to the far reaches of what you deem possible,
often confused and unsure of yourself. Life continues to jostle you around like a marble,
but it's shown you so much of the world that you don't care. Wacky adventures continue to
lie ahead. Your favorite number is 42.
Take the Book Quiz
at the Blue Pyramid.
Well well well,.. a good day for commodities.. finally.. !!!
Digressing.. investors or analysts tend to associate the reason to the event.. not the event to a reason.. They ( I am not an exception) tend to have a firm opinion on their opinion about the market and stick with it.. Since, the irrational behaviour in the market lasts longer than you are solvent, they market does not behave any remotely close to what they expect it to behave. Yet they stick to their convictions.. If market continues to go the other way, they kind of give up,, but this phase comes after they got totally obliterated (like I am now).. But what goes one way should go the other way too.. so eventually the market tracks the path the anaylst has predicted,, and well, thats when the analyst boasts "I said so!" .. . :)
Anyways, I spoke with an analyst who recently has been to a gold conference in Denver.. Interesting insights into whats happening in the markets.. From what I understand his explanation, most of US debt is held by central banks of other countries and the soveriegn wealth funds. Russia hold about 100bn of FNM and FRE debt, China a lot more and trillions of treasuries. Sinking credit markets in US has a nagative impact on the dollar and on the debt, logically so, the nations wealth ihas been eroding as fast as the dollar was sinking. When FNM and FRE were on the verge of collapse (technically they were not, as they were 'well capitalized - more than what is required by the mandate'), Treasury had to come in and bail them out. Well, this in a way is a lifesaver for the economy. and it was not in Fed's or tresury's interest to get on the bad books of other central banks.. From a different vantage point, Treasury and Fed's intention was to reverse the trade sentiment - short financials, long commodities, and by bailing out over a weekend, they infact did it. Commodities trade round the clock where as financial stocks only when the markets are open. Hedge funds who were short financials had to face margin calls on a monday morning, and had to sell the commodities.. Though financials were trading at prices not supported by fundamentals, funds could not short them as the naked short rule was put in place right on time. Add redemptions and liquidations to the equation. and the Soveriegn Wealth funds selling gold to support dollar (this is what text book does not teach - SWFs selling gold to bolster dollar.. the money they were making on the strong dollar was more than the money they were losing selling gold).. This in short explains what is happeneing in the markets, to the commodities, to gold..
When will all this come to an end?? when the selling comes to an end.. and I am not good at picking up the time correct.. It is wise, thus, to own options in commodities .. I happily own options of gold, Jan 09 exp.. 10 strike.!!! :)
Digressing.. investors or analysts tend to associate the reason to the event.. not the event to a reason.. They ( I am not an exception) tend to have a firm opinion on their opinion about the market and stick with it.. Since, the irrational behaviour in the market lasts longer than you are solvent, they market does not behave any remotely close to what they expect it to behave. Yet they stick to their convictions.. If market continues to go the other way, they kind of give up,, but this phase comes after they got totally obliterated (like I am now).. But what goes one way should go the other way too.. so eventually the market tracks the path the anaylst has predicted,, and well, thats when the analyst boasts "I said so!" .. . :)
Anyways, I spoke with an analyst who recently has been to a gold conference in Denver.. Interesting insights into whats happening in the markets.. From what I understand his explanation, most of US debt is held by central banks of other countries and the soveriegn wealth funds. Russia hold about 100bn of FNM and FRE debt, China a lot more and trillions of treasuries. Sinking credit markets in US has a nagative impact on the dollar and on the debt, logically so, the nations wealth ihas been eroding as fast as the dollar was sinking. When FNM and FRE were on the verge of collapse (technically they were not, as they were 'well capitalized - more than what is required by the mandate'), Treasury had to come in and bail them out. Well, this in a way is a lifesaver for the economy. and it was not in Fed's or tresury's interest to get on the bad books of other central banks.. From a different vantage point, Treasury and Fed's intention was to reverse the trade sentiment - short financials, long commodities, and by bailing out over a weekend, they infact did it. Commodities trade round the clock where as financial stocks only when the markets are open. Hedge funds who were short financials had to face margin calls on a monday morning, and had to sell the commodities.. Though financials were trading at prices not supported by fundamentals, funds could not short them as the naked short rule was put in place right on time. Add redemptions and liquidations to the equation. and the Soveriegn Wealth funds selling gold to support dollar (this is what text book does not teach - SWFs selling gold to bolster dollar.. the money they were making on the strong dollar was more than the money they were losing selling gold).. This in short explains what is happeneing in the markets, to the commodities, to gold..
