New Address:
Lemley Yarling Management Co
309 W Johnson Street Apt 544
Madison, WI 53703
Toll free phone numbers:
Bud: 312-925-5248
Kathy: 630-323-8422
|
30 September 2008
Thoughts
Asian markets were mixed
overnight with China closed and Japan down and India up. European bourse ibexes
are up small. U.S. futes are indicating a higher opening by 2%.Gold is up $5
and Oil has gained $1 in the early going.
Our thought is that a lower
opening would have been more positive but maybe the last hour 200 points drop
lower was enough to wash out the sell bug for now.
*****
Stocks have been up all day and
we have done nothing. The story remains the same and our feeling is that
today’s up move is the rally for the Bailout passage and so today’s up move is
robbing from Friday’s rebound if the Bailout Bill does pass.
*****
Oil gained $5 to $101 and Gold
lost $30 to $865 since the economic world did not end today. European bourse
indexes closed mostly higher and Treasuries gave back some of yesterday’s
flight to quality gains.
*****
The SEC has issued guidelines to
allow banks to value assets with judgment. OK, time to cook the books boys and
girls.
*****
They go down and they go up.
The DJIA gained 484 to close at
10850. The S&P 500 was up 58 to 1165 and the NAZZ jumped100 to 2985.
Just your typical first two
trading days of the week. By the by today is quarter end for mutual funds.
Breadth was 3/1 to the good on
the NYSE and 2/1 on the NAZZ and volume was light.
There were about a combined 655
new lows and 15 new highs.
The bulls came roaring back.
*****
29 September 2008
Thoughts
The DJIA is down 300 points an
hour into the trading day. Asian markets were down 3% and European bourses are
down 2% and more at midday. Gold is down $1 and Oil is off $3 in the early
going. Treasuries have a bid.
*****
The Bailout plan is receiving a
less than enthusiastic welcome. We sold EMC to raise a bit more cash and don’t
feel inclined to buy anything as we watch the market react to Fed intervention.
The Fed and Foreign Central Banks
are pumping $600 billion into the world banking systems and are going to keep
pumping till the crisis settles. And then Fed Funds will go to 0% and the U.S.
will be like Japan in the 1990s when their central bank kept rates at 0% to try
and get their economy going. It didn’t help.
Citicorp is buying Wachovia’s deposits and Citi shares are trading higher on the thought that the FDIC has now
assured that they will not let Citi go under.
Wachovia is toast and again we think not of the opportunities we
missed but the calamities we have avoided these past few months. And we raise
more cash in accounts to celebrate losing less.
*****
Mitsubishi has pumped $9 billion into Morgan Stanley and the shares are trading down 10%.
State Street Bank is down 10% this morning on no news.
*****
Germany’s DAX closed down 4%
while the FTSE in London and the CAC in France both closed over 5% lower. The
Irish market was down 11% and China was down 9%.
*****
The Bailout Bill failed
and the DJIA briefly touched 700 down at 1:10pm.
*****
We sold EMC
and NVDA for losses with the idea of
buying higher quality stocks down the same amount or more in the sell off with
those funds.
*****
Oil closed up $25 at $915. Oil
dropped $11 to $95.60.
*****
The DJIA lost 735 points to 10405. The S&P 500 was down 100 at 1112.
The NAZZ dropped 200 to 1983.
The S&P 500 is now 30% below
last October’s highs and it is also 45% above the 2002 lows. Is the cup half
full or half empty?
Breadth was 19/1 negative on the
NYSE and 8/1 on the NAZZ and volume was active at 7 billion on the NYSE and 3
billion on the NAZZ.
There were about a combined 1675
new lows and 30 new highs.
The bears were in control even without the ability to short
the financials. Maybe the SEC will ban all short selling. Tomorrow and tomorrow
and tomorrow...
*****
26 September 2008
Thoughts
Fasten your seat belts it is
going to be a wild ride today. The Hoover Republicans are now in charge of the
madhouse and the markets are lower across the globe as folks wonder what will
occur.
*****
WaMu was taken over by the FDIC
last night and its total deposit base was sold to JP Morgan. The markets are
yawning on that one while a month ago that failure of WaMu would have been the
cause of at least a 2% drop. It is interesting how bank failures can become old
hat so quickly. And JP Morgan continues to build its franchise.
*****
Final GDP was 2.8% plus for the
second quarter of 2008. Personal Consumption was 1.2%.
*****
Research in Motion, the Blackberry maker, reduced earnings
expectations by 10 pennies for the current quarter but revised revenue expectations.
The shares are trading $20 lower at $75 which is half of where it was priced in
June.
*****
We sold AT&T
and Verizon when the market turned positive to get
more cash in accounts. We thought the deal was done yesterday. It may be done
this weekend but....
*****
University of Michigan sentiment
was 73 versus 63.
*****
Maurice R. "Hank"
Greenberg, former chief executive of American International Group Inc., and affiliates reported holding
9.99% stake in the company after the stock sales Thursday, according to a
regulatory filing.
Mr. Greenberg and Starr International Co., an
investment vehicle he heads, reported selling a combined 40 million shares for
a total of about $126 million.
A year ago the 40 million shares
were worth $2.4 billion. Ouch!
*****
Oil was down $1.10 at $106.92.
Gold gained $10 to $892. Treasuries were a bit lower. Asian and European
markets closed lower on the day.
*****
The markets opened lower but
closed higher. We didn’t expect that action but then we have been surprised for
a while. Wachovia dropped 60% in
price today to $8.50. It looks like Goldman
Sachs is going to do a take under over the week-end. National City was also the subject of take-under rumors with Wells Fargo and US Bank as the undertakers.
*****
As we leave 5 minutes before the
close the DJIA is up 140 points at 11162. The S&P 500 was up 5 at 1212 and
the NAZZ was flat to 2185.
Breadth was 2/1 negative and
volume was active at 6 billion on the NYSE.
There were about 475 new lows and
20 new highs. (Combined)
Today was also a draw. Next week will tell the tale.
*****
25 September 2008
Thoughts
Our view is that the bailout measure will pass and stocks
will rally and then reality will force the pullback that makes the low. We have
concentrated our holding in six stocks and we do have a few retailers we would
like to add but we think that there will be a better opportunity. The October
time period is usually scary and then profitable. But with short selling banned
until probably the 19th of October the sell off may be delayed until after
mutual fund year end on October 31. That is what occurred last year. We have
plenty of cash. The economy is in bad shape and we are going to error on the
side of not making as much money to make sure we survive.
*****
Several folks have called to ask
about the financial condition of Mesirow Financial which is our clearing broker
and holds client securities and cash. Please know that all our own
assets are held at Mesirow and that we are on top of the situation. Mesirow’s
broker dealer subsidiary is well capitalized and well run and we are not at all
worried about the safety of our funds. Since we work for our clients, and have
always worked for our clients we would have no hesitation to move funds if we
were worried. We are not.
*****
Initial jobless claims were
493,000. That is too close to 500,000 for comfort.
*****
Asian markets were lower except
China up 3%. European bourse indexes at up and Gold and Oil are
flat as the trading day beings. GE warned and is trading lower but the U.S.
markets are going to open higher.
*****
New home sales were down 11% in
August.
*****
The DJIA is up 200 points an hour
into the trading day as financials lead the way. With no short selling who
knows what the real prices would be.
*****
Jeff Immelt, the CEO of GE was on CNBC this morning and he gave
a good explanation of the problems and possibilities at GE. Right after he
finished speaking the shares jumped $1 to over $25.80 after trading at $23.50
on the initial news of a 10% reduction in forecast earnings. Unfortunately
there is no short selling allowed in GE and so there is no price discovery
occurring.
*****
We would note that short selling is still allowed in the
six stocks that we own in accounts. Theoretically that means that true
price discovery is occurring. We added Dell
and Intel to accounts that own the
two issues.
*****
Paul Krugman: So now the whole
rationale for the plan is “price discovery”: we’re going to throw lots of
taxpayer funds into the pot because that will let us find the true values of
troubled assets, which are higher than the fire sale prices out there, and so
balance sheet will improve, confidence will return, etc, etc.. So I just did a
Nexis search trying to find out when Paulson and Bernanke started talking about
price discovery, which we’re now told are at the core of the plan’s logic. And
the answer is …Yesterday. I can’t find any use of the term, or even a
hint of the argument, until yesterday’s Senate hearings. One possible
explanation. It wasn’t until yesterday that they realized that it would
actually be necessary to explain themselves. But there’s another possible
explanation, which I find terrifyingly plausible: the plan came first, and all
this stuff about price discovery is an after-the-fact rationalization, invented
when people started asking questions. It has seemed very strange to me that
such a supposedly crucial economic program would be based on such an exotic
argument. My sneaking suspicion is that they started with a determination to
throw money at the financial industry, and everything else is just an excuse.
*****
In the pullback this afternoon we repurchased NVDIA in accounts that own EMC. With no
debt and $3 per share in cash and priced at 12 times earnings and net of cash
1.2 times sales we do like this company.
NVIDIA Corporation provides
visual computing technologies designed to generate interactive graphics on consumer
and professional computing devices in the United States and internationally. It
operates in four segments: Graphic Processing Unit (GPU), Media and
Communications Processor (MCP), Professional Solutions Business (PSB), and
Consumer Products Business (CPB). The GPU segment comprises products that
support desktop and notebook personal computers, and plus memory products. The
MCP segment consists of NVIDIA nForce core logic and motherboard GPU products.
The PSB segment offers professional workstation products and other professional
graphics products, including high-performance computing products. The CPB
segment provides mobile brands and products that support handheld personal
media players, personal digital assistants, cellular phones, and other handheld
devices. This segment also licenses video game consoles and other digital
consumer electronics devices. The company markets its products to original
equipment manufacturers, original design manufacturers, add-in-card
manufacturers, system builders, and consumer electronics companies.
*****
Gold dropped $14 TO $872. Oil was
up $2 at $107.80. Treasuries were lower with the two-year at 2.16% and the
ten-year at3.85%. European bourse indexes closed higher across the continent.
*****
The DJIA lost one third of its
gain of 300 points in the last half hour of trading. Our guess is that the
warrant feature (the right of the Treasury to buy stock in the banks it helps)
of the bailout bill caused the pull back of the share prices financials. The
fact that lunch won’t be totally free for the banks that are in trouble is a
long term positive in our view.
The DJIA gained 210 to close at
11035. The S&P 500 was up 26 at 1212 and the NAZZ jumped 30 to 2185.
Breadth was 2/1 positive and
volume was active at 6 billion on the NYSE.
There were about 265 new lows and
about 25 new highs. (Combined)
The bulls are hoping big time.
*****
24 September 2008
Thoughts
"It is difficult to get a man to understand
something when his salary depends upon his not understanding it."
Upton Sinclair
*****
“If we don't quickly resolve the
2000 election, it will be the end of America as we know it! If we don't pass
the "Patriot" Act, the terrorists will win! If we don't bomb Iraq,
Saddam will destroy us and Europe and Israel!” When trying to seize more power
and wealth, there's never a bad time to fan the flames of panic!
http://www.theleftcoaster.com/
*****
Warren Buffet stepped up to the plate last night an invested $5
billion in Goldman Sachs. He is
buying $5 billion in perpetual preferred stock with a 10% dividend. And he is
also getting warrants to buy $5 billion in common stocks at $115. The shares
closed at $125 after trading at $114 an hour before the close. Ya think some
folks knew about the deal?
The markets are calmed buy Buffet’s
buy and stocks are going to open higher this morning. Overnight Asian markets
were higher small and European bourse indexes are lower small at midday. Gold
is up $4 and Oil is $2 higher as the trading day begins.
*****
Buffet’s buy is an example of how the Feds should do
their buys. Buffet took preferred because there is a tax advantage for
corporations over straight debt. He also
got a very good deal. Goldman
paying 10% means the banks that the Treasury is rescuing should be paying the
government 12% and more. And Buffet got equity at a 10% discount not a premium.
So should the Treasury.
If Warren Buffet
isn’t doing any favors for Goldman Sachs why should the American taxpayer?
*****
The Feds rescued money funds that
made dumb and risky investments. That the Treasury is no exacting fines form
them and is penalizing all money funds by instituting a fee is a symptom of the
fact that free market folks are
trying to play at socialism for the rich and powerful. The financial turmoil is
a result of an unregulated free market. The regulations were on the books but
the free marketers removed them one by one and ignored the rules they couldn’t
remove. In theory free markets with no regulation in a perfect world would work
fine. But in reality greed causes folks to make stupid decisions. And now the
free marketers want to reward the foolish and punish the prudent. And the Queen of hearts is looking for the
Cheshire Cat as Alice wends her merry way.
*****
The SEC instituted a no short
selling rule that was to include financials. It then gave the power to the
exchanges to add stocks to the list. Today IBM
and Medco (the drug supply company)
have been added to the list. The NYSE is a private for profit exchange. That
the SEC delegated its responsibility to them to make additions to the list is
criminal.
*****
Goldman Sachs sold another $5 billion of
shares at $123. For the past few weeks Goldman has been saying it
didn’t’ need capital. Go figure.
By selling these shares they
soaked up a lot of demand in the marketplace although the $115 price that
Buffet is getting should act as a floor.
*****
At 07:18 UT
(Universal Time), on Wednesday, September 24th, 2008, Mercury the cosmic
trickster turns retrograde in Libra, the sign of the Scales,
sending communications, travel, appointments, mail and the www into a
general snarl-up! This awkward period begins a few days before the actual
turning point (as Mercury slows) and lasts for three weeks or so, until October
15, just after the Full Moon in Aries, when the Winged Messenger reaches his
direct station. At this time he halts and begins his return to direct motion
through the zodiac.
See the full discussion at the
end of this post.
*****
Reserve Fund
breaks the buck
More than a year before it "broke the buck" with losses that
spread chaos through the financial system last week, the Reserve Primary Fund
began loading up on a type of short-term debt that the money-market fund had
long shunned.
Even as Bruce Bent, the fund's founder, told shareholders in a July
2008 letter that the fund had "unwavering discipline focused on protecting
your principal," Reserve was gobbling up commercial paper. By May of this
year, 54% of the fund's holdings were in commercial paper, up from 0.9% about a
year earlier. Exposure to drab but safe certificates of deposit plunged.
