Showing posts with label C. Show all posts
Showing posts with label C. Show all posts

Thursday, August 6, 2009

Where is the Outrage ??

Where is the Outrage ??SocialTwist Tell-a-Friend
Fari Hamzei

Last Friday, the front page of the Wall Street Journal blared: “Nine Lenders That Got Aid Have $33 Billion Bonus Tab.”

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Thursday, December 20, 2007

Currencies, SWFs and our Stock Market

Currencies, SWFs and our Stock MarketSocialTwist Tell-a-Friend
Ashraf Laidi

I pretty much agree with Frank Barbera's outlook but not necessarily as bearish on the US Dollar in 2008. I think the Greenback will continue showing resiliency vs the British Pound, Kiwi and Aussie into mid Q2 before it starts to weaken again. Euro should start recovering after Q2.

As for our Stock Market, when you consider that the main catalysts to the recent gains were 1) Abu Dhabi buying part of Citi 2) rumors/hopes of aggressive Fed cuts 3) Bush rewriting legal contracts on mortgages, all of these factors fall under the "extraordinary items" category on which the ailing market cannot always count on. Unless of course, Arab Gulf SWFs, will alternate with Far Eastern SWFs every other week to announce new buyouts. The 2002 lows in stocks should come around by next summer.

Editors' Note: Ashraf Laidi will publish his 2008 outlook very soon.

Monday, August 20, 2007

Financial Sector and this Fed

Financial Sector and this FedSocialTwist Tell-a-Friend
Sally Limantour

The biggest question over the weekend was whether the engineered discount rate cut by the Fed was enough to safely say the lows were put in last Thursday. There are reasons to be skeptical in looking at the market players and the Federal Reserve.

We have been witnessing the phenomenon of deleveraging and if history is any guide this rarely occurs smoothly, or without some effect on the wider economy. It is hard to imagine that what took years to create is over in a few weeks. The ability to slice and dice risk and spread it around has us questioning the vulnerability of the economy.

In addition, there are clear signs that the pain is spreading from hedge funds to banks. The total amount of rescue financing has placed tens of billions of dollars at risk for many of the biggest banks. Most charge nominal fees for the guarantee of liquidity and some banks did not properly reserve for the risk since the prospect of default seemed remote.

Citigroup (C) and JPMorgan Chase (JPM), for example, have guaranteed more than $90 billion of liquidity, or about 5 or 6 percent of their total assets, according to a recent Banc of America Securities report.

State Street(STT), a custody bank, guaranteed about $29 billion, or 23 percent of its total assets.

That has ignited fear that the subprime contagion has spread to the global banking system — and, some suggest, caused the Federal Reserve Board to take action yesterday.

“The Fed is concerned because of the banks’ exposure. The banks are on the hook for potentially tens of billions of dollars,” said Christian Stracke, an analyst at CreditSights, a fixed-income research firm. “That could tighten credit conditions significantly if all that paper is tied up in things that none of the banks want to hold."

Bernanke’s Fed

The perception that the Fed will bail us out is still in the background for many, but if Bernanke turns out to be more like Volcker than easy Al as I wrote on August 13th, then the current Fed will inject liquidity when needed but may quickly remove it when markets stabilize.
Mr. Bernanke may not follow in the footsteps of the former Fed chairman and provide what fondly became called the “Greenspan put.” Under that philosophy whenever a crisis brewed Greenspan would slash the fed funds rate and provide cheap money to those who needed it as well as those who used it to add on layers of derivative speculation.

The Greenspan put helped during crisis such as the 1987 stock market crash and the 1998 Long Term Capital Markets hedge fund fiasco, but it also built up a huge speculative fervor and added on layers of risk that would not be there if cheap money had not been available.

Friday’s move by the Fed to lower the discount rate – not the Fed Funds rate made liquidity available to banks and depository institutions. They could borrow against collateral, such as asset-backed securities but the important distinction is that this discount window is not available to the more speculative group such as hedge funds and in this sense is quite different from the insurance that Greenspan provided.

We are going forward confronted with decisions to make both with our portfolios and with daily trading. I am approaching the markets as if I am still walking in a minefield and highly alert as to where I step. Listening for further news from institutions holding subprime debt as well as the language and actions of the Fed will be paramount as to how we navigate this treacherous terrain.

During the day I am trading “light and tight” meaning small positions with tight stops. I still believe we are at the beginning - not the end of a volatile time in many asset classes and we should not get lulled into complacency if markets are calm for a week or two. That said, my other twin always reminds me I am too close to the game and I am reminded of the words from Julian Jessop of Capital Economics as he puts it rather directly: “People in financial markets always think they are more important than the real world.”


Thursday, May 17, 2007

Equity Index Update

Equity Index UpdateSocialTwist Tell-a-Friend
Brad Sullivan

The index markets chopped back and forth in a rather uneventful morning session before turning on the headlights and pushing to high contract closes in the SP and DJIA. Mr. Buffet and Buffet Jr. (Eddie Lampert) both made splashes with investment stakes in JNJ and C respectively. That news gave investors another reason to be buy stocks as the general assumption is that if two value oriented players are raising stakes in equity holdings, why not me? Amidst the buying in mega-caps came a sharp move lower in metal based commodities. It is worth noting that over the last three months there has been a “linked” move with these commodities and domestic indices. If the metals roll over…will equities follow? I hardly think it will be that smooth, however, this divergence is worth keeping close tabs on over the next few weeks.

Overall, the SPM market remains contained within a tight trading range…essentially 1518 to 1505 with some outside push attempts. From a trading perspective this has been an excellent pattern as the market continues to bounce off the 1507-04 zone and fail in the 1518.50 to 1515 zone. Given the strength of yesterday’s close in the large cap SP and DJIA one has to wonder if today will be the day to finally break above our resistance. Keep in mind that – TYPICALLY SPEAKING – the Thursday prior to expiration is a one-way street. In other words, the odds are suggesting a choppy morning, followed by a late morning push into the close of trading.

Accordingly, the zone of resistance from 1515 to 1518.50 remains crucial for the session. Any 30 minute close above this zone should be purchased – HOWEVER, if it is early in the session (within the first 2 hours of trading) I will not chase ‘em up. I will try and get long in that zone with some reasonable breathing room for a stop (30 minute close below 1513 would do it for me). IF the index takes off higher and does not allow entry, we should be on the cusp of a strong one-way street rally session. Typically, I would look for a net change greater than one Standard Deviation…now my 8 day reading in STDEV are very small (only a net of +5.50 would take it out) however the 22 day reading is at a more reasonable +10.20. Essentially, if a one-way street develops I would look for the market to trade +10.50 to +1300 on the session or 1528 to 1531 in a zone for exiting longs. Along the way look for some stoppage around the 1525-1526 level, but expect any dips to be shallow.

On the downside, if the market fails to make any inroads above the key resistance zone, one has to play for a move back towards the 1512 to 1510.50 support zone. Below this, look for a choppy move for a trade into the familiar 1507-1504 zone. Only a 30 minute close below this zone will open up the selling door for a move towards 1496. HOEWEVER, much like I wrote yesterday, in this scenario expect lots of chop and spike oriented action.

I have gone a little chart crazy today and have included several that are worth examining. One of the key elements in trading is focusing on what the market is focusing on. Accordingly, I have the resurgent IBM (now 6.5% of the DJIA weighting), the Yen Futures vs. SP futures chart, a possible divergence in the Copper and SP chart as well as potential blow off top move in the long DJIA vs short Russell 2k chart. These charts represent a nice cross section of what has moved the market the past few months.

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