When will all this come to an end?? when the selling comes to an end.. and I am not good at picking up the time correct.. It is wise, thus, to own options in commodities .. I happily own options of gold, Jan 09 exp.. 10 strike.!!! :)
Tuesday, September 9, 2008
Its a crime to have a conviction in these markets. If you have any, you are proved wrong, in your face!! Monday, the big news that made the indexes across the globe rally was the bailout of FNM and FRE.. after all they are too big to fail.. Dow rallied near 300 points. Normally, such a bail out is inflationary and lthe dollar theoaritically should weaken, pushing Gold, if not any other commodity, up.. But well,, this is not the market where you play according to teh books. Open tuesday, the market shed most of the gains it had the prev day. Leh in the spot light, hitting a 10-year low.. Seems Korean govt has (and has not - might as well be a rumor) advised KDB against buying a stake in Leh. Indeed who would want to wash their money down the drain.. Leh has relatively more exposure to Commercial/Residential mortgages, fixed income business,, which are both in shatters.. added to the woes, the asset management, Underwriting, M&A business has all dried out. However, is the stock tumbling form low 60's to 9 dollars not enough for everything. Guess not. Spread on CDS (Credit Default swap) for Leh debt increased by about 150 basis points, pointing that LEH currently is a risky investment. As some economists have pointed out, may be leh is the next BIG bank to go under!
On other news, DEll bought 100 million worth of shares in Dell.. A significant insider buying.. what should technically happen to the stock.. go up ofcourse.. and what incidentally has happened today.. No sign of uptick!! Current trade philosophy - if there is a bad news on a stock, beat it, if there is a good news on a stock - beat it..
what are the stocks with about 1.2 Bn market cap, with 1B shares outstanding that can have a wild 50% swing on a single day??? answer - FNM and LEH..
Not surprisingly, FNM and FRE were awarded tax breaks by IRS and they get to keep all the NOL's - about 12 Bn.. That should get their effective tax rate to 0 for teh next 20-30 years!! catch is, it is only good if they are able to make any money!!
Till a couple of weeks back, the market strategy was to long commodities and short financials.. but now the former part of the equation seems to have altered. Commodities are facing a wide sell off, because of the percieved global slow down. High oil and commodity prices have created a demand destruction and a slow down of global economy. Its hard to restarin from going with the natural tendency - to invest in commodities are they seem to be at attractive valuations.. But, I do not think this is not a right time to get in.. Lesson - Never try to catch a falling knife!!. I really would like to know who is buying USD and what they're doing with it? They're not buying commodities or stocks or real estate or gold or American cars. WHAT ARE THEY BUYING,, Ipod, XBOX?
Apple unviels its new Ipod.. reception - lucke warm and the stock down 6. Thats the problem if investors have thier expectations high on a compnay. esp in these markets.. Microsoft on the otherhand is coming up with a newer version of Zune (and recently slashed the prices of Xbox). Well, dwelling the numbers, AAPL sold about 150 mill of ipods and Zune about 2 mill.. How do you think the market recieves MS zune changes considering the reaction to new ipod..
Bankruptcydata.com reports that 15 major retailers have filed for bankruptcy this year, compared with seven in all of 2007.
BAd news all the way!! The well-regarded Manpower Employment Outlook Survey's look at corporate hiring plans found that a net 9% of firms expect to hire in the fourth quarter, down from 12% in the previous quarter, and 18% for the fourth quarter a year ago. According to MarketWatch, this is the longest string of quarterly declines in two decades.
On other news, DEll bought 100 million worth of shares in Dell.. A significant insider buying.. what should technically happen to the stock.. go up ofcourse.. and what incidentally has happened today.. No sign of uptick!! Current trade philosophy - if there is a bad news on a stock, beat it, if there is a good news on a stock - beat it..
what are the stocks with about 1.2 Bn market cap, with 1B shares outstanding that can have a wild 50% swing on a single day??? answer - FNM and LEH..