While the run on money funds that was ignited by the fund's losses has
eased, Mr. Bent's failure to follow his own advice on the virtues of
conservative investing is having catastrophic consequences for Reserve's
money-market funds, managed by Reserve Management Co.
The firm lost 90% of its assets, which had fallen to $8.5 billion as of
Monday, down from nearly $86 billion at the start of September, according to
iMoneyNet Inc. Reserve faces at least two lawsuits over its disclosure of
losses on Lehman securities and indefinite suspension of further redemptions.
A spokeswoman for Reserve declined to comment on the fund.
Industry experts say the primary fund's recent trouble could cause
investors to stay away. Anthony Carfang is a partner at Treasury Strategies
which provides cash-management consulting services to corporations and
financial institutions. He says, because of the recent turmoil at Reserve, he
thinks it will be hard for the firm to sell its money-market funds to corporate
treasurers and other institutional investors.
*****
What goes up... or
bulls make money... or...
Boone Pickens’ hedge funds are having a difficult year. One of his
hedge funds that focuses on energy stocks down almost 30% through August. A
smaller commodity-focused fund is down 84%. All in, the funds have lost around
$1 billion this year, a figure that includes $270 million of personal losses.
"It's my toughest run in 10 years," said Mr. Pickens, a former
geologist who earned billions by building an oil company and investing in
energy. "We missed the turn in the market, there's nothing fun about
it."
*****
As we watch Bernanke and Paulsen
testify we remember the words of Medal of Freedom winner and former revered
head of the Federal Reserve System who now makes million of dollars a year
advising corporations and other rich folks:
Newswires 2/24/04: Federal Reserve Chairman Alan Greenspan said
Monday that Americans' preference for long-term, fixed-rate mortgages means
many are paying more than necessary for their homes and suggested consumers
would benefit if lenders offered more alternatives. In a standing-room-only
speech to the Credit Union National Association meeting here, Greenspan also
said U.S. household finances appeared generally sound, despite rising debt
levels and bankruptcy filings. Low interest rates and surging home prices have
given consumers flexibility to manage debt, he said. "Overall, the household
sector seems to be in good shape," Greenspan said... "American
consumers might benefit if lenders provided greater mortgage product alternatives
to the traditional fixed-rate mortgage," Greenspan said. Americans have
been buying homes and refinancing mortgages at a record pace in the past
several years, lured by low interest rates. Most mortgages are fixed rate, so
consumers can prepay when rates go down but do not face higher costs if rates
rise. Under adjustable-rate mortgages (ARMs), which made up about 28% of
mortgages in January, borrowers usually have lower initial rates but face the
risk of higher payments if rates in the broader economy rise.
While borrowers can refinance fixed-rate mortgages, Greenspan said
homeowners were paying as much as 0.5 to 1.2 percentage points for that right
and the protection against a potential rate rise, which could increase annual
after-tax payments by several thousand dollars.
He said a Fed study suggested many homeowners could have saved tens of
thousands of dollars in the last decade if they had ARMs. Those savings
would not have been realized, however, had interest rates shot up.
"American consumers might
benefit if lenders provided greater mortgage product alternatives to the
traditional fixed-rate mortgage," Greenspan said.
Joseph McKenzie, deputy chief
economist at the Federal Housing Finance Board, says buyers like the stability
of fixed-rate mortgages, but there is increasing flexibility in products.
"There are lots of innovative
programs, especially targeting low-income and first-time buyers," he says.
*****
A different
approach:
Wednesday, September 24th 2008,
9:40 AM
NEW DELHI
- More than 60 former employees of an Italian manufacturing company in India
have been arrested for allegedly beating to death the company's local chief
executive officer, police said Tuesday.
*****
Secretary of State Condoleezza Rice who has an oil
tanker named for her as an honor for her serving on the Board of Directors of
Chevron: was interviewed on CNBC this morning.
QUESTION: “How does a United
States in the middle of a global financial crisis affect diplomatic efforts
around the world and your efforts? […]”
RICE: “Everybody understands that
this is a very specific, indeed once-in-a-lifetime – well, we certainly hope –
circumstance. But people have confidence in the United States. As the
President has said, this is a financial crisis, but the fundamentals of the
U.S. economy are strong.
Everyone understands our great
ability to innovate, the productivity of our workers, the ability of
the country to move quickly. And so I believe the United States’ standing has
not been really affected.”
*****
U.S. corporate debt: Caterpillar cracked
the door ajar on investment grade issuance with its $1.3
bln 2-trancher yesterday, which was ultimately priced at 325 bp over 5- and
10-year Treasuries; that's the widest in
over 30 years. However, this succeeded in breaking the longest logjam on
corporate issuance in recent memory (the calendar had been empty since
September 9). Fresh on the docket today are Bank Nederlandse with a $1 bln
2-year, and a $1 bln 2-year deal from KfW. Also, American Honda is planning a
2-part offering of 5- and 10-year debt of unspecified side. Stanley Works is
also prepping a $250 mln 5-year note issue, set to price today. A comprehensive
and well-structured financial rescue package would go a long way to helping
thaw out corporate debt issuance. So far this week, bond sales total only $1.3
bln, though that's more than twice last week's mere $580 mln.
*****
Bill Gross of PIMCO the largest fixed
income manager in the worlds with over $800 billion in assets under
management has offered to work for no fee to help the Treasury figure out the
prices to bid on distressed mortgage pools. Of course Gross owns a whole bunch
of bank preferred shares that will benefit from a workout but it still seems
like and honest offer.
*****
Last week Jim
Cramer had terrorists destroying the markets and this week he wants
all of us to do our patriotic duty and bail out the banks. Jim Cramer is one
amazing guy.
*****
These are the guys who advertise themselves as bankers to the wealthy
because of their experience and conservative management.
*****
Bank of
New York Mellon will take a $425 million charge
this quarter from its support of 10 money-market funds, six of which the
company disclosed for the first time Wednesday needed help to avoid
"breaking the buck" in the wake of Lehman Brothers Holdings Inc.'s
bankruptcy.
The latest move, which involves
five so-called cash sweep funds and one used to reinvest cash collateral within
Bank of New York's securities-lending business, highlights the steps companies
have been taking to keep money-market investors whole. The company previously
disclosed support for four Dreyfus money-market mutual funds.
*****
Oil ended down $1.44 at $105.16.
Gold dropped $5 to $886. European bourse indexes closed mildly lower.
*****
We added to CBS,
Verizon and AT&T in accounts in the last hour pullback when the DJIA
dropped 100 points before rallying into the close. The dividend yields are
compelling.
*****
The DJIA closed down 30 points at
10825. The S&P 500 lost 2 to 1186 and the NAZZ gained 2 to 2155.
Breadth was 3/2 negative and
volume was active at 5 billion on the NYSE.
There were a combined 250 new
lows and 20 new highs.
Today was a wash.
*****
From http://www.astrologycom.com/mercret.html
Mercury Retrograde
Mercury retrograde in Libra
[Sep 24 – Oct 15 2008]
At 07:18 UT (Universal Time), on
Wednesday, September 24th, 2008, Mercury the cosmic trickster turns retrograde in Libra, the
sign of the Scales, sending communications, travel, appointments, mail and the www into a
general snarl-up! This awkward period begins a few days before the actual
turning point (as Mercury slows) and lasts for three weeks or so, until October
15, just after the Full Moon in Aries, when the Winged Messenger reaches his
direct station. At this time he halts and begins his return to direct motion
through the zodiac.
Everything
finally straightens out on October 31, as he passes the point where he first
turned retrograde. Mercury turns retrograde three times a year, as a rule, but
the effects of each period differ, according to the sign in which it happens
(see box for Retrograde Periods in 2008).
A
planet is described as retrograde when it appears to be moving backwards
through the zodiac. According to modern science, this traditional concept
arises in the illusory planetary motion created by the orbital rotation of the
earth with relation to other planets in our solar system. Planets are never actually
retrograde or stationary, they just seem that way due to this cosmic
shadow-play.
Retrograde periods, although
often problematic for us earthlings, are not particularly uncommon. Each planet
retrogrades, except the Sun and Moon. Although a powerful astrological
influence, Mercury is quite a small planet that travels at a relatively fast
speed through the zodiac. Despite being the closest planet in our solar system
to the Sun, it is not always in the same sign as the Sun (for example, although
this time Mercury turns retrograde in Libra, the same sign as the Sun, last year Mercury turned in Scorpio
while the Sun was in Libra, but headed back into Libra just as the Sun strode
into Scorpio).
Fated Events
As a rule,
retrograde planets presage a period of seemingly inevitable or fated events
that relate to their sphere of influence. They
present us with a series of events over which we seem to have little or no
control, relating especially to the sign in which the retro gradation occurs.
For example, Mercury retrograde in Scorpio (intensity; sexuality) presents
quite different sets of circumstances from those generated when it retrogrades
into Libra (relationships; harmony; esthetics).
A
retrograde period is best seen as a cycle, beginning when the planet begins to
slow to a halt before travelling backwards through the zodiac and ending when
the planet returns to the point where it first paused. However, during the
cycle, the planet's energy is most powerful (and more likely to generate
critical events of universal importance) when the planet makes a station:
appearing motionless in the sky.
These
stationary periods occur near the beginning of the cycle (when the planet first
halts as it prepares to move backwards) and midway through the cycle when the
retrograde planet slows to a stop before moving forward again. The "direct
station" (when the planet halts before moving forward again) is the most
powerful and can be used for maximum benefit.
Many
astrologers consider that the "Mercury Shadow" begins some three
weeks before the actual retro station (when Mercury passes the point of direct
station for the first time). This has some justification, but I am more
inclined to think that the really noticeable peculiarities begin when Mercury
slows significantly, a few days before the retro station. This period of
"Mercury Shadow" extends to the Return date, some three weeks after
the direct station. Bear this in mind, because experience shows that the
effects of the retro period are still marked during the "shadow"
phase. Some of the most characteristic annoyances often occur just after
Mercury makes the direct station, while he is crawling forward before picking
up speed.
What does Mercury affect?
In general, Mercury rules thinking and perception, processing and
disseminating information and all means of communication, commerce, education
and transportation. By extension, Mercury
rules people who work in these areas, especially people who work with their
minds or their wits: writers and orators, commentators and critics, gossips and
spin doctors, teachers, travelers, tricksters and thieves.
Mercury retrograde gives rise to
personal misunderstandings; flawed, disrupted, or delayed communications,
negotiations and trade; glitches and breakdowns with phones, computers, cars,
buses, and trains.
And all of these problems usually arise because some crucial piece of
information, or component, has gone astray or awry.
It
is therefore not wise to make important decisions while Mercury is retrograde,
since it is very likely that these decisions will be clouded by misinformation,
poor communication and careless thinking. Mercury is all about mental clarity
and the power of the mind, so when Mercury is retrograde these intellectual
characteristics tend to be less acute than usual, as the critical faculties are
dimmed. Make sure you pay attention to the small print!
The Key Issue
The
key issue here is one of focus. Mercury's retro phase tends to bring unforeseen
changes and blockages, but the aggravation and frustration that many of us
experience during these periods is often due to our own inability to roll with
the punches. Is this due to our ego-fixation? Mercury sets out to restructure
our thinking processes and for many of us this is painful and frustrating.
Moreover, these experiences reveal flaws in our internal organisation as well
as our external planning, which can make us feel foolish and inadequate.
Mercury
retrograde, like any cosmic aspect, affects people differently, depending on
where it hits their personal charts. Some people actually prosper under retro
Mercury, especially if Mercury is retrograde but otherwise well-aspected in their
birth charts. It is also a time when matters begun under a previous retro
period will come to fruition or completion as the case may be. Firm decisions
that have been previously made when Mercury is travelling normally through the
zodiac may be implemented or finalized while Mercury is retrograde without too
much worry, for experience shows that this can be done without undue problems
arising.
Mercury Retrograde in Libra
When Mercury is retrograde,
everyone's thinking is more introspective and we tend to think about issues and
concerns which relate to the sign involved. With Mercury retrograde in Libra, people with this
sign prominent in their charts will be especially prone to such introspection.
Libra is a Cardinal Sign, so the other Cardinal Signs, Aries, Cancer and
Capricorn will also receive a touch of the lash!
Venus, the planetary ruler
of pleasure-loving Libra, enters sexy, mysterious Scorpio at the same time
(Sep. 24) and remains there until leaving Scorpio to enter Sagittarius
on Oct. 18. This stimulates jealousy and intense, passionate emotions, combined
with a love of sensation, luxury and pleasures. Excesses of sex and passion,
especially among the young, will prove more than usually chaotic over this
phase. Religious feeling tends to be intense. Misdirected communications can
create jealous marital relations, impulsive behavior and the need to control
relationships.
Mercury retro in Libra can
disturb the mental balance, making us more than usually indecisive. Virtue and
morality will be under pressure from both sides, combining jealousy and
possessiveness with the agonies of doubt and indecision! Sharing ideas,
especially those connected with moneymaking and other tangible rewards will
present a higher risk. Attempts to maintain objectivity and an unbiased
approach are likely to be thwarted and colored by emotion. Trouble through
lawsuits affecting partnerships or an unfaithful marriage partner will afflict
those who may be in the relevant situations.
Gossip
about celebrities, the arts and salacious topics in general will be rife.
Rumors regarding partners, spouses and collaborators in business and joint
ventures should be discounted, or at least taken with a dose of salt,
especially if sex or money are involved, as the atmosphere will be thick with
misinformation and innuendo, particularly leading up to the Full Moon on the
14th of October.
All areas of communication are
affected, especially in matters related to the law,
partnerships, marriage or the arts. This period brings travel snafus and missed
appointments of all kinds. Documents can go astray. Be sure to carry a diary and refer to
it often.
*****
23 September 2008
Thoughts
You’ll be glad to
know that The Carlyle Group in a display of patriotic fervor is interested in buying some of
what the government takes over in the planned $700 billion rescue of the
financial markets. Speaking on CNBC,
Carlyle Group co-founder David Rubenstein said the Washington, D.C-based
private equity firm may be interested in acquiring some mortgage-backed
securities and other assets. "Private equity can help by buying these
assets," he said. "Private equity can be among the most significant
buyers of assets." Rubenstein did not mention specific issuers of
securities.
Nor did Rubenstein mention that Poppy Bush and George
Shultz and a bunch of other politics are or have been partners in the Group.
The vultures are already lining up to feed at the trough.
