For what it's worth

Sammie, me and Harish watched Tropic Thunder on Sunday.. A "short" background tune from the movie sounded very familiar. After a couple of google attempts, I did get the song. the song was sung by Buffalo Springfield -" For what it's worth". Amazigly 'feel good' lyrics, coupled with a resonating guitar plucks, a soothing 70's melody!! . This also is an OST from one of my all time favourites "Forrest Gump".





Had a pretty nice weekend.. Went to see an exhibition match starring Jim Courier and Anna Kornikova... The best part of the whole thing is I came as close as 1 foot distance to Anna.. She is a doll!!! I was so stupid that I kept taking her pictures instead of asking her autograph.. Anyhow, I was very excited to having seen her so upclose..





Where is the Rupee headed?
Couple of my friends were asking me this question, and I thought I will write something about it.
Exchange rate is traded like a commodity and is set by the same demand and supply fundamentals. If forex investors see an opportunity in Indian markets, they pump in cash into the system by buying Indian rupee (Rupee appriciates). Conversely, when investors flee indian markets, selling the rupee, the currency depriciates. over the last couple of years, the net foriegn inflows grew from $6.8 Bn in 2000, and 15.4Bn in 2004 to 26.5 Bn in 2006. Strong economic growth, corporat eperformance, cheaper borrowing terms overseas, higher domestic interest rate have been driving these inflows. Offlate, the reversal has started to happen. The weakness in emerging markets (EM amrkets were the worst hit.. Brazil, Korea, China, India, Pakistan... ) has forced the investors to liquidate Rupee assets and hold the cash in dollar terms. This has been driving the Indian currency down( and exchange rate up). Sales of Indian shares by overseas investors this year exceeded purchases by a record $12.2 billion as the Sensex slid more than 55 percent.. When would the run end?? when the liquidation of the local assets end. which inturn would end when investors retain back the confidence in Indian stock market, and when investors stop investing in safe havens - gold and dollar. But with the crdit crisis spread across the globe the only two currencies that are showing strength are the dollar(safe bet) and yen ( reversal of carry trade).. Is there anything RBI could do? Well, they could increase the interest rates.. but at the expense of domestic corporate growth. Is a lower rupee bad for teh economy.. well.. the argument sways either wise.. Lower rupee is good for the exports.. It would make domestically manufactured products cheap for foreign nations.. at the same time, it would make imports expensive... I personally think that it might reach 52 before gaining its strength again.

Outrageous news: Goldman Sachs in talks with Citi for a merger.. Goldman merging with a traditional consumer bank was long anticipated as it is now a bank holding company, but,, the plans of merger with Citi is not quite... If the deal goes through, it would be an intimidating combination,, though Citi no longer is as good and BIG a bank it was earlier. Also, it seems the money thats put in the banks as preferred stock by the Fed/Treasury, is not being used for purposes it should have. In an internal employee meet of JPM, when an employee asked the question when would JPM start issuing loans with the treasury money, Dimon literally said 'never' and added taht the money would be used to 'gobble' weak banks. Well, Bear Stearns, Wamu and whats next in the bag of JPM.. anyways, with banks using up the capital to shore up their balance sheets or to 'acquire' weaker counterparts, I dont think the revival is going to take its sweet course..

Meantime, DOW is down 230 points today.. and the trend of last minute collapse is no longer a trend but a rule!! ( a drop of about 430 points in the last 30 min.. wtf!!) .. Interesting are the headlines in my inbox.. Midway in the day it was 'Stocks shed early losses and post a gain' and later in teh evening the headlines read 'stocks shed mid day gains'... :) ..

An interesting graph from FT..


showing the swing of the markets in intervals over a day before and after the lehman collapse. Notice the action in the first and the last hour.. huge moves.. Its hard to predict, well, its stupid not hard, to even try to predict the market moves by fundamentals.. The market is way beyond teh reach of fundamental explanation.

Goldman Sachs is planning to cut 10 per cent of its workforce in response to the worsening economic environment. The cutbacks will fall most heavily on areas such as fixed income and investment banking. Most of the cuts would be in London and Newyork offices. And I sit and gloat!!! :)

The Fed today has set the interest rates it will charge companies for the commercial paper it will buy from them under the CPFF program. Earlier last week, GE said that it would access funds from the CPFF program. This should help the cash squeezed corporations. Corporations typically issue 1day to 30 day commercial paper to finance their working capital. The revival of the 1.4 T CP market should bring down the key rates (LIBOR, CDS spreads). This should prompt a weak rally in the market over this week and may be into the next, but this prediction comes with a discalimer!! :)


Tax plan of McCain and Obama simplified..