Not surprisingly, FNM and FRE were awarded tax breaks by IRS and they get to keep all the NOL's - about 12 Bn.. That should get their effective tax rate to 0 for teh next 20-30 years!! catch is, it is only good if they are able to make any money!!
Till a couple of weeks back, the market strategy was to long commodities and short financials.. but now the former part of the equation seems to have altered. Commodities are facing a wide sell off, because of the percieved global slow down. High oil and commodity prices have created a demand destruction and a slow down of global economy. Its hard to restarin from going with the natural tendency - to invest in commodities are they seem to be at attractive valuations.. But, I do not think this is not a right time to get in.. Lesson - Never try to catch a falling knife!!. I really would like to know who is buying USD and what they're doing with it? They're not buying commodities or stocks or real estate or gold or American cars. WHAT ARE THEY BUYING,, Ipod, XBOX?
Apple unviels its new Ipod.. reception - lucke warm and the stock down 6. Thats the problem if investors have thier expectations high on a compnay. esp in these markets.. Microsoft on the otherhand is coming up with a newer version of Zune (and recently slashed the prices of Xbox). Well, dwelling the numbers, AAPL sold about 150 mill of ipods and Zune about 2 mill.. How do you think the market recieves MS zune changes considering the reaction to new ipod..
Bankruptcydata.com reports that 15 major retailers have filed for bankruptcy this year, compared with seven in all of 2007.
BAd news all the way!! The well-regarded Manpower Employment Outlook Survey's look at corporate hiring plans found that a net 9% of firms expect to hire in the fourth quarter, down from 12% in the previous quarter, and 18% for the fourth quarter a year ago. According to MarketWatch, this is the longest string of quarterly declines in two decades.
A quick glance over at the Forrester study of IT spending found that 43% of companies have cut IT spending this year. How can companies like Oracle (ORCL), Microsoft (MSFT), and IBM (IBM) have strong earnings into next year with that kind of trend?
A Bloomberg News survey of 39 economists showed that they believe pending US home sales dropped again in July.
Sunday, September 7, 2008
Finally Treasury had laid out a plan to bail out FNM and FRE. Not surprisingly, the rescue plan was made public on Sunday (now investors would be scared to hold Finacial stocks over the weekend). Monday, FRE and FNM would fall to near zero levels, the dollar weakens, pushing gold and commodities up. stick to the same strategy that I laid out a couple of days back.. long gold and ferts, commodities.. Will it work.. Well .. i am not sure!!!
Its a crime to hold a conviction in such markets!!!
Its a crime to hold a conviction in such markets!!!
Friday, September 5, 2008
My take.. Sep 5
Todays market action has been pretty volatile.. down more than 100 points at one point but ended in green by the end of the day. Labor department announced a sharp decline in nonfarm pay rolls.. THe unemployment rate stands at 6.1% now.. up about 40 basis pionts from last month.. the highest since 2003. Later in the day, financials rallied, and did the commodities too.. on no particular news.. I guess, this is just a buy in on a last day of the week.
Coal stocks intrigue me a lot. Oil had hit a peak of 147 sometime in june, and thats when the oil&gas stocks peaked. When oil started its trend down stairs in an elevator, no energy related stock was spared.. and surprising for me, the coal stocks followed suit.. Irony is that the Coal prices in the futures market, and teh spot market have not come down.. There is a big disconnect between the prices of coal and the stock action.. Did the fundamentals change?? Nada.. I am hoping for a big time come back for coal stocks..
and gold and dollar.. yet another hard nut to crack.. I am loosing my brother's savings a lot betting on these stocks!!
Coal stocks intrigue me a lot. Oil had hit a peak of 147 sometime in june, and thats when the oil&gas stocks peaked. When oil started its trend down stairs in an elevator, no energy related stock was spared.. and surprising for me, the coal stocks followed suit.. Irony is that the Coal prices in the futures market, and teh spot market have not come down.. There is a big disconnect between the prices of coal and the stock action.. Did the fundamentals change?? Nada.. I am hoping for a big time come back for coal stocks..
and gold and dollar.. yet another hard nut to crack.. I am loosing my brother's savings a lot betting on these stocks!!