*****
The SEC has decided to allow the
various exchanges which stocks should be on the banned short selling list. That
is an abdication of its oversight authority. Overnight American Express and General
Motors and GE were added. The
NYSE has asked other companies to apply for the exemption.
*****
Lehman, which is in bankruptcy and
is being sued by the conservators of its British subsidiary for $8 billion
transferred to its American counterpart a week before it filed bankruptcy.
Lehman reserved $2.5 billion to pay bonuses to its 10,000 American employees
before it filed bankruptcy. The court is allowing Barclays, who bought the
American operation in bankruptcy to pay that money. That works out to $250,000
per employee with some getting a lot more and some getting a lot less than the
average.
Up is down and black is white in
the new financial world.
*****
Bristol Myers raised its bid for Imclone to $62 from $60. That news
reminded us of why we have a hard time owing the stock. BMY has made a series
of dumb acquisitions over years and we think this one is really dumb. They are
valuing Imclone at $6 billion including debt and paying $ 4 billion net since
they own 17% of Imclone. We know they have a pipeline but the price seems pie in the sky to us.
We are selling BMY as a scratch profit.
*****
Asian markets were mostly lower
overnight and European bourse indexes are down 1% to 2% at midday. Oil is at
$109. The jump yesterday was related to expiration and is being investigated. Of course. Gold is down $10. Treasuries are flat.
*****
Can anybody say future too big to fail problems on the
horizon even before the present problems are under control? From the WSJ:
Meanwhile, Citadel Investment Group LLC, a hedge-fund firm under
Kenneth Griffin that manages about $20 billion in assets, is in early
discussions to further broaden its footprint in the banking world. Citadel has
been considering creating a division that would advise midsize and large banks
on technology balance-sheet issues. This sort of capital-advisory business is
the bread-and-butter of investment banks, and would be a first for Citadel and
rare for the hedge-fund industry, according to a person familiar with the
discussions.
The company already looks more like a diversified financial-services
firm than the typical hedge-fund firm. It has the largest options market-making
business in the U.S. and provides back-office services to other hedge funds.
Some see the latter as a precursor to Citadel's having a full-fledged prime
brokerage in-house -- turf that is near and dear to Morgan Stanley and Goldman.
With the historic changes at Goldman, Morgan, Merrill Lynch and Lehman,
hedge and private-equity firms are seen as stepping further into the
risk-taking fold. The list includes Fortress Investment Group and Och-Ziff
Capital Management, which have both hedge and private-equity funds.
The advantages of firms like these: the ability to attract talent,
command a steady supply of money to invest and have the size and diversity to
borrow more money.
"A lot of these people running private-equity and hedge funds walked
away from the banks. I view this is as sort of an outsourcing model" that
will become more pronounced, says William J. Wilhelm, a University of Virginia
finance professor who is a specialist on the history of investment banking.
Some of Wall Street's most highly paid traders and deal advisers are
likely to flee to smaller hedge funds and boutique advisers such as Bruce
Wasserstein's Lazard Ltd. and Evercore
Partners, Mr. Wilhelm says.
Even if Goldman and Morgan Stanley ultimately get bigger by merging
with deposit banks, the effect could be the same. Size will compel more elite
specialists who are used to big paychecks to go elsewhere, he says.
*****
Hank Paulson says he shares our frustration
with CEO compensation. He sold $500
million in GS stocks tax free
when he became Treasury Secretary.
*****
Paulson says they decide the root
cause was housing and housing prices. He’s nuts. The root cause was the Fed and
Treasury and Bank and Broker CEOs neglecting their responsibilities and
prudence in order to make big bucks. Greed over risk was the root cause.
*****
Paulson was shocked, just shocked
by the lack of a pertinent regulatory system. Of course when he was CEO of
Goldman Sachs he was duding all he could to get rid of the regulatory system.
*****
The more we listen to the hearings on the bailout the
more we want cash in accounts. We sold MRK
and Yahoo for too much loss and AMAT and PFE for scratch losses.
*****
No shorting stock, no longs in commodities. So much regulation so
little time:
U.S. lawmakers may
seek to include commodity speculation limits in legislation designed to rescue
banks from bad mortgage investments after a squeeze in oil trading sent crude
to a record gain. Crude oil for October delivery yesterday
climbed more than $25 a barrel in New York Mercantile Exchange trading, before
settling 16 percent higher at $120.92 as the contract expired. The fluctuation,
the biggest since Nymex crude trading started in 1983,
prompted the Commodity Futures Trading Commission to say it was ``closely
monitoring'' prices for manipulation. ``I know for a fact
that some members of Congress are working to include speculation legislation in
the financial markets legislation,'' CFTC Commissioner Bart Chilton said
yesterday in an e-mail. ``Those efforts, I think, may get fueled by the large
spike in oil prices.''
*****
We wonder what Don and the old stockbroker would say
about the current mess.
*****
At noon we have surrendered all
of Friday’s gain yesterday and the first three hours of today and are now
moving into Thursday’s.
*****
Oil closed at $103 on Friday. It closed at $120 last
night. It is now trading at $104. Those moves must be because of changes in
demand, not for oil but for the underlying futures. The big boys and girls are
having fun with us.
*****
An interesting comment from
dailykos.com:
Sources familiar with the Treasury's thinking said warrants
would limit participation in the program. Only failing banks would be
willing to give the government stock in exchange for buying up their bad
assets, these sources said. But key Democrats said the point was critical.
Umm. Why should I care if a provision "limits participation in the
program"? I call that "saving taxpayers money". If a financial
institution doesn't need our money to survive, then GOOD!
The more I see quotes like that, the more suspicious I get about the
administration's motives. If this is a true bailout, then the troubled
institutions have no choice and are desperate for the capital infusion. As a
matter of survival, they will happily sign over warrants just like they'd give
any other investor.
But what we're seeing instead is the administration trying to gift
their friends on Wall Street taxpayer money with no strings attached, and
suggesting that anything else would be a disaster for the economy.
Color me very skeptical.
Us too.
*****
Another interesting comment from
Kos:
I just saw your post "More on the tell
... ". Let me try to explain Bernanke's thinking.
I'm a little puzzled by the exact language the Marketwatch article attributed
to the Fed chief, but I'm pretty sure I understand his logic. (FYI, I spent
over a decade with a company that services the securitization industry, so I
have some background here.)
The bulk of the assets that the Treasury
would buy under the Paulson plan are the highest rated "tranches" of
subprime bonds issued between 2005 and 2007. These bonds sit above other, lower
rated bonds in the capital structure of the relevant securities. To simplify,
you might have a pool of $100 million worth of subprime mortgages used to issue
$70m in AAA bonds and $25m in let's say BBB bonds. The remaining $5m is
"overcollateralization." As mortgages default, the
overcollateralization begins to disappear. Once that's gone, the BBB bonds get
hit. Meantime, principal being repaid by the borrowers who aren't defaulting is
used to pay back the AAA bondholders. The math gets really complicated, but
suffice it to say that the $30m in cushion provided to the AAA bondholders
allows them to withstand very high default rates. The typical 2006 AAA subprime
bond was able to withstand a cumulative default rate of 50% or so with
recoveries of around 50%. Cumulative default rate just means what percentage of
borrowers from the original pool end up not paying. Recoveries mean what
percentage of the loan is recovered on foreclosure. At this point, it looks
like cumulative default rates may be somewhat higher than 50% and recoveries
may be somewhat lower than 50%. So, the AAA bondholders are probably going to
suffer some principal losses. The question is how much. (By contrast, a lot of
the lower rated tranches are certain to be wiped out ... but the Treasury won't
be buying these.)
Right now, these formerly AAA bonds have a
market price of around 50 cents on the dollar. To justify that price, you'd
have to have going forward cumulative default rates of something like 80% to
90% with recoveries of around 30%. The math is complicated, but I believe
that's what it works out to. That is a really, really extreme scenario and
probably entails very dramatic additional declines in housing prices (say 30%
down from here).
I think Bernanke and Paulson's logic is that they can go in and buy
these bonds at, say 60 cents on the dollar. The sellers would not have to take
any further write downs. And, the Treasury by holding the bonds to maturity
would most likely collect more than 60 cents on the dollar based on some number
of mortgagees continuing to make payments (believe it or not, most of them
still are) and the proceeds from foreclosures.
*****
Oil ended at $107.14. Gold was down $10 at
$895. Treasuries are flat. European bourse indexes closed 2% lower.
*****
What is the big suspense? The bill is going to pass in
some form next week. The talking heads are breathless about the possibility of
it failing. Get a clue.
*****
The markets rallied from 1:45pm
to 2:15pm on forced buy-ins of shorts. The buy-ins are
now over and the markets are lower.
*****
The DJIA closed down 175 points
at 10850 as sell programs hit the markets at 2:45pm. The S&P 500 was down
20 at 1188 and the NAZZ dropped 25 to 2154.
Breathe was 2/1 negative and
volume was active at 5 billion plus on the NYSE.
There were about 290 combined new
lows and 40 combined new highs.
The bears still have a grip.
*****
22 September 2008
Thoughts
Are we angry about
the bailout? Yes. Time is needed to fashion a reasonable action. The rush to
act is foolish.
*****
The Fed is allowing Morgan Stanley and Goldman Sachs to become banks. By becoming banks these two trading
entities can now take customer deposits and have a secure source of funding
guaranteed by the U.S. government and thus their trading is supported by the
U.S. taxpayer. Say it ain’t so Joe.
But it is and we are now in the
financial world before 1929. In the 1930s the regulators required that deposit
banks and investment banks separate because they reasoned that one of the
reasons for the 1929 crash was the fact that the underwriting function of
investment banks had led to the losses that banks who held securities in their
capital base suffered in the Crash of 1929. By underwriting function we mean
the selling of new securities to the public and the holding of securities in
bank portfolios to sell to the public. That is exactly why all the money center
banks in the country are now being rescued by the Fed. These banks underwrote
the packaging of mortgages and the selling of them to the public.
Unfortunately, when the game of musical chairs stooped all the banks were left
holding the worst of the packaged mortgages. Those mortgages are what we the
taxpayers are now going to buy at inflated prices so that the banks can
survive.
We have complained for twenty
years as the separation of banks and brokers has slowly been eroded by a too
pliant Congress. Both Democrats and Republicans are responsible for this mess
and as always the American taxpayer is paying. And we truly resent Paulsen and
all the other talking heads saying that the taxpayer is responsible because the
taxpayers are the ones who took out the undeniable mortgages. What poppycock.
It is truly a sad day in
financial market regulation.
The $700 billion emergency bill in Congress is a super
rip-off of the taxpayer. It is atrocious and there is no need for speed. A pox
on all politicians houses for what they are doing to the citizens of this country.
*****
This is one press release on
Morgan/Goldman: The Federal Reserve says
it has granted a request by the country's last two major investment banks --
Goldman Sachs and Morgan Stanley -- to change their status to bank holding
companies. The Fed announced late Sunday that it had approved the request of
the two investment banks. The change in status will allow them to create
commercial banks that will be able to take deposits, bolstering the resources
of both institutions. The change continued
the biggest restructuring on Wall Street since the Great Depression.
What the press announcement doesn’t say is that the
changes in the financial structure in the 1930s took seven years to accomplish
and the current changes are taking place in seven days.
*****
Microsoft announced a $40 billion share buyback this morning.
*****
Asia was higher with China up
another 7% to go on top of a 9% rise last Friday. European bourse indexes are
mostly higher small. Oil is up $2 at $106 and Gold is up $21 at $882.
*****
From the NYT:
Cash for Trash
By
PAUL KRUGMAN
Some skeptics are calling Henry
Paulson’s $700 billion rescue plan for the U.S. financial system “cash for
trash.” Others are calling the proposed legislation the Authorization for Use
of Financial Force, after the Authorization for Use of Military Force, the
infamous bill that gave the Bush administration the green light to invade Iraq.
There’s justice in the gibes.
Everyone agrees that something major must be done. But Mr. Paulson is demanding
extraordinary power for himself — and for his successor — to deploy taxpayers’
money on behalf of a plan that, as far as I can see, doesn’t make sense.
Some are saying that we should
simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing.
But that’s only half true: he is a smart guy, but what, exactly, in the
experience of the past year and a half — a period during which Mr. Paulson
repeatedly declared the financial crisis “contained,” and then offered a series
of unsuccessful fixes — justifies the belief that he knows what he’s doing?
He’s making it up as he goes along, just like the rest of us.
So let’s try to think this
through for ourselves. I have a four-step view of the financial crisis:
- The bursting of the housing
bubble has led to a surge in defaults and foreclosures, which in turn has led
to a plunge in the prices of mortgage-backed securities — assets whose value
ultimately comes from mortgage payments.
- These financial losses have
left many financial institutions with too little capital — too few assets
compared with their debt. This problem is especially severe because everyone
took on so much debt during the bubble years.
- Because financial institutions
have too little capital relative to their debt, they haven’t been able or
willing to provide the credit the economy needs.
- Financial institutions have
been trying to pay down their debt by selling assets, including those
mortgage-backed securities, but this drives asset prices down and makes their
financial position even worse. This vicious circle is what some call the “paradox
of deleveraging.”
The Paulson plan calls for the
federal government to buy up $700 billion worth of troubled assets, mainly
mortgage-backed securities. How does this resolve the crisis?
Well, it might — might — break
the vicious circle of deleveraging, step 4 in my capsule description. Even that
isn’t clear: the prices of many assets, not just those the Treasury proposes to
buy, are under pressure. And even if the vicious circle is limited, the
financial system will still be crippled by inadequate capital.
Or rather, it will be crippled by
inadequate capital unless the federal government hugely overpays for the assets
it buys, giving financial firms — and their stockholders and executives — a
giant windfall at taxpayer expense. Did I mention that I’m not happy with this
plan?
The logic of the crisis seems to
call for an intervention, not at step 4, but at step 2: the financial system
needs more capital. And if the government is going to provide capital to
financial firms, it should get what people who provide capital are entitled to
— a share in ownership, so that all the gains if the rescue plan works don’t go
to the people who made the mess in the first place.
That’s what happened in the
savings and loan crisis: the feds took over ownership of the bad banks, not
just their bad assets. It’s also what happened with Fannie and Freddie. (And by
the way, that rescue has done what it was supposed to. Mortgage interest rates
have come down sharply since the federal takeover.)