Finally, an interesting article to prove that every assumption on the stock market demise is untrue.. All the claims about the current grim situation

1. Bank lending to non-financial corporations and individuals has declined sharply.
2. Interbank lending is essentially nonexistent.
3. Commercial paper issuance by non-financial corporations has declined sharply and rates have risen to unprecedented levels.
4. Banks play a large role in channeling funds from savers to borrowers

are proved wrong.. This is what I am talking about.. You can never be sure of what you think is right, in these markets..

A bad start of the day..

Its not good when your boss wakes you up at 6:00 in the morning, cancels a breakfast with an analyst, and demands to be in the office by 7:00..
Well, dow futures are down 550 points ( and futures trading actually was stopped as a circuit breaker kicked in), Korean market is down 10%, Nikkei is down about 9%, Newzealand is at a 2 year low, other asian markets sharply down..

Market just opened,... and Dow down 250 points in the first one minute of the opening.. 313 now..

I will start buying the index at 7500 level!! Gold is below 700 levels, oil briefly touched 61 dollars not paying any heed to OPEC's 1.5M barrels a day cut.. The best time to buy gold.. :)

Quote of the day!

Quote of teh day by Jim Reid, Deutsche Bank:

"It’s a depressing world when the only safe haven at the moment is a country that has recently nationalised its two largest mortgage companies, bailed out the world’s largest insurance company, is spending $700bn buying toxic assets, is injecting $250m into its largest banks after high profile failures and is about to go on a fiscal expansion the likes it has never before seen in its history."

Fuck!!! I didnt read/post anything concreate tonight... Restlessly preoccupied for most part of the day with something. I hope/wish/pray  everything goes fine. 

Yeh hein 'Dow Jones' meri jaan!! :)

Well,, the cat is shot down!! Dow down about 514 points.. A pretty non-volatile day, as the news and neagtive earnings of the companies sinked in, the index kept falling. A neat trend in the p[ast weeks market - when ever the market is up, it is up on a very light volume, it is not a sign of strength or optimism..  and, most of the market action is happening in the last one hour of trading.. 

Last week Rio warned about the slowdown in China, putting downward pressure on commodities. Today BHP followed suit pushing oil and other commodities even lower. Oil, now is trading at $67, off from its high 0f $147, as concerns about demand slowdown mount across the globe. It is interesting to note that, the implied probability in $45-$55 oil futures is 7 times the normal average probability. OPEC was concerned about the falling oil price and has called for an emergency meeting on Friday. There would definitely a production cut, and the analysts and the cartel members differ on how BIG the cut would be (the range is 500,000 barrels to 2.5M barrels). I do think that oil is headed to $60 - $65, but prior to the meeting it would briefly touch ~$75, before falling back to $65 again.

Countries that are on the verge of bankruptcy - Iceland, Argentina, Russia, Hungary, Ukarine, Pakistan - and the list should pile on..

Walmart US division head had some interesting insights on consumer spending. In a "disturbing" trend, Castro-Wright said Wal-Mart for the first time is seeing a paycheck-related spike in sales, suggesting consumers are rushing to buy such necessities as soon as they have the cash. The percentage of overall sales from the days surrounding those pay periods has risen 250 basis points indicating consumers have reached a level where they are spending on a paycheck-to-paycheck basis. He added that many consumers have "maxed out their Credit card limits" and are quickly changing (read - cutting down) their spending habits. Though the retail stocks are punished, there is more downside room, as a NOT-MILD RECESSION is not fully priced in the stock price.

Earnings:

Allegheny Technologies, is one of the largest and most diversified specialty metals producers in the world, today reported earnings of  144.1M or 1.45 per share on sales of 1.39B. Provided guidance for Q4 in the range of 1 -1.10, and full year guidance of 5.51 - 5.61, below the estimates of 1.38 and 5.64 resp.Stock is trading at 22.81 and relatively unchanged after the earnings release. Much of the earnings weakness in earnings is attributed to the economic downturn and the strike at Boeing, delay of Boeing 787 program and screwed up margins as the raaw material costs have fallen significantly. However, management is bullish on teh cash flow in the future, including a significant reduction in managed working capital. With about 4x earnings, no short-term debt obligations, decent cash on the balance sheet and long-term oppurtunities in electrical energy generation and distribution and medical markets, I guess this stock is a value stock.