Thursday, September 4, 2008
My take on the markets - Sep 4
A bad day for the market.. dow down 344 points down, the longest losing streak since Jan. Unemployment cliams data was out today and it was not a soothing news. .Claims went up by 15000, to 444000 - figure well above the recessionary level of 400000. Ospraie went down draggin the commodities along with it. Not a very good respons for the debt sale of FNM and FRE. drop in a oil price. Rumors that Atticus has to liquidate its assets.. Every thing that has happened has left investors gripped wit he fear that the worst is yet to come and instigated a across-the-board sell off.. Finanaisl, materials, tech, comodities, oil, natgas, gold - every thing was down. It is a bottom yet.. I guess not.. Wall Street has been talking about suprime, consumer spending, credit card debt, student loans, ARS for quite some time now.. but what I feel they would start talking aout it the corporate spending. Till now the long story was the corporate balance sheet strength and the earnings. lately the numbers seem to be quite disappoiting signalling a global slow down.. GLW, WFR signalled weakness in comsuner electronics and Semiconductors.. and there is every reason to believe tis is just the begining of the storm..
However, this is not the end of the world.. In every bear market, there would be some place to hidethe money.. GEOY,
Wednesday, September 3, 2008
Market News Sep 3
Contrary to what I anticipated Gustav didnt hit the Gulf of Mexico coast and left the oil rich region unscathed. Well, oil was down sharp, trading at 105 at one point, but settled at 109.. The market action - overselling every commodity stock in sight.. Oil stocks were down, Nat gas stocks were down, Airlines were up and there ends the rational behaviour.. Coal stocks were down, commodities like corn, wheat, soybean were off, fertilizers were down, Mining equipment stocks were down, agricultural stocks were down.. Part of the reason for is the liquidation of a commodity hedge fund. My opinion, the same stocks that are down, would gain their normal trading levels in a couple of weeks time. I would be long in all the over sold stocks.. ACI, POT, MOS, CF, BTU, KOL, BUCY, JOYG to name a few..
That brings a question what is the fundamental price of oil.. what would it be 1 month, 1 year, 5 years down the line.. Well,, I do not know the exact answer to this, but in my view of fundamentals, I guess oil would continue to trade above 100 levels for the near and far future.. Price of oil is a pure supply demand play.. Supply is supposed to have peaked at 85-90 mn barrels a day.. and with the current demand destrcution in play, the demand might seem to have not outstripped the suply.. But the key to the oil supply is held in the hands of a few.. OPEC to be precise.. It is not in their best interest to keep the production at the current levels and see the prices go down.. I bet they would curtail the production in their spet meeting.
Oil denad in US spiked from 17.7 M barrels in 1995 to 20.7 mbd - 17% increase. China’s consumption vaulted from 3.4 million bpd to 7 million bpd – a 106% increase. India’s oil imports are expected to more than triple from 2005 levels by 2020, rising to 5 million bpd. well is the trend going to continue - you bet..
Another commodity that is down big in the last two days is Gold.. It shed over more than 45 dolls falling below 800 dolls for the second time in the last 6 months.. On the other hand, Dollar has gained strength against all the major currenies.. But the dollar gain can wear off in the near term, and gold being a seasonal metal, I believe the gold prices should reach 900 levels again..
That brings a question what is the fundamental price of oil.. what would it be 1 month, 1 year, 5 years down the line.. Well,, I do not know the exact answer to this, but in my view of fundamentals, I guess oil would continue to trade above 100 levels for the near and far future.. Price of oil is a pure supply demand play.. Supply is supposed to have peaked at 85-90 mn barrels a day.. and with the current demand destrcution in play, the demand might seem to have not outstripped the suply.. But the key to the oil supply is held in the hands of a few.. OPEC to be precise.. It is not in their best interest to keep the production at the current levels and see the prices go down.. I bet they would curtail the production in their spet meeting.