But Mr. Paulson insists that he
wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed
bailout with no strings attached — no quid pro quo on the part of those being
bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is
also demanding dictatorial authority, plus immunity from review “by any court
of law or any administrative agency,” and this adds up to an unacceptable
proposal.
I’m aware that Congress is under
enormous pressure to agree to the Paulson plan in the next few days, with at
most a few modifications that make it slightly less bad. Basically, after
having spent a year and a half telling everyone that things were under control,
the Bush administration says that the sky is falling, and that to save the
world we have to do exactly what it says now.
But I’d urge Congress to pause for a minute, take a deep breath, and
try to seriously rework the structure of the plan, making it a plan that
addresses the real problem. Don’t let yourself be railroaded — if this plan
goes through in anything like its current form, we’ll all be very sorry in the
not-too-distant future.
*****
As the financials move lower this
morning we know it isn’t short sellers.
On this same note the powers that
be have added GE to the short
selling banned list. We wonder if the Treasury will be buying GE failed debt
even though it isn’t a bank. Our guess is yes since GE has a jillion lobbyists.
And of course GM and Ford and Chrysler are to be bailed out. The list is never ending. And maybe
GE will become a bank.
*****
Doug Kass
from realmoney.com:
The current nightmare has exposed the players
on Wall Street, who, in their packaging, slicing and dicing of mortgage
products, have proven themselves to be scarier and more destructive than a
serial killer in a slasher flick.
The words of a mentor of mine ring out loud:
As he recently said in an interview, the way to riches on Wall Street is being
a part of that community, not by investing in Wall Street shares.
Aggressive use of leverage, the risks
associated with short-term funding (and long-term lending) of brokerage balance
sheets and the subpar level of secular profitability (return on assets) on Wall
Street have combined to expose an over-rated industry whose engineers --
namely, a small cabal of the firms' traders and executives -- bear full
responsibility for the credit fiasco and it's economic ramifications.
It was an accident waiting to happen.
-
Wall Street firms take uncommon risk in
producing normal returns for their shareholders.
In the process of leveraging
up, the financial benefits were bestowed upon a privileged few, but the
systemic risks were passed on to the many.
Let me frame the math: A
broker/dealer index that includes Bear Stearns, Goldman Sachs, Merrill
Lynch and Paine Webber demonstrates that the average return on
equity for the industry has averaged 15.9% over the last 23 years. (Return on
equity peaked in 2006 to 2007 at about 26% and, taking out the last year,
troughed at about 5% in 1990 to 1991). During the same period, leverage has
ranged from about 30x to approximately 15x, depending on where the industry is
in the cycle.
In other words, Wall Street's
return on average assets has averaged roughly 1% over several profit cycles! I
don't use leverage in my partnership, but I am certain if I returned only the
1% that Wall Street has achieved on average, I would have very few (if any)
investors left.
- A "heads I win, tails I win"
compensation culture on Wall Street extracts capital and necessitates
continued high degrees of leverage and its attendant risk.
Over the past decade, Wall
Street's compensation was no longer calculated on multiple years of
contribution/performance but rather became a short-term (meritocracy)
calculation based on a one-year profit and loss statement. The extraordinary
compensation at hedge funds, private equity and in the investment and
commercial banks became a "heads I win, tails I win" proposition as a
star system emerged that was based on contributions calculated within reduced
time frames rather than an assessment of the value-added contributions over
lengthy periods of time (subject to high water marks and claw backs).
Importantly, outsized annual
compensation packages were typically not retained but rather were allowed to
exit Wall Street every year -- in part, helping to explain the appreciation in
home prices between 1995 and 2005 on the East and West Coasts and the
willingness to take risks.
Wall Street has sold out America.
*****
American Express is down 8%. It’s
time for the Feds to add ADX to the list.
*****
At 1pm Oil is up $14.
*****
We want to get a bit more cash in accounts. We sold Schering Plough because our other drug stocks have good dividend yields. We
took a scratch profit in Motorola
and a scratch in Sprint.
*****
Crude-oil futures settled up
$16.37 at $120.92 a barrel after roaring to $130 during the New York trading
session. The move was driven in part by a weakening of the dollar as investors
awaited more details on much the government's financial-sector rescue operation
will eventually cost. Gold gained $42 to $907. Treasuries gave ground and
European bourse indexes closed 1% to 2% lower.
*****
CNBC is reporting that the Treasury is agreeing to an
equity stake for loans given and also to an oversight board. But the Treasury
still doesn’t want to give in on executive salaries or mortgage adjustments.
This is the website for the bill introduced by Senator
Dodd today on the bailout: http://www.politico.com/static/PPM41_ayo08b28.html
*****
The Dodd plan is worth the read and addresses a lot of
our concerns. Hopefully the Dems have the backbone to stick with it.
*****
The DJIA closed down 375 at 11013. The S&P 500 was down
48 at 1207 and the NAZZ dropped 95 to 2178.
Breadth was 4/1 negative but volume was active at 5.5
billion on the NYSE.
There were 176 new lows and 60 new highs.
The bears are back.
*****
19 September 2008
Special note:
since the Treasury and SEC suspended short selling and messed with the markets
in many ways last night, we will no longer be comparing our performance to the
S&P 500. When the government changes the rules of the game to favor one
side we don’t think it makes sense to continue to compare how we do in the real
world with the pseudo world of Washington regulators. And so our performance comparison
to the S&P 500 ends on 9/17/08. We will continue to update and value the
portfolio as trades occur.
Thoughts
Welcome to the Brave New World of economic thought in
21st century America. The U.S. Treasury has decided to let the American
taxpayer rescue the financial system and its $10 million payday Pooh-Bahs from
themselves.
Those who swept into political
office on the slogan that government was the problem now say that government is
the solution. And down became up overnight.
All short selling in 799 financial stocks has been suspended for 10
days to thirty days. (30 days from
now is the anniversary of the 1987 Crash.) Companies will be allowed to day
trade their own shares to support prices and money market funds are being
guaranteed. These are all steps introduced by the free marketers, imagine if
the socialist Democrats were in the White House. Our only wonder is why the
powers didn’t ban speculative longs in Oil. Oh, that’s right; the folks in the
White House are from Oil.
*****
Trading was suspended in the
Russian markets for two days this week because it was down too much; and
Trading was suspended today because it was up too much. Are we learning
capitalism from them or are they learning from us.
Many Asian markets including Hong
Kong and China were up 9% and European markets are $5 and more at midday. The
U.S. markets are going to be up another 4% on the opening.
*****
In the spirit of playing the cards the Fed has dealt and,
with the knowledge that they are making up the rules as we go along to make
sure the big boys and girls don’t lose too much money, we did a little buying
today. We bought more Merck and also
Bristol Myers and Pfizer for their 5% plus dividend
yields and because the smart guys were a selling them as they move from safety
to speculation. We also added Schering
Plough as it was under pressure and Applied
Materials which is on its low. And we repurchased Yahoo in accounts where we sold WFMI yesterday and added to our EMC
holding.
And that’s it folks.
*****
Yesterday was the first 10
billion shares day on the NYSE. We were around for the first 10 million shares
day.
*****
General Electric was omitted from the short list ban but CNBC,
which is a subsidiary of GE, says that it is expected to be added to the list.
By the way we hope the Fed will take cognizance that we now own drug stocks
paying good dividends and will guarantee those dividends for us in the future.
*****
By the way the Feds also are
guaranteeing money market funds to the tune of $50 billion.
*****
Oil closed up $5 at $103. Gold
dropped $30 to $865. Treasuries tanked with the two-year at 2.15% and the
ten-year at 3.75%. European bourse indexes closed 5% to 8% higher on the day.
*****
The DJIA gained 450 points in
early trading and closed up 366 points at 11386. The S&P 500 was up over 50
before closing up 45 at 1250. The NAZZ gained 70 on the day to 2270.
Breadth was 5/1 positive on the
NYSE and 2/1 on the NAZZ and volume again over 10 billion on th NYSE and 4 billion on the NAZZ.
There were 425 new highs and 260
new lows as the measures crossed big-time today after the 1000 points two day rally
from noon yesterday.
The Treasury and SEC are in charge for the weekend.
*****
18 September 2008
Thoughts
Treasury 3-Month
Bill Rates Drop to Lowest Since at Least 1954.
The SEC is now going
to enforce the rule against naked short selling after the horses are out of the
barn.
CALPERS, the
California Retirement Fund is now going to not loan its securities to short
sellers and is asking other institutions to do the same. Duh!
*****
These headlines tell it all. Stocks opened higher this
morning with the DJIA up 150 points. We sold into the rally.
As we awoke our
first thought was of 1987 when the market rallied strongly on the Thursday
before the next Monday Crash. And so we decided to raise cash into this
mornings’ rally. We sold a bunch of stocks. Fear conquered greed as it didn’t
do in 1987 when we were younger.
*****
Asian markets were down 4% overnight until the World’s
Central Banks began a flooding operation placing billions of dollars into the
financial systems of the word. On that action Asian stocks recovered but still
closed about 2% lower. European bourse indexes were higher at midday by 1% on
that news but are giving the gains back as the rally in U.S. stocks falters
Oil was up $3 but is now flat while Gold is up another $30
to $880. Treasuries, especially the short maturities, are on fire with the 3
month yield 0.10%. That is because billions are being removed from money funds
and placed in Treasuries.
*****
The WSJ reported last night that Morgan Stanley was in merger talks with Wachovia. That makes no sense to us since Wachovia has large
mortgage default problems from a badly timed acquisition of Golden West
Financial, and MS has denied any unknown liabilities. Why would MS want to
merge into a problem bank when it has no problems?
*****
We have done a lot of trading the last three days.
We are reacting to market conditions not predicting and we will survive as we do this.
There is no ego in our trading only a desire to control our greed. We have it
under control.
Yesterday we said that there was only a 20% chance of a
Crash. If the Fed doesn’t institute an uptick rule there is a much greater
chance. We will be unhappy to miss the rally that will ensue but the dopes in
Washington don’t seem to realize that the immediate problem is a trading
problem caused by no uptick rule. And since they haven’t addressed the problem
we have no choice but to back off.
*****
State Street Bank’s share price dropped in half
today from $66 to $28 and then back to $44 in two hours time. Northern Trust shares dropped from $76
to $46 and then back to $66 in that same time period.
The DJIA was up 250 in the first half hour of trading. The
DJIA moved down 150 at 11am before rallying to up 150 at 12:30pm on news the
United Kingdom has banned all short selling in financial shares.
Britain's Financial
Services Authority says it is temporarily banning short-selling of shares in
publicly-traded financial companies.The FSA says the
new rule will take effect at midnight local time. The rule will remain in place
until Jan. 16, 2009, but the FSA said it would review the situation again after
30 days and may extend the ban to other sectors.
The boys and girls who make the rules get to change the
rules. This ban is a bad as no rules on short selling. Short selling is an
integral part of trading. The uptick rule and delivery of shares worked for 80
years. It didn’t prevent market panics
but it did prevent the goofy trading we have been seeing the last month.
Banning short selling will eventually come back to haunt the regulators and the
markets. Banning is not the solution.
*****
A run on a money market fund managed by Putnam
Investments, a subsidiary of Great West Lifeco Inc. has forced the company to
liquidate the institutional fund. Putnam said that "significant redemption
pressure" on Wednesday forced it to close the $15 billion Putnam Prime
Money Market Fund. "Constraints on liquidity in money market instruments
created the risk that in order to process redemptions, the fund would realize
losses in selling its portfolio securities," said Putnam in a statement.
"The Trustees determined to close the fund to ensure equitable treatment
of all fund shareholders." The statement did not say when shareholders
will receive their money, nor did it say whether the payouts would maintain the
fund's $1 a share net asset value.
*****
Now CNBC is talking about
terrorists shorting stocks to bring the U.S. financial system down. Come on,
the fat cat CEOs and boards of directors of financial institutions, all of whom
wear American Flag lapel pins, are the ones who caused the problems.
*****
Washington, D.C., Sept. 17, 2008 — Securities and Exchange Commission Chairman Christopher Cox
and SEC Enforcement Division Director Linda Chatman Thomsen issued the
following statements today concerning ongoing and forthcoming Commission
actions to investigate fraud and manipulation in the nation's securities
markets:
"Millions of
investors entrust their savings to our securities markets because they can be
confident that our markets are orderly, liquid, efficient, and rational,"
said Chairman Cox. "The turmoil in today's markets, particularly in the
financial sector, is challenging that assumption for ordinary Americans. Markets
are the best tool a free society has to price and allocate assets across a
complex economy, but as is well known from experience, sometimes the wisdom of
crowds is supplanted by crowd behavior. We need well-functioning markets to
help us draw the line between reasonable miscalculation and error or something
worse involving the failure of due diligence, self-dealing, and conflicts of
interest. It is thus vitally important that the market mechanism continue to
inspire investor confidence.
"In order to
ensure that hidden manipulation, illegal naked short selling, or illegitimate
trading tactics do not drive market behavior and undermine confidence, the SEC
today took several actions to address short selling abuses," Chairman Cox
continued. "In addition to these initiatives, which will take effect at
12:01 a.m. ET on Thursday, I am asking the Commission to consider on an
emergency basis a new disclosure rule that will require hedge funds and other
large investors to disclose their short positions. Prepared by the staffs of
the Division of Investment Management and the Division of Corporation Finance,
the new rule will be designed to ensure transparency in short selling. Managers
with more than $100 million invested in securities would be required to promptly
begin public reporting of their daily short positions. The managers currently
report their long positions to the SEC."
Chairman Cox
continued, "Director Thomsen and the Division of Enforcement will also
expand their ongoing investigations by undertaking a series of additional
enforcement measures against market manipulation. The Enforcement Division will
obtain disclosure from significant hedge funds and other institutional traders
of their past trading positions in specific securities. Those institutions will
also be required immediately to secure all of their communication records in
anticipation of subpoenas for these records."
SEC Director of
Enforcement Linda Chatman Thomsen said, "The Enforcement Division has been
investigating and will continue to investigate any suggestion of manipulative
trading. We are committed to using every weapon in our arsenal to combat market
manipulation that threatens investors and capital markets."
The Commission is
actively considering additional actions as appropriate.
*****
With one half hour of trading
remaining the DJIA is up 400 points which means there was a 1000 points range
today with all the ups and downs. Word that Treasury Secretary Paulson is
considering an RTC type solution is what led to the rally. (We have been
calling for that for the last six months) When the big boys and girls begin
losing serious money all the free market talk disappears.
