Congratulations, President Barack Hussein Obama

Let me start with a bright note on the things.. The credit markets definitely seemed to have given in quite considerably from its all time highs made in the last quarter..

1) LIBOR has fallen dramatically worldwide.
2) Commercial paper issuance has increased substantially and commercial paper rates have fallen substantially.
3) The mortgage-backed securities market has rallied substantially, pushing mortgage-rates to all-time lows. Moreover, the yield spread between agency securities and Treasuries has fallen substantially.
4) Corporate and municipal bond yields have fallen sharply of late, including junk bond yields.
5) Corporate bond issuance is rebounding.

New support for the U.S. economy will arrive within weeks when the Federal Reserve initiates its Term Asset-Backed Securities Loan Facility (TALF), which will provide up to $200 billion for the asset-backed market.

The 3-month Libor-OIS spread fell below 100 basis points for the first time since September.

In this back drop I did expect that Obama Presidency would bring a rally (short-term) in this bear market. but --- What Obama Rally???

Barack Obama was sworn in as the 44th President of the United States, taking office at a time when the U.S. economy is in its worst shape since World War II. The Indexes continued their downtrend with growing concerns about banks around the world and the possibility of more surprises in the balance sheets. C down 18%, RBS down about 11% followed by a 67% ddown yday, JPM down about 23%. I guess C abd BofA would face a smiliar fate of RBS .. A huge governement intervention in the banks operations and a huge injection of capital into the bank.. But, this would come at a cost to the shareholders as it causes a dilution and literally wipe the shareholder value to 0. Though the Fed and Tresaury have been injecting money into the banking system and waiting for teh second leg of TARP money to be injected, Banks still do not have any incentive to lend the money. The next set of capital injections would tag along with a set of regulations and rules. In line with that Khakhari has demanded the banks which recived the TARP injections to provide a monthly report on the balances, loans etc.

State Street (STT) turned in one of the banking sector's worst performances after reporting sharply lower fourth quarter earnings and forecasting flat results for full year 2009. Shares of State Street fell 59 percent to a twelve-year closing low. Significant weakness was also visible among real estate and housing stocks, as traders expressed concerns about the impact of a continuation of the financial crisis. Electronic storage, steel, oil service, and semiconductor stocks posted notable losses.

Even with a strong U.S. dollar, February gold closed up $15.30 at $855.20 with concerns about several large banks and expectations that 2009 will produce negative growth in several countries.

The day has ended with Dow down 332 points and settled at a level seen before Dec 1st.

In a conference at Dubai Roubini commented:
U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,”
“I’ve found that credit losses could peak at a level of 3.6 trillion for U.S. institutions, half of them by banks and broker dealers, If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”
“The problems of Citi, Bank of America and others suggest the system is bankrupt,”
Oil prices will trade between $30 and $40 a barrel all year
“I see commodities falling overall another 15-20 percent,”


Guess, we are not even close to calling it a bottom. Welcome to the second session of wild swings in the market ... yet again..