Oil denad in US spiked from 17.7 M barrels in 1995 to 20.7 mbd - 17% increase. China’s consumption vaulted from 3.4 million bpd to 7 million bpd – a 106% increase. India’s oil imports are expected to more than triple from 2005 levels by 2020, rising to 5 million bpd. well is the trend going to continue - you bet..
Another commodity that is down big in the last two days is Gold.. It shed over more than 45 dolls falling below 800 dolls for the second time in the last 6 months.. On the other hand, Dollar has gained strength against all the major currenies.. But the dollar gain can wear off in the near term, and gold being a seasonal metal, I believe the gold prices should reach 900 levels again..
Trip to Lousiana..
A day before the last of teh long weekend, I and Harish decided to drive to Ruston and Pensacola. We never had thought that we would experience the Gustav effects..
The ride there was amazing like always.. Had a quick stop over at Shrevenport to gamble in the casino, and well, I lost 40 bucks and Harish lost 120 bucks.. It was interesting.. At one point we were up 100% and it woudl have been good had we atleast changed the table. But no,, the greedy side in both of us made us yearn for more and eventually we lost our initial money.. I felt very bad for Harish.. :) ..
Well, reached Ruston almost at the midnight, and kicked off the weekend witha lengthy before-sleep conversation with Pandu and Harish. Next day morning Harish left, and I was left in the company of Mr and Mrs Pandu and Mr and Mrs Laxmi. At times it was odd to be in the company of Families.. but most of the times I felt HOME.. I guess I would not find it a hassle to get used to family istyle again.. !! :)
The whole two days went amazingly good and me and Harish drove back on Tuesday night.. I look forward for teh next long weekend. :)
Bil and Jeremy were pissed off by my one day delay.. Though it is not my fault at all, i should have informed I was caught in Gustav!! With a lighetr note, Bill's comment - "You stupid little fuck, I dont think they will teach you this in B-School, but you never should travel into a hurricane" ..
Anyways, It was not good to be back at work.. We were down big in Aug, and I have a lot of ground to cover.. Me, Bill and Jeremy discussed about what needs to be done and finally they bought some of the stocks I recommended.. I hope my ideas will make some money for us..
The ride there was amazing like always.. Had a quick stop over at Shrevenport to gamble in the casino, and well, I lost 40 bucks and Harish lost 120 bucks.. It was interesting.. At one point we were up 100% and it woudl have been good had we atleast changed the table. But no,, the greedy side in both of us made us yearn for more and eventually we lost our initial money.. I felt very bad for Harish.. :) ..
Well, reached Ruston almost at the midnight, and kicked off the weekend witha lengthy before-sleep conversation with Pandu and Harish. Next day morning Harish left, and I was left in the company of Mr and Mrs Pandu and Mr and Mrs Laxmi. At times it was odd to be in the company of Families.. but most of the times I felt HOME.. I guess I would not find it a hassle to get used to family istyle again.. !! :)
The whole two days went amazingly good and me and Harish drove back on Tuesday night.. I look forward for teh next long weekend. :)
Bil and Jeremy were pissed off by my one day delay.. Though it is not my fault at all, i should have informed I was caught in Gustav!! With a lighetr note, Bill's comment - "You stupid little fuck, I dont think they will teach you this in B-School, but you never should travel into a hurricane" ..
Anyways, It was not good to be back at work.. We were down big in Aug, and I have a lot of ground to cover.. Me, Bill and Jeremy discussed about what needs to be done and finally they bought some of the stocks I recommended.. I hope my ideas will make some money for us..
Monday, September 1, 2008
Long weekend news
Gustav didnt impact the oil prices, and currently trading at 114 again..
Alitalia has gone belly up! and the traitor - high oil prices.. Are any of american airlines next in line???
another scary news - Atticus Capital, one of New York’s most powerful hedge funds, has lost $5 billion this year. in this environment the metric for measuring success is redefined.. its not how much money you make, its how much less money you lost is important..
Alitalia has gone belly up! and the traitor - high oil prices.. Are any of american airlines next in line???
another scary news - Atticus Capital, one of New York’s most powerful hedge funds, has lost $5 billion this year. in this environment the metric for measuring success is redefined.. its not how much money you make, its how much less money you lost is important..
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