Whatever, the markets are rescued
for today and we have core investments with good yields and a lot of cash.
*****
The hedge funds that were short are now being taken to the
cleaners. There is real pain in hedge fund land tonight.
*****
European stocks closed lower on the day but will rally big
time in the morning. Oil closed down at $98.10 and Gold was up $24. Treasuries
lost their gains.
*****
There were no gaps
in the trading of the market measures or many stocks today so it was not a key reversal day. Definition of a key reversal day: A sharp reversal pattern that
occurs during a trend. In an uptrend, prices open above the previous day's
close, make a new high and then close below the previous day's low. In a
downtrend, prices open below the previous day's close, make a new low and
then close higher than the previous day's high. The greater the price range and
volume on the key reversal day, the more reliable the signal.
The DJIA closed up 415
points at 11020. The S&P 500 gained 50 to 1206. The NAZZ soared 100 to
2200.
Breadth was 2.5/1
positive at the close and volume was 10 billion on the NYSE and 3.8 billion on
the NAZZ.
There were about 1485
new lows and 145 new highs. (COMBINED)
The bulls saved their
hides today.
*****
17 September 2008
Thoughts
We get mail: The ides of September is Sept
13. The ides occur on the 15th of March, May, July and October. Otherwise it is
the 13th. It’s really 8 days after the nones.
*****
Asian markets were mostly lower
overnight with China and India down 2% and Japan up 2%. European bourses were
mostly higher before the U.S. markets opened. Trading in Russia was
suspended for a second day. Oops.
Oil is up $3 in the early going
and Gold is up $4. Treasuries have a bid as U.S. stocks are going to open
lower.
*****
After an hour of trading the
markets are down over 2% in active trading. We are encouraged by the drop,
especially by the talking heads predicting the demise of the Goldman and Morgan
Stanley models.
*****
AIG was rescued by the Fed.
The Fed took warrants for 80% of the equity in making the loan. This is
a good sign and one we have been suggesting for GM and Ford. We own GM but we
still think the government should get an equity kicker for making loans.
*****
Into the abyss we are buying Cisco and repurchasing GE $1.50 lower than we sold on Monday.
We want to own GE even with the financial exposure. We added another tranche of
SPDR Financial, and took positions
in Goldman Sachs. We bought small in
Morgan Stanley and BankAmerica in aggressive accounts and
also purchased shares of Walgreen
and J Crew in accounts. We also
added shares of Saks and Sony and Wachovia.
*****
The markets are down 25% for the year and our accounts are
down 3% to 5%. We think there is enough fear in the markets to warrant taking
positions in quality stocks which is what we are doing.
*****
Reserve Fund, which is the oldest
money fund in the country, broke the dollar yesterday and that may be part of
the panic. Rest assured that our clients money is in a Treasury only
money fund.
*****
Gold is up $85 at $1.30.
*****
Today we first bought Morgan Staley when it was down $7. It proceeded to drop another $5.
We bought BankAmerica down $1 and it
dropped another $2. At the same time we were acquiring a holding in Goldman Sachs down $25 on the day. In
the contra hour rally we sold our MS at a 30 pennies loss and BAC at a 40
pennies loss. We also dumped Wachovia
at a 50 pennies profit and so, on the three trades, we lost a total of about 25
pennies. Given that we were down about a combined $5 per share we are happy to
be out.
We are delighted with our GS position and also with our
addition to the SPDR Financial and bought JP
Morgan at $36.50 down $4 on the day with the money from the dicier financials.
*****
The Crash in 1987 occurred because traders and regulators
didn’t know the effect that the new trading instrument called stock futures
would have on market movements.
The 2008 Crash, if it occurs next Monday will be because
regulators and traders didn’t understand how important the uptick
rules on short sales was. That is because regulators
and those in government who made these rules have no idea of the panic that
strikes the heart of investors when they see a stock they have owned for years
drop 30% in value in a week for no apparent reason. Also they don’t understand
trading.
Ha Ha,
what did Joe Kennedy know?
We predicted the crash of 1987 and we also predicted early in
2007 that elimination of the uptick rule would lead
to chaos in the markets.
*****
Gold ended up $85
at $862. Oil
gained $3 to $105. Treasuries were firm and European bourse indexes closed
lower on the day.
*****
The DJIA dropped 450 points to close at 10605. The
S&P 500 was down 58 points at 1156 and the NAZZ dropped 109 to 2095.
*****
Breadth was 10/1 negative on the NYSE and 5/1 bad on the
NAZZ and volume was active at 9 billion on the NYSE and 3 billion on the NAZZ.
*****
There were less combined new lows today. At the bell
there were about 1425 new lows and 30 combined new highs.
The bears rule.
*****
16 September 2008
Thoughts
Asian markets were down 4% to 5%
overnight catching up with the rest of the world since most Asian markets were
closed on Monday. European bourses are down 1% to 2% which make 4% to 55 over
the last two days. U.S. futes are indicating a mildly down but not catastrophic
down opening. Treasuries have a bid of course and the Fed is flooding the
system with liquidity.
Goldman announced earnings 10
pennies better but the share price is down $8 as all stocks financial are the
subject of fear. The beat in this quarter by GS was the result of a lower
income tax rate.
Dell warned which is the second
warning in a month that demand has dropped precipitously.
All in all the markets are set up
for a rally today, at least for awhile. But unless the AIG mess is resolved and the SEC gets rid of naked shorting and
better yet institutes an uptick rule again we would surmise that there is more
pain ahead.
*****
Jim Cramer makes the point we
have been harping on for the last two years.
Christopher Cox and his crowd
of academics and theoreticians did more to destroy the confidence of this
market with their adherence to free-market destruction of stocks than any of
the managements of the companies themselves.
I know that is a strong
statement, but you have to understand that the rules against naked shorting and
shorting without upticks were about having firebreaks in the system. Consider
these rules a swath of chopped-down trees meant to slow a fire so firefighters
have a real chance to put out a monster conflagration.
*****
The Consumer Price Index for August was down 0.1% while the core rate
was up 0.2%. Year over year the CPI was up 5.2%.
*****
Maybe Putin will decide to be our friend
again. The Russian stocks exchange
was down 12% when they halted trading this afternoon. With oil down another
$3 today what happened to all the demand that ran it to $145.
We would guess that the
speculative demand of the hedge funds is no more. How much oil can a hedge fund use?
*****
We bought AT&T,
Verizon, Merck and Nvidia into
the selling in the first hour of trading when the DJIA dropped another 100
points. The first three have 4.5% plus dividend yields and we have traded them
before off their purchase prices which are within pennies of 12 month lows. We
keep tying with NVDA because it is at one times sales with $3 in cash and no debt
encompassed in a $9 price. And the expectations are for earnings of 80 cents
which places an 11 multiple on the shares. We also repurchased Micron at $3.75 after selling at $4.40
a few weeks ago and watching it trade over $5. We bought to hold through the
valley.
We did the buying today because the DJIA and S&P 500
are now down over 25% from their highs of a year ago. At these levels stocks are either going to rally or there is about a 20% chance
that stocks well fall into the abyss. We are buying high quality issues in
which we have confidence and which will survive to the other side of ay
untoward event. The likelihood of a Crash lessens as the calls for a Crash
increase.
We would like to add Cisco but we are waiting for a better
price.
*****
The major measures are positive
at 10am on probable short covering in the financials and retail.
*****
CNBC is reporting at 10:15 am
that sources say a no rescue of AIG
is possible from the private sector. Of course, the free market guys are all
calling for hated inefficient government to rescue the situation.
*****
Its time for Hewlett
Packard to set up some more reserves with a $2 billion one time charge so
it can smooth operating earnings over the next few years (the CPQ layoff
special charges must have run out) and keep Wall Street happy. HPQ is going to
fire 22,000 folks to make that occur. Ain’t
capitalism grand for the Pooh-Bahs who run the companies? All we know is that
America’s most prosperous period was when companies expanded and hired folks. Too
bad we don’t value companies by how many folks they employ at a living wage and
break even on profits. Since shareholders never get the profits anyway, the
number of employees to sales could be the new ratio to replace the price to
earnings ratio. Of course wouldn’t be any $50 million a year CEOs and $5
million a year underlings with that scenario.
*****
Most of the financials are now
higher on the day but Morgan Stanley
is down $5 after rallying back to even an hour ago. It looks like the hedgers
have designated MS as the next rumor to ruin brokerage stock. The
hedgers have given up on the banks stocks for now and also on GE. We presume
they are avoiding GE because it ahs all the other business to hedge any real
losses in the finance unit. And the Fed has seemed to declare that most large
banks are too large to fail. Moreover it is only a matter of time before the
Fed reinforces some naked short selling rules and maybe even the uptick rule.
*****
Approaching Fed announcement time
in half an hour the major measures are flat and volume is over 6 billion on the
NYSE. Combined new lows exceed 1500 with over 1000 new lows on the NYSE where
most of the action is. That new low figure is a positive for the short term at
least. CNBC is focusing on AIG and we would guess that many traders are also;
but that is an old story in our book. According to the talking heads bankruptcy would be a catastrophe. It would be for
many but the financial system will survive that. Many companies operate in
bankruptcy and our guess is that AIG is solvent and its problems are the result
of a bear raid on the stock. Hey SEC, Duh?
The next catastrophe looks to be
MS and while none of the talking heads
are aware of its price action since they are too busy talking, the down 20%
action in MS suggests that sooner than later the big boys and girls are going
to have it in their short sightedness.
We surely hope the institutional
investors who have 10% of their money in hedge funds are happy with the results
on the other 50% of their holding that are in common stocks down 25% or more
from last year in part because of hedge fund shenanigans. The negative 5%
return on their hedge funds is not offsetting their losses in their portfolios.
And they are paying 2% plus 20% for the privilege.
*****
No rate change and stocks sell
off. It didn’t make sense to lower rates and we are glad they didn’t although
the markets initial reaction was negative.
*****
About 1:30pm there was news that Barclays is buying Lehman’s trading
operation and investment bank and the markets rallied. Entering the final
hour of trading the DJIA is up 100 points and the S&P 500 is up 12.
*****
Gold ended down $5 at $782 and
Oil was down $3 at $92.86. Treasuries gave ground and European bourse indexes
were 1% lower at their close.
*****
We bought GM
is more aggressive accounts at $10.85. Both candidates want to loan Ford and GM
money. GM is $4 billion cheaper than Ford in the market place.
*****
The DJIA gained 141 to 11060. The
S&P 500 was up 20 at 1213 and the NAZZ jumped 22 to 2202.
Breadth was 5/4 negative on the
NYSE and 5/4 plus on the NAZZ and volume was active with .5 billion shares
trading on the NYSE and 3 billion on the NAZZ for the
first time in a while.
There were about 1620 combined new lows with over 1100 new lows on the NYSE and 66 combined new highs with
22 on the NYSE.
The new low figures are 200
hundred less than on July 15 and a further rally tomorrow would be positive for
the bulls.
The bulls won the day by staunching the selling.
*****
15 September 2008
Thoughts
Welcome to the Ides of September.
They are not as famous as the Ides of March but with the demise of Lehman and
Mother Merrill over the week-end the date will have a small place in the
history of U.S. economic madness. Lehman went the bankruptcy route and Mother
is to be acquired at a 70% premium to Friday’s close by BankAmerica the lucky
recent buyer of Countrywide Financial and earlier purchaser of MBNA, the credit
card behemoth.
We offer our sympathy to the
folks at Lehman who toiled there through the years and had their fortunes tied
up in the company. And we offer our condolences to BankAmerica shareholders who
will now have their shares arbed to death in the stock deal. Our guess is that
the Fed encouraged the BAC/MER deal to lessen the counterparty risk on
derivatives that would have occurred had Merrill also failed. The premium price
for Mother is a function of the Singapore government’s investment recently made
and the Fed making sure that Singapore didn’t lose money since the Fed had
probably given some assurances. In today’s world the Singapore Government is
more important that the U.S. taxpayer.
*****
Crashes do not occur off the top
but after a correction that fails. But when the markets are down 20% and fail
to rally is the time to worry. Markets are down 20% from the top....
*****
AIG is the soap opera of the day.
*****
The bid for Mother Merrill is $29
and it began trading at $22. That says a lot and a little. The deal is .8595
share of BAC for each share of Mother. Since BAC is off $4 today the value of
the deal is currently about $25 and a 12% haircut gives the $22 value. That
happens to be the value of the shares in MER sold to raise capital a month ago.
There are no coincidences in this business.
*****
Asian markets were mostly closed
overnight while European bourse indexes are down 2% to 3% at midday. Oil is $4
lower as the trading day beings at $97 and Gold is up $20. Treasuries have a
bid, especially on the short end.
*****
Fifteen minutes into the trading
day the DJIAI is down 300 points. This happened last week on the upside and the
markets were not able to hold the gain.
*****
JP Morgan and Well Fargo are
trading positive this morning. Greed prevails. Who need to own them at these
prices which are like 10% off their highs. That’s
nuts, unless it is short covering to raise money to short the less solid
financials.
*****
E*Trade’s order execution system
was down for the first forty minutes of trading this morning.
*****
The DJIA and S&P 500 touched
their July 15 lows this morning and are now bouncing an hour into the trading
day. We are on the sidelines because we don’t expect the bounce to hold.
*****
This line for Krugman’s column in
the NYT today struck a nerve: The
defenses set up to prevent a return of those bank runs, mainly deposit
insurance and access to credit lines with the Federal Reserve, only protect the
guys in the marble buildings, who aren’t at the heart of the current crisis.
That creates the real possibility that 2008 could be 1931 revisited.
That is because the real crash
occurred from 1931 to a market bottom in 1933. After the 1929 Crash the market
recovered almost 66% of their value before rolling over in the failure of the
economy to recover.
By October 2007 the DJIA actually
recovered all of its 2000 to 2003 losses this time around but the DJIA is now
down 25% from its high of last year. The action today in the better banks makes
no sense to us and retailers also have bids. The greed factor is certainly more
prevalent in the markets than the fear factor.
*****
The FED is now expected to save
the capitalist system on the backs of savers as early as today by cutting rates
by 50 bps.