ATT (T) posted earnings of 3.2 B or 67 cents per share on revenues of 31.3 Bn below the estimates of 71 cents. 

*another incomplete post* .. 

Sammie made us watch a hindi movie tonight.. Yeh hein Mumbai meri Jaan.. a feel good movie... a perfect depiction of Mumbai, TV commentators, Mumbai police.. The movie is about how 5 people living in Mumbai are affected by the bomb blasts on 7/11. I loved the smooth ending,, an ending which makes one feel light and happy!! 

Second day in a row the market didnt fluctuate around unch!

State Street today released the Investor Confidence Index. Global Investor Confidence decreased by 17.5 points to 58.2, lowest level since State Street started maintaining the data in 1999, from a revised September level of 75.7. The steepest decline being from North America.



Fed is continuting its efforts to do everything at its disposal to revive the money markets. Today Fed has announced a purchase plan to buy $600 billion of money market mutual funds' assets that have been hit with redemptions by investors. A money fund mainly buys the highest rated debt (Commercial Paper) which matures in under 13 months. In current situation, the money market fund could not sell the debt paper they own to meet the redemptions. This step by Fed would limit the redemptions by the investors and hopefully would stop the fire sale of assets.

Kirk Kerkorian, a phamous investor, is seeling off his stake in F.. He had bought about 140M shares of F at an average price of 7.20, and had sold 7.3M shares at an average price of 2.43. Assuming he sells his remaining stake at teh same price he would have to take up 600M in losses. :) .. 600M!!! fuck!! anyhow, the point that Kerk is tryin to make is taht F has very dim growth prospects going forward. I on the hand have invested in ford, and waiting for teh price to hit 3.00.

Market was down abour 230 points today, and Dow is just over 9000.. I guess investors now are dscounting weak earnigns more than the credit market problems. Infact, the credit market has started to show some signs of improvemtn. TED spreads are coming down, Libor is off from its peak, CP market is improving, CDS spreads of the companies are narrowing.. Said that, I dont think that marks the begniing of the good times. Banks still are not willing to extend credit to corporates, earnings across sectors are still weak, global recession chances are still looming, consumer confidence is making a new low..

Highlights of todays earnings"
AAPL reported earnings of 1.26 cents for the third Q, on revenues of 7.9 Bn. the consensus was 1.11 cents and revenues of 8.05 Bn. Though on the faec of it, it might seem that AAPL has beat the estimates, AAPL is reputed to give a conservative guidance and later beat the estimates.

Yahoo reported 9 censt on 1.33 Bn of revenues. inline with the estimates.

CAT (barometer for the industrial growth) reported 1.39 cents on 12.15 B of revenues. Missed the estimates of 1.43 on 12.43 Bn revenues.

Schlumberger (SLB) reported third quarter earnings of $1.29 per share on revenue of $7.26 billion. The consensus earnings estimate was $1.26 per share on revenue of $7.02 billion for the quarter. But again, with oil back at 70 levels, the drililng activity would be limited.

Intel (INTC) reported third quarter earnings of $0.35 per share on revenue of $10.22 billion. The consensus earnings estimate was $0.34 per share on revenue of $10.26 billion for the quarter. Semi conductor sector is BAD!

The growth engine has slowed for a breath!

China macro figures released today, show that 3Q08 China GDP growth of 9% emerged below onsensus estimates of 9.7% and compares to 2Q08 growth of 10.1%. The figures formally confirm the comments made last week by CEO of Rio Tinto of a Chinese slowdown, however growth of 9% during a quarter when industrial output was curtailed due to the Olympics with rolling nine month growth of 9.9% is still exceptionally strong. Growth is forecast at 8-9% in 2009. With faling commodity prices, the risk of an inflation has abated and that should give the govt officials some leeway to cut the interest rates or to take steps to kick start the growth!!

*Semi post intended to post yday! *

Movie night!!

Today I watched a hindi movie Shourya, with Rahul Bose in the lead. I liked the movie a lot, more coz of Rahul, I guess. The movie is about an army officer's transformation from an easy-going person to a 'responsible' one. A court drama is the center stage of the movie, and was captivating. Rahul was excellent as a Lawyer, reckless youngster and as a friend.

Tomorrow, we are plannign to give a send off party to a friend of ours at Six Flags.

more bad news yet Dow up 400 points..

