September 30, 2008

Global Market Comments for September 30, 2008 1) The Bail Out Bill II will be voted on Thursday. That took the Dow up 485. 2) Three month LIBOR hit 7% overnight, a 500 bp premium to Fed funds. During the 1987 stock market crash the premium only got up to 200 bp. Mortgage backed securities are now trading at levels implying a 55% default rate. During the great … [Read more...]

September 26, 2008

Global Market Comments for September 26, 2008 1) The government seized WAMU and sold it to JP Morgan without even telling WAMU's senior management because they were all on a plane to meet with a potential buyer. Common, preferred, and debt holders were all wiped out. Morgan immediately wrote off $31 billion of WAMU's debt, about 20% of the total. 2) From 2002 to … [Read more...]

September 25, 2008

Global Market Comments for September 25, 2008 1) Those who work in the financial industry see the world ending on their screens, then walk outside and see people and cars on the street, shops doing business, the sun shining, and everything appearing normal. It's surreal. Many businesses and banks are months away from shutting down from the lack of operating cash and no … [Read more...]

September 24, 2008

Global Market Comments for September 24, 2008 1) Congress plays the fiddle while the economy burns. Bernanke is warning that the US may enter a decade of sub par growth, as Japan endured during the nineties. 2) Bill Gross at Pimco, the country's largest bond fund manager, has calculated that the government could make a $56 billion profit on the $700 billion bail … [Read more...]

September 23, 2008

Global Market Comments for September 23, 2008 1) Yesterday was a real 'Sell the US' day. Stocks, bonds, and the dollar all fell big, a very rare occurrence. It shows you that foreigners were making large scale withdrawals of capital from the US, not wanting to get caught up in the Fall of the Roman Empire. Congress is making sausage here and it is not very pretty. … [Read more...]

September 22, 2008

Global Market Comments for September 22, 2008 1) Prices on 30 year T-bonds have plunged an unprecedented 8 points in two days, taking the yield up from 3.90% to 4.6%. Please see my comment last Thursday that bonds were a screaming short at 124. With all of the bail outs, the national debt has effectively risen from $9 trillion to $18 trillion in a month. Iraq and a … [Read more...]

September 19, 2008

Global Market Comments for September 19, 2008 1) The Treasury announced a blockbuster rescue package which has triggered a global buying panic, but without the details. It is creating an RTC type entity which will buy distressed assets from the banks. Short selling has been banned in 799 financial stocks. Restrictions have been lifted on company stock buy backs. The Fed has … [Read more...]

September 18, 2008

Global Market Comments for September 18, 2008 1) Now is the best time ever to start a hedge fund. It is like going into the insurance business the day after the 100 year flood. All of the model busting worst case scenarios have happened. Dow up 450 on RTC type bail out rumor. 2) The global liquidity crisis accelerates. 90 day T-bills traded at 0% yield yesterday, which … [Read more...]

September 17, 2008

Global Market Comments for September 17, 2008 Note: If world ends, there will be no comment for September 18. 1) The government nationalized AIG, taking 79.9% of the stock in exchange for an $85 billion bridge loan. The trillion dollar company provides 18% of the life insurance in the US. This is a steal for the government, which will make tens of billions of dollars on … [Read more...]

September 16, 2008

Global Market Comments for September 16, 2008 1) The fallout is still reverberating from the Lehman (LEH) bankruptcy. Wells Fargo (WFC) announced it took a $109 million hit on LEH preferred. Their initial investment was certainly a lot more than that. George Soros also took a hit. Banks all over Asia announced $100 million plus losses in LEH preferred, loans, derivatives, … [Read more...]

September 15, 2008

Global Market Comments for September 15, 2008 1) In last Friday's newsletter I predicted that Merrill Lynch (MER) would be the next target for the cloud of locusts. I had no idea that it would be gone in a few hours! The scary thing is that Bank of America (BAC) was willing to pay $50 billion for MER, but not $1 for all of Lehman. A year ago, people were laughing at BAC … [Read more...]

September 12, 2008

Global Market Comments for September 12, 2008 1) Lehman is a dead man walking. Expectations are now so high that if Lehman (LEH) is not sold by Sunday the market will be down big on Monday. The cloud of locusts is already looking for its next victim. At the top of the list? Merrill Lynch (MER) who's stock has plummeted from $90 to $17. Citibank put out a report today … [Read more...]

September 11, 2008

Global Market Comments for September 11, 2008 1) The Great Unwind of 2008 continues. Gold down from $1,100 to $740. Crude from $148 to $100.25, Natural Gas from $13.50 to $7, Silver from $21 to $10.40. The Russian stock market, with the ruble depreciation has plunged 50% since July. The best of breed commodity stocks are all down 50%, like Freeport McMoran Copper & Gold … [Read more...]

September 10, 2008

Global Market Comments for September 10, 2008 1) Lehman (LEH) held its much anticipated conference call. The bottom line is that all of the saleable parts will be sold and the toxic waste will remain with LEH on a $600 billion balance sheet. The Q3 loss is $3.9 billion on $5.6 billion in net mark to market losses. A majority stake in Neuberger Berman will be sold. The … [Read more...]

September 9, 2008

Global Market Comments for September 9, 2008 1) The biggest financial bail out in US history, and the nationalization of the majority of American home mortgages and we only get a one day rally. Hank Paulson must be slitting his own wrists. All this at the price of doubling the national debt, from $9 trillion to $18 trillion. Investors have figured out that shrinking these … [Read more...]

September 8, 2008

Global Market Comments for September 8, 2008 1) Hank Paulson promised a bazooka and delivered a pea shooter. The Treasury used the Bear model once again, making Fannie Mae (FNM) and Freddie Mac (FRE) bond holders whole, while wiping out the equity owners. Trillions of dollars in debt, largely owned by China, Japan, Russia and other foreigners are now obligations of the US … [Read more...]

September 5, 2008

Global Market Comments for September 5, 2008 1) The August unemployment rate rocketed from 5.7% to 6.1%, a five year high. The monthly non farm payroll rose an unexpected 84,000. Traders were out there from the get go, selling stocks with both hands, taking the Dow down 150 points. Bond yields are flirting with all time lows. Blood is flowing in the streets once again … [Read more...]

September 4, 2008

Global Market Comments for September 4, 2008 1) Today the global recession came home to roost, knocking stocks down 350 points. If shares can't go up on a $43 drop in crude, then they can only go down. Bond yields soared, taking the ten year to 3.60%, giving you a real return of negative -1.00%. It's all a flight to safety, nothing rational. 2) Q2 productivity … [Read more...]

September 3, 2008

Global Market Comments for September 3, 2008 1) The dollar spiked up to the $1.43 handle against the euro as billions poured out of the soon to be lower yielding euro and pound and into the soon to be higher yielding greenback. Since we have had no significant pull backs from the major break of $1.55, this is increasingly taking on the character of a multi year trend … [Read more...]

September 2, 2008

Global Market Comments for September 2, 2008 1) Hurricane Gustav pulled its punch, so crude (USO) crashed $13 from the Friday high to the $105 handle. The market was discounting another Katrina and got a damp squib instead. Natural gas (NG) collapsed 74 cents to $7.20. They don't call this contract the widow maker for nothing. Expect to hear about more hedge funds … [Read more...]