*****
Ok, now we are afraid. We sold our two financial stocks GE and Wachovia for two large losses because we don’t like the bear raids
that are occurring in the financials. Shorting on downticks hasn’t been
addressed that is allowing daily raids on individual stocks. Today it is AIG
tomorrow is could be Wachovia or GE.
The reality is that unlike CBS or
Whole Foods we have no idea what liabilities are involved any of the
financials. Folks who own them, including us, are trading blind and on faith
that the folks who run these institutions know what they are doing. Given
recent disclosures that faith is becoming less viable by the day.
Is a sane world we would be
buying today’s selling. But fear has overtaken greed and so we are eliminating
recent positions at losses. We are bidding on AT&T to replace the GE since
it is down the same amount today. For the last two years we have been trying to
participate in the financial selloff. But we keep losing our nerve. Sometimes
losses are good losses.
*****
From Diane Swonk, Mesirow
economist: The Fed has broadened the securities that it will accept at the
discount window and in their term auctions to keep the market liquid in the
face of the Merrill Lynch buyout, Lehman bankruptcy, and fears of a downgrade
for AIG.
The probability that the Fed will
ease on or before it meets on Tuesday has also soared, despite some holdouts
among the Fed presidents.
So far, the market has absorbed
the news relatively well, but the day and the week are still young (and those
"hopes" are predicated on bets that the Fed actually eases on
Tuesday, perhaps as much as 50 basis points.)
The real news, however, will be
whether other central banks will step up to the plate and support the Fed and
global financial markets. China has already eased by 27 basis points this
morning, in a sign that it is now willing to stimulate its economy.
The European Central Bank should
not be too far behind the Fed and other central banks as the economies of
Europe are already weakening, and European banks have yet to write off all of
their mortgage-related losses.
On net, we are still not done.
Unlike Japan in the 1990s, however, we are willing to face up to our losses.
This should set the stage for a rebound in financial market conditions much
sooner than we saw in Japan. The surviving financial players are particularly
well-positioned to post a major turn-around in profits, as a steepening of the
yield curve has improved the profitability on the loans that surviving
institutions can underwrite, and widespread failures have eliminated much of
their competition.
*****
The Fed has hired Morgan Stanley
to help it, the Fed, to arrange bridge financing for AIG. Morgan Stanley is
down $5 (15%) in price on its own shares today. Hopefully Morgan Stanley will
avoid becoming the stock of the day short sellers list.
*****
Meredith Whitney, an analyst who has become the guru of
the short sellers since she predicted the downfall of Bear Stearns and then
Lehman, is on CNBC badmouthing Wachovia and Citi.
*****
Oil ended off $6.58 at $94.60
short Treasuries rallied with the two-year at 1.63% and the ten-year at 3.53%.
Gold gained $24 to $876. European bourse indexes closed on their lows down 3%
and more.
*****
The WSJ is reporting that the Treasury has asked Goldman
and JP Morgan to create a $70 billion lending facility for AIG. Treasury
Secretary Paulson made a big deal in his press conference today of the
government staying out of the rescue business. Our thought is that the free
market ideologues in Washington are letting their failed philosophy interfere
with a rational solution to the crisis gripping the financial industry. And that
intransigence is exacerbating not solving the crisis. We know JPM and GS aren’t
going on the hook for $79 billion to rescue AIG. The FED and Treasury have to
be backstopping them. What the subterfuge?
*****
The DJIA closed down 493 points
at 10928 and the S&P 500 closed at 1195 down 56 points. The NAZZ collapsed
80 to 2180.
Breadth was 12/1 negative on the NYSE and 6/1 negative on the NAZZ
and volume was active at 8 billion.
There were a combined about 1050
new lows and a combined 55 new highs. The July 15 low had 1800 new lows.
The bears are in control. This week is a quarterly Witching
week and the Fed meets tomorrow. Stay tuned.
*****
12 September 2008
Thoughts
GM and Ford want $50 billion from
us (we are Uncle Sam) to make up for their past mistakes. If they don’t get it
they aren’t going to build energy efficient cars. No one wants to buy Lehman
unless the Feds backstop them. And so goes capitalism in America. And the
capitalists on Wall Street are the ones pushing for Government help for banks
and autos and whoever will pay them a nice fee to buy Congress. And the present
and retired CEOs don’t plan on giving back any of their billions in bonuses.
The market value of GM shares is
$8 billion and so if the government it going to loan them $25 billion and
essentially save them then the government should get an ownership stake of 50%.
Are you listening Obama?
*****
Asian markets were mixed
overnight with Japan up 15 and India down 2%. China was unchanged. European bourse
indexes are higher by 1% at midday except Germany. Treasuries have a bid and
Gold has bounce up $14 with oil having a $102 handle. Jim Cantore and the
Weather Channel gang are all ready to stand out in the hurricane to let us know
that folks should not be out in the hurricane. And the political campaign
begins anew today. Pigs are getting slaughtered on Wall Street while having
lipstick applied in Washington.
*****
The Producer Price Index was down
0.9% in August.
*****
The tragedies of the day are Lehman again, Washington Mutual, AIG
and Mother Merrill. Sometimes a loss
is better than a larger loss. Of course not placing ourselves in a position to
take a loss would be the best.
*****
GE is down $1.50 on financial
worries and we reinitiated our holdings. Unlike banks and brokers GE can fudge
its books as long as the accountants go along. The closing
low on the shares for the last twelve months is $36.25 which a $42 high. With a
secure 4.5% yield we bought for trade/hold. We are sticking with quality in
this market phase.
*****
Treasury Secretary Henry Paulson is "adamant" that
no government money be used in any deal that resolves the crisis at Wall Street
investment bank Lehman Brothers, a source familiar with his thinking said on
Friday.
*****
Fortune’s Shawn Tully notes that the latest drop in Lehman Brothers shares - they fell 12% in early afternoon action
Friday, to $3.70 - takes the stock back to the level it traded at in its first
day as a public company in its current configuration, nearly 15 years ago.
On May 11, 1994, Lehman - newly
spun off from American Express - opened at $16.51 before rising in moderate
volume to close at $16.75. Adjusted for dividend payments and stock splits,
shares closed that day at $3.74. So investors who got Lehman shares when AmEx
distributed its stake in the brokerage and held on through thick and, more
recently, thin are back to break-even, a decade and a half later.
CEO Dick Fuld, of course, has
done a bit better. Though a report in The New York Times Friday notes that the value of options Fuld holds have dropped by
some $900 million since the stock peaked last year, the paper also puts his cash take during his CEO tenure at $466 million. It
was nice while it lasted.
*****
Oil closed at $100.90 up 3
pennies and Gold was up $20 at $765. Treasuries were flat and the euro was
$1.42 with the yen at 107. European bourses closed higher by 1% to over 2% on
the day.
*****
AIG, the former insurance giant has lost $160 billion, that’s
billion in market value in the last year.
*****
The folks who moved from New
Orleans to Houston may have to move back. They sure must be wicked people to
have the natural calamities following them.
*****
The DJIA lost 10 to 11422. The
S&P 500 was up 3 at 1252 and the NAZZ gained 3 to 2261.
Breadth was flat and volume was
active.
There were about 360 combined new
lows and about 60 combined new highs.
Today was a tie between the bulls and bears.
*****
11 September 2008
Thoughts
Stocks are going to open 1% lower
this morning as Lehman is the main topic with Mother Merrill at a new low below
the big deal price of a few weeks ago. CSX did raise guidance this morning on
lower fuel costs and that has stabilized markets at much lower levels.
Asian markets were lower by 2%
and more and European bourse indexes are 1% lower. Oil is $102 and Gold is down
$14.
*****
From realmoney.com: Jobless claims decreased 6k to 445k in the
week ended September 6th, holding in a sharply elevated zone for a seventh week
when compared to the several months prior.
These levels have not been seen since March 2002, suggesting worse news
ahead on monthly payrolls. Continuing claims increased 122k to 3.525 million,
and that's the highest level since October 2003.
The claims figures suggest the likelihood of much larger declines in
monthly payroll tallies, probably between 100k to 150k per month, with the
chance at outliers closer to recession-like tallies of 200k+.
Although some of the recent increase in jobless claims reflects
technical factors--claims had been around 370k for months until they began to
spike in the middle of July-the increase almost certainly reflects
deterioration in the labor market.
*****
With stocks down 130 points and approaching the July 15
low we bought Mother Merrill at $20,
Wachovia at $13.75 and Intel at $19.95 for a trade. Last night
while riding we revisited our trading of the last few weeks and realized that
most of our losses were in new stocks that we haven’t traded before and are
thus less familiar. And so we are going to stick to old favorites that we have
traded successfully over the years as we try to take advantage of this bear
market.
*****
The capitalists on Wall Street want the government to
bail out the banks. The government has been bailing out the banks at least once
every decade for the last 40 years. They do it by lowering interest rates and
forcing prudent savers to take less to no income in order to allow the bankers
to recoup their losses that are the result of dumb and criminal schemes that
went sour. And then we here folks rail about how
great capitalism is and how terrible government it. Give us a break.
*****
Oil ended down $2 at $100.75.
Gold dropped $15 to $740. The euro was $1.39 and the Yen 107. Treasuries ended
firm.
*****
After we bought Mother
Merrill down $3 on the day it proceeded to drop another 8% in ten minutes.
We decided that we didn’t need that kind of action from the unknown and sold it
for a $1 loss at the close. Bear Stearns and Lehman are too fresh in our minds.
Sometimes we don’t know until we own a stock how we will react.
*****
Stocks were all over the place on Thursday. The rumor at the close which jumped the
major measures 1% was that BankAmerica was buying Lehman. Hopefully that is the
case and we will recover our Mother Merrill loss with our Wachovia trade.
The DJIA gained 170 points to
close at 11436. The S&P 500 was up 18 to 1250 and the NAZZ gained 30 to
2258.
Breadth was 2/1 negative and
volume was active.
There were about 725 combined new
lows as new lows continued to expand and about 60 combined new highs.
The bulls saved the day although internals were ugly.
*****
10 September 2008
Thoughts
Asian markets were mixed to lower
overnight. European bourse indexes are lower at midday; U.S. futes were higher
on revised higher Fed Ex
expectations but are now flat after Lehman
announced a $3.9 billion quarterly loss and said everything is fine.
Gold is down $13 and Oil is up at
$103.50 after OPEC said it is cutting production by 500,000 barrels a day. So
much for supply and demand.
*****
Investors’ Intelligence has 38% bulls and 42% bears which is
similar to last week.
*****
Last year at this time the combined market value of Freddie and Fannie
was over $100 billion.
Standard & Poor's will remove Fannie Mae and Freddie Mac from its S&P 500 Index after the close of trading Wednesday.
The minimum market capitalization a company must maintain to be
eligible for the S&P 500 Index in $5 billion. At the close of trading on
Tuesday, Freddie's market capitalization was $614 million and Fannie's was
$1.04 billion.
Standard & Poor's will replace Freddie Mac in the index with
software applications company Salesforce.com and Fannie Mae with Fastenal., an industrial supplies
maker.
*****
Stocks opened higher out of the
gate but after an hour of trading there are selling in financials and retail.
*****
We sold Barnes,
SBUX and partials on WFMI in our efforts to continue to
batten the hatches.
*****
We especially like this comment
from a contributor on realmoney.com:
One of the things that I absolutely hate about Wall Street is the
pathological inability to ever tell investors that maybe they are better off
holding high levels of cash rather than stocks. No matter what the market
conditions are, you have the Wall Street pros telling us we should be buying.
Over the years, the one great lesson I have learned is that when the
market is acting poorly, you should just get out of the way. Not racking up
losses in a bad market gives you a huge advantage, but for some reason, Wall
Street just doesn't get it. There is no doubt that my success in the market is
due to a great degree because I don't lose money in bad markets. When things
turn back up, I can rack up gains that put me far ahead of the crowd. You just
have to avoid the drawdowns in a market like this.
Unfortunately, Wall Street is in the business of keeping people in
stocks. However, you would think that every once in a while, even for a little
while, they might acknowledge that maybe it's not a good idea to be 70% or 80%
exposed to equities, especially when things are downtrending.
One of the big farces on Wall Street is the whole idea of
"defensive stocks." There are very few, if any, safe havens in bear
markets, but Wall Street will pretend that you are better off holding some
"safe" stock rather than cash. In most cases, these safe stocks
simply don't go down as fast as the broad market, which is great for mutual
funds concerned about relative performance, but not so good for people trying
to make money.
If you aren't holding high levels of cash at this point in time, then
you are a victim of Wall Street. You have bought into their baloney and need to
realize that their interests are not are aligned with yours. What you need to
do is understand how much better off you are avoiding losses than trying to hold
through bear markets. Once you understand that, the proper course of action is
not that hard to understand.
*****
European stocks closed down Wednesday as fears for credit markets and
recession in Europe sent stocks on a downward trajectory. The Dow Jones Stoxx
600 Index fell 0.8% to 277.3.
*****
Institutional investors caused
the rapid rise and subsequent steep fall in oil prices in 2008, according to an
independent report released by U.S. lawmakers on Wednesday.
The report, co-authored by hedge fund
manager Michael Masters, said from January to May index traders poured $60
billion into commodity markets, causing a big spike in oil prices. When
Congress held hearings in May to July about reining in speculation, traders
pulled $39 billion from the market, the report stated.
*****
The euro ended at $1.40 and the
yen at 107.50. Treasuries were softer on the day. Gold lost $35 to $755 and Oil was $103.12 down 12 pennies.
*****
Oil and commodity stocks were up
all day after being decimated yesterday.
*****
The DJIA gained 35 to close at
11268. The S&P 500 rose 7 to 1230 and the NAZZ jumped 18 to 2228.
Breadth was 5/4 positive and
volume was active.
There were about 530 combined new
lows and about 70 combined new highs.
The bulls stemmed the bleeding
for the day at least.
*****
9 September 2008
Thoughts
Asian markets were mostly lower
and European bourse indexes are mildly higher at midday. Gold is up $5 and Oil
has a $105 handle.
*****
Yesterday’ market action was
muted by the failure to close higher that the opening pushes. A 2% gain in the
major measures is impressive but the failure of the tech and commodity areas
while the financials and retail gained left a sour taste. Today will give a
better idea if a rally can gain traction.
*****
The following discussion is why
some noted value investors were long Fannie and Freddie and kept adding to
their holdings all the way down. These investors didn’t believe that the
Treasury department, which had encouraged bank ownership of Fannie and Freddie
preferred shares, would abandon the investors.
