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...
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