The U.S. Labor Department said that the consumer price index was unchanged in September and up 4.9% from a year ago. The Federal Reserve said that industrial production was down 2.8% in September, hurt by Hurricanes Gustav and Ike. The Philadelphia Federal Reserve's regional index of manufacturing fell from +3.8 to -37.5 in October, the lowest in 18 years. Overnight, central banks added another $254 billion of funds to keep the money markets liquid. Also, the Swiss government invested 6 billion Swiss franc in its biggest bank, UBS, and is planning to take $60 billion (U.S.) worth of troubled mortgage securities off of the bank's books. Citigroup said that they lost $2.8 billion in the third quarter and Merrill Lynch lost $7.5 billion.

Yet, DOW was up 401 points.. Well, there is no point in trying to reason the market moments.

Investors have withdrawn about 43 Bn from hedge funds in the month of Sept, in a month the market was down about 6%. I wonder what the number would be in Oct when the market is down 17% MTD. Citadel( $15 Bn Assets Under management, down ~30% YTD) and Highland Capital ($14 Bn Assets Under Management), two big hedge funds, are unwinding the positions at firesale prices, though Citadel denied it as a rumor. I guess, the redemptions from hedge funds would be more than 50Bn atleast for the month of Sept, and the selling spree from the hedge funds would continue, pushing the stocks even lower. Gold dropping $50 in three minutes and comments from the veteran are indicative that commodites are not spared either and that its a massive sell-off action thats driving the markets. Watch for DOW heading to 7500 in this month or the next!

Update on BDI (Baltic Dry Index): Last time I mentioned it, it was at 2764, and today its at 1506 - the lowest since 2002.

Banks and dealers’ overall direct borrowings from the Fed averaged a record $437.53 billion per day in the week ended October 15, topping the previous week’s $420.16 billion per day. During the week ended Oct 1st, the figure was about 370 Bn. THis should be a good indicator in predicting the initial signs of a recovery in credit markets/economy - A lower figure is a sign of banks starting to trust each other and start lending over night money to the other banks..

Well, another unfinished post..I wasted most of my post office time chatting with Harish and Sammie, and in watching some dumb movie.. I added just one paragraph on markets post office hours!!Well, No regrets.. !!

Today I spoke with a friend of mine, after a very long time.. almost 11 years. It felt so good talking to him, and made me forget all the "bitter sweet" crap thats going on. He was my junior in HPS.. now got married and working as a Field Manager sort of job in hyd. One thing that was strikingly different betwen him and me was that he was 'HAPPY'. Well, I am not saying that I lead a SAD life, but his happiness was different.. a "SECURED", "UNCONDITIONAL" happiness that you can flaunt only when you are living among 'YOUR' poeple. Damn!! I miss India!! I wish I were THERE!!

After all these many years you expect the other person to have changed.. But he didnt, not even a single bit, at least he didnt make me realize that he did. .. .. Me, when I talk to my undergrad classmates or schoolmates, the first thing they say is that I have changed (not in a bad way though). The way I talk, the way I hold myself back from being hyperactive, the way I selectively choose sentenses as I speak, the was I keep silent when I have nothing to say. Even my mails to people are "formal". Fuck.. the corporate experience and MBA has made me diplomatic,,.. and that is something I dont want myself to be!!

Good night.. enough of introspective crap!! Come tomw, and I shall be back to normal again..

Song: "I am the highway" - Audio Slave
Mood: Gloomy

Holy Dow!

Market down 733 points.. Am I right or what!!! :) .. 20 of the previous 23 trading sessions, Dow index has made a three digit move.. putting it another way,, the market has been UP only in one session so far - 940 point monday move .. This is the perfect definition of volatility and no wonder VIX is back on the track to make a new peak ( at 69.5, its shy of just 6 points to make a new high)..

Today, I listened to a 2 hour analyst call of Chesapeke (CHK).. The stock was trading at $40 last month and is at $16.. Most of the last weeks drop in share price is attributed to the insider selling (The CEO of the company had to sell 31M shares to meet his margin calls). I was tempted to buy the stock during the call, as the management was pretty bullish on the outlook of the company. I stepped back after I plotted the price action of Natural gas and XTO (another natural gas company). Historically the stock price has closely tracked the price of Nat Gas, but off late there has been a big digression,.. Now again, they are hand-in-hand.