The article was posted on August 28, 2008 on:
http://seekingalpha.com/article/93039-who-s-letting-banks-invest-in-fannie-and-freddie-preferred-stock
From Sovereign to JPMorgan banks
make headlines with writedowns on their holdings of Fannie’s and Freddie’s
preferred stock, but the obvious question of how stock ever got onto banks’
balance sheets is only asked by Felix Salmon - and even
he doesn’t know the answer. In general, banks are barred from investing in
equity securities. However, the government made Fannie and Freddie preferred stock
a “permissible” investment to create a sufficiently large market for these
securities.
Of course, making the stock “permissible” didn’t necessarily make it
attractive, so regulators had to pull another trick. Under the risk-based
capital rules, national banks may carry agency preferreds at a 20 percent
risk weighting, while
state-chartered banks and OTS-regulated savings associations must apply a 100
percent risk weighting. This means that banks only have to hold 1.6% or 8%
capital against their investments (or should we say ‘speculation’?) in Fannie and Freddie preferred stock.
This compares to 8% that must be held against senior commercial loans, which
have a much more favorable risk profile than any equity, and dollar for dollar
capital requirements for other preferred or common stock.
Another appealing feature of the preferreds is their eligibility for
the 70% dividends-received deduction under IRS rules. Therefore, only 30% of a
dividend payment is taxable for the bank. Assuming a 35% tax rate, Uncle Sam
will get only about 10% in taxes on preferred Fannie and Freddie dividends. So
preferreds pay bond-like interest at better after-tax returns. The resulting
taxable-equivalent yield is a nice spread above most banks’ funding cost. It’s
no wonder then that banks loaded up on most of the $36 billion of outstanding
Fannie and Freddie preferreds. After all, you have to dance while the music is
playing.
So, why exactly did banking regulators award this favorable treatment
for GSE preferred equity? They did so because otherwise, there would have been
no market to place $36 billion of preferred stock. 14 out of 21 of Freddie
Mac’s preferred issues were sold after 2000. For Fannie, 15 of the 16 preferred
issues were issued after 2000, the bulk of them after 2005. This occurred at
the time when OFEHO had imposed a capital penalty on the GSEs, and forced them
to raise additional capital - in preferred stock.
Corporations seeking tax-advantaged alternatives to bonds buy most
preferred stock. Despite potential interest from corporate treasuries, placing
$36 billion of two firms quickly in such a narrow and specialized market is
impossible. Therefore, the government had to create a market for the preferred
stock of the two GSEs, and what easier way to place it than to encourage the
institutions that have the money to buy the stuff. Some of the preferred stock
was clearly structured to appeal to banks rather than income-oriented
investors. Not many buyers chasing yield will get excited by Fannie’s Series F
preferred that pays a whopping 2-year CMT rate minus 0.18%. Such a preferred stock only makes sense in the portfolio of an
investor that gets a low weighting for regulatory capital purposes, gets a tax
break and has a low cost of funds at a variable rate. That type of investor
looks just like a bank to us.
Effectively, what is considered equity at the level of the GSEs is in fact highly leveraged debt when you look
at the financial system as a whole. This is hardly a recipe for safety and
soundness.
Now that Fannie and Freddie are in trouble, the government is in a
bind. After encouraging banks to buy FNM/FRE preferred by loosening
regulations, they cannot easily make the banking sector take $36 billion of
writedowns on securities that banks only invested in because of strong
government incentives. Bailing out preferred investors is less a question of
moral hazard than of credibility of bank regulators. Predictability and
stability of government regulations make for stability. Encouraging banks to
invest in the two GSEs preferreds and then making them take a write-off won’t
help restore confidence in regulators.
We are curious to see how the government will get out of that quagmire.
Taking too steep a haircut on the preferred is out of the question due to the
risk of further credit contraction. $36 billion of writedowns decreases banks’
lending capacity by at least $450 billion. The market tells us that bank’s
won’t take any risk with unpredictable government action. Some adjustable rate
preferreds are trading at an 80% discount to their liquidation value, whereas
fixed rate preferreds are only at a 50% haircut. Investors who can tolerate
some spread volatility can lock in the spread and profit from liquidity-seeking
banks’ indiscriminate selling.
Disclosures: Thomas
Kirchner is long FNM. He manages the Pennsylvania Avenue Event-Driven Fund
[PAEDX], which is long and short various FNM and FRE securities. He is a former
FNM employee.
*****
After all these years it is still tough to take losses.
But.... Today we sold Micron, Rite Aid, Molex, Texas Instruments,
Nividia, Akami and Ciena. We are
entering mutual funds tax selling season and we didn’t get the bounce in the
tech issues that sold off on lousy quarterly earnings reports that we thought
might occur before mid September. The discipline is to take losses as well as
scratches and profits when raising cash. And so.....
*****
All you ever wanted to know about
Canada but were afraid to ask from: http://www.bythefault.com/2008/09/09/canadian-election-polls-show-conservative-gaining-a-majority/#more-3566
Canada has an election upcoming October
14th. Here are seven things every American should know about Canada.
1– Canada has ten provinces.
Prince Edward Island, New Brunswick and Nova Scotia are called the Maritimes.
Add Newfoundland to that mix and
you get Atlantic Canada. Newfoundland was an independent country until it
joined Canada in 1949. Newfoundland is also the poorest region of Canada.
Ontario is Canada’s most populous
province and French-speaking Quebec its largest.
The Prairies refer to Manitoba
and Saskatchewan.
Add Alberta and British Columbia
to the Prairies and you get Western Canada.
Northern Canada is composed of
three territories: the Yukon, the Northwest Territories and Nunavut which is
Canada’s newest administrative district created in 1999 carved out of the
Northwest Territories. Nunavut has a population of only 29,474 spread over an area
the size of Western Europe.
2– Canada became independent in
1867. The official name of the country is the Dominion of Canada and the
British monarch serves as the Head of State represented in Ottawa by a
Governor-General. In 1867, only a part what today is Ontario and Quebec plus
New Brunswick and Nova Scotia gained independence, the rest of what today is
Canada remained British.
3– Canada has a parliamentary
system with four major parties and a host of smaller ones. The four main
parties are the Conservative, Liberal, New Democratic Party and the Bloc
Québécois. Perhaps the most unusual party in Canada is the Marijuana Party.
4– Canada has 33.4 million people
or slightly less than California. 90% of Canadians live within 100 miles of the
US border. About half of all Canadians live in Ontario and Quebec.
5– The United States last
seriously considered annexing Canada in 1911 during the Taft Administration.
Canadians were not amused by this.
6– The relationship between the
United States and Canada is the closest and most extensive in the world. It is
reflected in the staggering volume of bilateral trade–the equivalent of $1.5
billion a day in goods–as well as in people-to-people contact. About 300,000
people cross the shared border every day. Since the implementation of NAFTA in
1994, total two-way merchandise trade between the U.S. and Canada has grown by
265%.
7– Stephen Harper is the Prime
Minister and he is the leader of the Conservative Party. Stephane Dion leads
the Liberal opposition. Canada has had one female Prime Minister, Kim Campbell,
a Conservative, who finished off Brian Mulroney’s
tenure in 1993.
Polls in Canada Point to a
Conservative Majority
It appears that Prime Minister
Harper’s gamble to call early elections may pay off for his Conservative-led
minority government. Early polls indicate that the Conservatives look poised to
gain more seats and are now within striking distance of gaining enough seats to
form the first Conservative majority government since Kim Campbell’s brief
tenure ended in 1993.
From Reuters: Canadian Prime
Minister Stephen Harper’s gamble to call an early election already looks to be
paying off as his ruling Conservatives stride into a large lead, helped in part
by the problems troubling his main rival.
The Conservatives, who only have
a minority government, were virtually tied with the opposition Liberals in
opinion polls for months until September 1, when Harper made clear he was
likely to call an election — now scheduled for October 14.
But a string of new polls has put
him within striking distance of the first Conservative majority government for
20 years.
“Something’s happened,
something’s shifting,” said Antonia Maioni, who heads the Institute for the
Study of Canada at McGill University in Montreal.
The campaign only started on
Sunday, but some experts say they do not see how Harper can fail to be
reelected with at least another minority, barring a major disaster.
He has many advantages. The
left-leaning vote in Canada is split between the Liberals and two other
parties, while the Conservatives have no rivals.
And as prime minister, Harper can
set the agenda. He has a clear and simple way of communicating that contrasts
starkly with Liberal leader Stephane Dion.
“When you see him handling
himself in front of the camera — where elections are fought these days — he
just seems to be in control and seems to have a mastery of the situation,” said
Professor Paul Thomas at the University of Manitoba.
PRIME MINISTER
Polls consistently show most
Canadians think Harper would make the best prime minister.
Harper has two messages for
voters: only he can steer Canada through economic weakness caused by the U.S.
slowdown; and a carbon tax that Dion has made the mainstay of his election platform
would be dangerous.
Dion, a French-speaking former
academic, speaks heavily accented English, and is hardly the best person to
explain a complex carbon tax proposal.
“I think the Liberals have got a
problem trying to get their message out, embodied in a leader who has trouble
making a strong connection with voters,” said Thomas.
Dion is particularly unpopular in
his home province of Quebec, which has 75 of the 308 seats in Parliament.
The Conservatives have 11 Quebec
seats and are eyeing the 48 seats held by the separatist Bloc Quebecois. Harper
has made great efforts to woo Bloc voters and some strategists predict he could
win an extra 15 seats in the province.
“Dion is not connecting. It seems
to me people are voting Liberal despite him, not because of him. Certainly,
that’s the case in Quebec,” said Maioni.
Dion, complaining that voters did
not know who he was or what he stood for, launched a website on Tuesday to
introduce himself to Canadians — an implicit admission that after 21 months in
the job, he is still a mystery.
Yet Harper, who comes across as
cold and aloof, is not sure yet of a majority government and rivals
consistently accuse him of harboring an extremist agenda.
The Conservatives, popular in
rural areas and western regions, have yet to break into the country’s three
main cities — Toronto, Montreal and Vancouver.
John Wright, a pollster for
Ipsos-Reid, said the election would be decided in densely populated parts of
Ontario and Quebec, which between them account for more than half of the seats
in Parliament.
He said a recent poll by his firm
shows Dion “weak in everything. But the thing that has been holding back Harper
in that crucial area of Ontario and parts of Quebec is the … sense of hubris
and sense of a hidden agenda.”
Wright predicted the
Conservatives would win 137 seats with the Liberals winning 106.
“This means Harper is 18 seats
short of a majority, and Dion is strong enough to stay on as leader,” he said.
It also means Harper would still be prime minister.
*****
The bears are prowling, shorting
stocks with abandon. Financials have given back most of yesterday’s gains and
the DJIA is down 175 points entering the final hour of trading.
*****
Oil closed down $4.29 at
$102.24.Gold dropped $18 to $784. European bourse indexes closed large
fractions to over 1% lower. The euro is at $1.41 and the Yen at 107. Treasuries
rallied on the stocks sell off and as traders adjust their portfolios.
*****
The DJIA dropped 260 points to
close at 11250. The S&P 500 dropped 40 to 1225 and the NAZZ lost 55 to
2215.
Breadth was 3/1 negative and
volume was moderate.
There were about 495 combined new
lows and 100 combined new highs.
The bears won the day.
*****
8 September 2008
Thoughts
Paulson speaks, Fannie and Freddie are now Government entities, the markets are saved, house
prices will rise and all is well in La La land. Or...
Asian markets and European bourse
indexes all are up 2% and more as are U.S. futures pre-opening in NYC.
INTERSTINGLY China bucked the trend dropping 2%. Financials are on fire as shorts are
covering. Oil is also up $2 and Gold is up $2 and Treasuries are lower as
traders sell Treasuries to move to the now safe GSEs.
Today should be interesting.
*****
Our take on the bailout is that
it will eventually be profitable for the government. The GSE borrowing costs
come down and so the spread becomes more profitable.
*****
The DJIA opened 350 points
higher. That is a pretty good gap opening which eventually will have to be
filled. Moreover the question now is where we go from here. Financials are the
big gainers up 10% and more while other stocks are up 2%.
*****
Machinists are striking Boeing. We think the company wants the
strike as an excuse to further delay the delivery of the new 777 which it has
had problems producing and certifying.
*****
We are selling some issues into the gap opening today in
case this rally doesn’t have legs. Already this morning’s pop has retraced 50%
of the opening push and the trading is lethargic at the noon hour. We took
scratches in recent buys of Cisco
and Intel and are taking scratch
profit in Briggs & Stratton and
scratch P/L in Williams Sonoma.
*****
Oil closed up a few pennies and
Gold was up $2. Treasuries gave ground. European bourse indexes closed higher
with most up over 3%.
*****
The DJIA closed up 295 points at
11515. The S&P 500 gained 25 to 1267 and the NAZZ was up 15 to 2270.
Breadth was 2/1 positive and
volume was active on the NYSE at 8 billion shares with Fannie and Freddie
trading a billion shares between them.
There were about 280 combined new
lows and 130 combined new highs.
The bulls won the day.
*****
5 September 2008
Thoughts
The August Employment Report was
an unemployment report showing a net
84,000 lost jobs. The July report was adjusted upward by 10,000. These reports
are nothing more than excuses to trade since it is impossible to measure within
3% of what the actual numbers might be. 3% of 125 million jobs is almost 4 million.
Be that as it may, the markets are down 1% pre-opening and after an hour of
trading they are now down 1%.
Asian markets were down 2% to 3%
overnight and European bourse indexes are lower by over 1% at midday on a
negative Nokia report. Gold is under $800 and Oil is also $1 lower.
*****
In this kind of bear market we
are trading holdings to improve quality while keeping some exposure to stocks. In that vein we sold JDSU and
JAVA for 10% losses this morning. They are the kind of stocks that can
trade down $5 or up $5 depending on the hope that is in the market. Since a lot
of better quality stocks are now down
as much as they on a percentage basis we will use the funds to deploy in the
better quality stocks as the opportunity presents.
*****
China’s Central Bank needs
capital. From this morning’s NYT: China’s central bank is in a bind.
It has been on a buying binge in
the United States over the last seven years, snapping up roughly $1 trillion
worth of Treasury bonds and mortgage-backed debt issued by Fannie Mae and Freddie Mac.
