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!!!

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!!

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,

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..

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..

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..

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..

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!!!!

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!!

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.