The best thing to do, now, is to stay side lined till there is a recovery in Nat gas Prices. Well, I do not think the prices of Nat gas are going to improve in the short term (1-2 months). Ac to the U.S. Energy Department Nat gas inventories increased 88 billion cubic feet in the week ended Oct. 3 to 3.198 trillion cubic feet. The department's next supply report is scheduled for tomorrow, and the average estimates predict an increase of another 63B cubic feet. Add to it, a mild weather prediction that would curtail the demand for heating the homes. I would rather stay short these Nat gas stocks.

Rating agencies have coem to their senses more than needed I guess. Last week Moody's played around with MS credit rating (jeopardizing the Japanese bank and MS deal).. Today, S&P said it may downgrade $280.1 billion of Alt-A mortgage securities. Last month, ratings companies downgraded about $118 billion of prime- jumbo and Alt-A bonds. In August the figure was $ 200 Bn.. This is going to make the things even worse.. Banks would have to shore up cash to meet the capital requirements, and they can raise neither equity nor debt as the equity and debt markets are in deep kaka. More selling of assets follows.

Today, Intel (INTC), JPMorgan Chase (JPM), and Wells Fargo (WFC) should be doing well. They earned the right with outstanding numbers for the last quarter. But, each is up only modestly, 1% or a bit better. They have been dragged into the pit by the news that retail sales were poor last month, down 1.2%. There was not much surprise in the retail figures. The economy is in a recession. It was bad, and there is more coming. However,10 Reasons why you should be bullish..

A couple of days back I heard a tune on my radio and was trying hard to recollect the singer, the song and the movie.. Struck me today that the song is "Bitter Sweet Symphony" by Verve, and the first time I heard it was in the movie "Cruel Intentions". I have been playing that song on my comp since noon.. :).. ( The tune, supposedly, be pretty similar to "The Last Time" by Rolling Stones..

Early conclusion.. but well, ydays action was a dead cat bounce!!

The market opened with a ~ 200 point gain, but by the end of the day, the market ended ~60 points down. Well, it might be a profit taking from ydays rally, or the wait-and-see approach as tomorrow some of the financial institutions have their earnings release date.. JPM, WFC... Should be an interesting day tomw.

Verizon has trouble getting the committed capital for the 28.1 Bn acquisition deal of Alltel. Seems every one - hedge funds, PE firms, banks, Soveriegn Wealth FUnds are hoarding cash.

The American Bankers Association asked the Securities and Exchange Commission on Monday to override accounting rule makers’ new guidelines on mark-to-market accounting, saying they still relied too heavily on distressed asset values. Another step away from the definition "free-capital-markets". It is the bankers who vouched for mark-to-market accounting when the asset valuations were shooting through the roof.. Now that there is no market for those toxic derivative products they want the rule to be evoked. Ironical is the fact that why now are the banks worried when the treasury is willing to buy 700Bn (now it is 450 Bn as 250Bn is put aside to buy the preferred stock of banks) of bad assets from banks??? May be, 700Bn is not enough to cover the BAD assets!!

Lehman CDS data point: The payment calculations so far performed by the DTCC Trade Information Warehouse (an electronis exchange where the CDS are settled) relating to the Lehman Brothers bankruptcy indicate that the net funds transfers from net sellers of protection to net buyers of protection are expected to be in the $6 billion range (in U.S. dollar equivalents). That is way below the $250 Bn figure that is floating around (even I quoted the same number in my prev post). If thats the case, I guess the problems regarding the Lehman bankruptcy are overblown and the "recovery" or stalibilty shlod occur sooner than the estimates..

Oil trading at 79 dollars.. national average for gas is $3.16 and expected to lose another 20-30 cents. This I guess, is the greatest stimulus package that anyone can ever expect!! :).. Will save millions of dollars from tax payers pockets!! - Another reason why the recovery should be sooner.

Earnings :

INTC (Intel) reported today after the market close. Reported 35 cents estimates being 34 cents. 

Genentec Reported.. Revenue line beat the estimates but earnings did not.. 

I thought I will start writing about the earnings report as the earnings has started. but.., my schedule seems tight to properly end the post.. Should change it.. I write more than half of my blog before I leave the offcie. After I come home the time just flips past.. I watch an episode of "two and a half men", chat with Sammie and Harish,, go for a jog, come back, eat, watch part/full Sammie's movie of the day,spend some time over the phone .. and thats it -- its freaking bed time.. Either I should start scribbling early, or I should squeeze my bed time!!