Those investments have been
declining sharply in value when converted from dollars into the strong yuan,
casting a spotlight on the central bank’s tiny capital base. The bank’s
capital, just $3.2 billion, has not grown during the buying spree, despite
private warnings from the International
Monetary Fund.
Now the central bank needs an
infusion of capital. Central banks can, of course, print more money, but that
would stoke inflation. Instead, the People’s Bank of China has begun
discussions with the finance ministry on ways to shore up its capital, said
three people familiar with the discussions who insisted on anonymity because
the subject is delicate in China.
The central bank’s predicament
has several repercussions. For one, it makes it less likely that China will
allow the yuan to continue rising against the dollar, say central banking
experts. This could heighten trade tensions with the United States. The Bush
administration and many Democrats in Congress have sought a stronger yuan to
reduce the competitiveness of Chinese exports and trim the American trade
deficit.
The central bank has been the
main advocate within China for a stronger yuan. But it now finds itself
increasingly beholden to the finance ministry, which has tended to oppose a
stronger yuan. As the yuan slips in value, China’s exports gain an edge over
the goods of other countries.
The two bureaucracies have been
ferocious rivals. Accepting an injection of capital from the finance ministry
could reduce the independence of the central bank, said Eswar S. Prasad, the
former division chief for China at the International Monetary Fund.
“Central banks hate doing that
because it puts them more under the thumb of the finance ministry,” he said.
*****
From the WSJ: Speculation
sweeping the market that large hedge fund Atticus
Capital is liquidating its positions and closing down is not accurate,
according to executives of the firm. "We've heard these rumors as well and
they're not true," says Tim Barakett, founder of Atticus, which has about
$14 billion under management. "We're certainly not liquidating. In fact we
have a large net cash position and are looking for opportunities to invest
capital."
Part of the reason stocks tumbled
Thursday was selling by hedge funds who are trying to get out of positions they
fear fellow hedge funds, such as Atticus, will sell if they are under pressure
to close shop or trim losses. Some are trying to make money shorting stocks
held by struggling hedge funds, traders say. "Hedge funds that picked on
Lehman Brothers and Bear Stearns now are picking on each other," said the
head of prime brokerage at a major investment bank. A number of hedge funds are
nervous that their investors might ask to pull out in the weeks and months
ahead, amid a disappointing year for many funds. That's sparking anxiety in the
market. Atticus, however, says its investors are largely sticking with it, despite
losses of between 25% and 32% in its two main hedge funds this year,
through August, according to investors. Losses this month have not been
dramatic, these investors say.
*****
Is the U.S. really stupid enough
to sell planes to Iraq just so aerospace companies can make a few dollars. From
the WSJ: The Iraqi government is seeking to buy 36 advanced F-16 fighters from
the U.S., say American military officials familiar with the request, a move
that could help reduce its reliance on U.S. air power and potentially allow
more American forces to withdraw from the country than had been proposed.
*****
Markets recovered after the first
hour downdraft and while trading in negative territory for most of the morning
there is a bid for stocks.
At noon the financials have a
bid, oil is $2 lower and the sell off envisioned this morning by the talking
heads has not arrived-yet.
*****
Oil ended at $106.58 down $1.33.
Gold gained $2 to $806. European bourse indexes finished lower but above their
worst levels. Treasuries had a bid and the euro was $1.44.
*****
The DJIA closed up 32 points to
11220. The S&P 500 gained 5 to 1243 and the NAZZ lost 3 at 2255.
Breadth was 5/4 negative and
volume was moderate.
There were a combined 475 lows
and 40 new twelve month highs.
The bears won the week.
*****
4 September 2008
Thoughts
Ciena blew up on us this morning and is down 25% in early trading.
The company lowered guidance by 20% for the next quarter saying that Telcos have not but may pull back on orders. CIEN shares
are now trading below where they did in the 2002 internet bust. The company has
$1.2 billion in cash and low interest high conversion rate convertible debt of
$800 million, $300 million due in 2013 and $500 million in 2017.
Ciena provides network
infrastructure, associated software, and professional services in the United
States and internationally. The company’s transport and switching products
include the CoreDirector Multiservice Optical Switch, CoreStream Agility
Optical Transport System, and the CN 4200 FlexSelect Advanced Services
Platform. Its packet interworking products comprise the CN 5000 Packet Services
Series, and the DN 7000 Series Multiservice Edge Switching and Aggregation
Platform, which enable communications service providers to transition their
networks to carrier Ethernet and IP/MPLS from legacy technologies, such as ATM
and Frame Relay. The company’s access products for consumer broadband include
the CNX-5 Broadband DSL System and CNX-5Plus Modular Broadband Loop Carrier
that allow service providers to transition legacy voice networks to support
next-generation services, such as Internet-based (IP) telephony, video
services, and DSL, and enable migration to higher bandwidth Ethernet network
infrastructures; and for enterprise broadband services comprise the CN 3000
Ethernet Access Series platforms, which enable carriers to extend Ethernet
services to various customer sites. It also offers integrated network and
service management software, the ON-Center Network & Service Management
Suite, which simplifies network management and operation. In addition, the
company offers consulting and support services, including network analysis,
planning, and design; network optimization and tuning; project management,
including staging, site preparation, and installation activities; deployment
services, including installation and turn-up, and test services; and
maintenance and support services, such as helpdesk and technical assistance and
training, spares and logistics management, software updates, engineering
dispatch, technical support, and hardware and software warranty extensions.
*****
Asian markets were lower
overnight and European bourse indexes are mixed at midday. Gold is up $5 and
Oil is unchanged at $109.15. Jobless claims were up 20,000 to 440,000.
*****
We sold AT&T
and American Eagle Outfitters for
scratch gains and Chico’s, GE and Merck (with the dividend) for scratch losses. All are anchovies for
us. We bought equal shares of Ciena down
$4 today with the AT&T sale. We would rather increase our volatility
on a down day like this as we did with the T sell and CIEN buy.
Our trading is just holding us in place but given that
the markets are down 15% this year we are satisfied to be flat to down 2%.
*****
At noon-thirty down volume is ten times up volume as the
DJIA approaches down 300 points and the S&P 500 off 30. Traders can’t say
they aren’t getting any action. Gold is lower and Oil is down almost $2.
Commodity stocks are again taking it on the chin but then most issues are today
with breadth 4/1 negative.
*****
In keeping with our comfort with telecom oriented tech we
added Intel and Cisco to accounts that own Texas
Instruments. We sold CSCO at the beginning of August at $24.15 and are
buying back at $22.30.
*****
Oil ended at $107.88 down $1.47.
Gold lost $8 to $800. European bourse indexes closed lower. The euro is at
$1.43 and the yen is 108 to the dollar. The two year was 2.19% and the ten-year
at 3.65%.
*****
Stocks closed on their lows for
the day.
The DJIA lost 350 points to close
at 11180. The S&P 500 dropped 38 to 1236 and the NAZZ lost 73 to 2260.
Breadth was 4/1 negative and
volume was brisk at over 5 billion. Down volume exceeded up volume by over 13
to 1.
There were about 390 combined new
lows and 55 combined new highs.
The bears won the day.
*****
3 September 2008
Thoughts
Asian markets were lower
overnight as are European markets at midday. Gold is under $800 and Oil is down
$1 at $108. Investors Intelligence reported a drop in bulls to 37% and a rise
in bears to 40% in the latest week.
*****
The markets reversal at midday yesterday
has been ascribed to a letter issued by a large hedge fund which announced it
was closing its doors after dropping 30% in value this year.
There are rumors – aren’t there
always – that other commodity oriented hedge funds are in trouble.
*****
Commodity stocks are tanking
again today giving validity to the rumors or maybe the rumors are self
fulfilling.
*****
We purchased Molex
in accounts.
Molex manufactures and sells electronic components worldwide. It
offers micro-miniature connectors, SIM card sockets, keypads, electromechanical
subassemblies, and internal antennas and subsystems for telecommunications
market; and power, optical, and signal connectors and cables for end-to-end
data transfer, linking disk drives, controllers, servers, switches, and storage
enclosures for data products market. The company also provides interconnects
used in air bag and seatbelts, tire pressure monitoring systems and powertrain,
and window and temperature controls; and designs and manufactures connectors
for home and portable audio, digital still and video cameras, DVD players, and
recorders, as well as devices that combine multiple functions for automotive
market. In addition, Molex manufactures cables, backplanes, power connectors,
and integrated products that are found in various products, such as electronic
weighing stations, and industrial microscopes and vision systems, as well as
provides connectors and custom integrated systems for diagnostic and
therapeutic equipment used in hospitals, including x-ray, magnetic resonance
imaging, and dialysis machines. Further, it provides manufacturing services to
integrate specific components into a customer’s product. The company sells its
products to original equipment manufacturers, contract manufacturers, and
distributors. Molex was founded in 1938 and is based in Lisle, Illinois.
*****
Our guess is that
in connection with the commodity stock fund liquidations there is short
covering occurring in the financials and retailers and selling in the tech
stocks. The
reversal yesterday was not positive for a near term bullish case. We are raising a bit of cash by selling J Crew, Coldwater and
also Wachovia and JP Morgan for gain. JCG is the most
expensive of the retailers we own and after Coldwater we still have Chico’s as
a women’s retailer. We also reduced our Williams
Sonoma position. We think it is prudent to take a few dollars off the
table.
*****
Gold ended down $5 at $804. Oil
was off 30 pennies to $109.50. European bourse indexes closed lower.
*****
The DJIA gained 20 to 11535. The
S&P 500 was down 3 to 1275 and the NAZZ lost another 15 points to 2333.
Breadth was 5/4 negative and
volume was about 5 billion.
There were a combined 130 more
new lows than new highs.
Today’s contest was a tie.
*****
2 September 2008
Thoughts
Oil is down $7 from Friday at
$108. Yesterday it traded as high as $118 before it became obvious that
Hurricane Gustav was a bust for the TV networks and oil trading bulls. Oil is
down $33 at $801. Asia was lower overnight and European bourse indexes are higher
as are U.S. futures.
*****
We repurchased Merck today.
*****
The DJIA was up 200 points in the
first hour as Oil and Gold tanked. But three hours into the session stocks are
giving back their gains as traders rethink the positive premise that oil will
continue to move lower. After all, the lower oil is premised on worldwide
recession.
*****
When we last wrote on August 15 the DJIA was at 11660.
This morning it is at 11650. The S&P 500 was 1298 and today it is 1285. Oil
was $112 and it is 108 and Gold was $792 and today it is $800.
*****
With one and one half hours to go
in the trading day the major measures are now negative. Sic transit profits.
*****
Oil ended at $110.20 down $5 and
change and Gold finished at $811 down $23.
*****
Oil and natural resource stocks
tanked today and that led the major measures lower. Financials and retail were
higher.
The DJIA lost 28 points to 11516.
The S&P 500 dropped 6 to 1276 and the NAZZ was down 20 at 2350.
Breadth was 5/4 negative and
volume was pretty good at 5 billion shares.
New highs and new lows were about
even.
And so the new month begins with the bears growling after
the failed rally attempt.
*****
A review in short contemporaneous notes of the past two
weeks in the markets:
18 August
Longs agreed on Tuesday to be
acquired by CVS
Caremark Corp. for about $2.6 billion, or $71.50 a share, a 32% premium to
its 4 p.m. closing price of $54.04 on the New York Stock Exchange that day.
Including assumed debt, CVS valued the purchase at $2.9 billion.
Pershing Square on Aug. 5
reported acquiring an 8.8% position in Longs stock, for which it paid $40.47 to
$45.92 a share. It owns about 3.1 million of the 35.8 million shares outstanding
as of May 29. The fund has further exposure to Longs, based in Walnut Creek,
Calif., through private contracts called swaps, bringing its total economic
interest to the equivalent of 9.2 million shares, or about 25.8% of Longs's
outstanding shares.
*****
8/18 and we sold BP at a 40
pennies loss on 8/18. The Georgia mess coupled with the fight over their
Russian properties is more uncertainty than we want to handle at this time. It
is the reason for the low price but may be a good reason for the low price.
*****
We sold VMW on 8/18 for a 10% plus profit.
It is volatile and a true anchovy. We added J Crew and Williams Sonoma to accounts.
*****
Financials lead stocks lower. DJIA was down 200 on low
volume.
*****
19 August
Producer Prices rose substantially
in fact 9.9% year over year. Yesterday Fannie and Freddie tanked after Barron’s
said a government bailout would wipe out the common.
*****
Jim Cramer had a good take on the
Fannie/Freddie mess: Who leaked? Who told
Barron's that there is a plan to take over Fannie (FNM - commentary - Cramer's
Take) and Freddie (FRE - commentary - Cramer's
Take), and then who leaked yesterday and denied
such a plan? Who tolerates this nonsense at Treasury, and who speaks for
Treasury? Did the SEC not know that the short-selling suspension coupled
with a "bad article" about Fannie and Freddie could undo months of
"they are well-capitalized" rhetoric from the regulators and the
administration? Could the administration be so stupid as to spend thousands of
man-hours investigating leaks about Iraq and let this nonsense go on, thus destroying
billions upon billions in capital? Does anyone really know what they are doing
here?
The Treasury-SEC amateur hour
is a wondrous thing to behold. I am not excusing Fannie and Freddie: They are
worthless. That's clear from the bad loans they made. However, they could be a
superior dumping ground, a genuine Resolution Mortgage Trust, if the
administration would just think this through and realize that there has to be a
place for the FDIC to dump bad mortgages when they seize a bank. Otherwise, they
will be running dozens of regional banks and using up capital at a reckless
clip.
What seems to be missing in
this morass is a plan -- a plan that is active, not passive and reactive --
from someone of responsibility in this government. They are so steeped in
laissez-faire that there's an actual debate about doing NOTHING to help figure
out this house price depreciation -- they are actually debating the fate of the
U.S. economy and whether anything should really be done to fix the banking
system. What an incredibly preposterous position! What are we doing? Teaching
everyone a lesson at the taxpayers' expense? Why doesn't the government just
close the ne'er-do-wells and take them over and then redistribute the equity
after sanity replaces recklessness? Why can't they be SMART?
I am aghast how predictable
all of this is. The SEC suspends the short-selling rule just when the earnings
collapse of the banks allows short-sellers to help the rout and make
capital-raising impossible. That then drains the FDIC and causes a total lack
of confidence in anything that the agencies or Treasury says, let alone the
institutions like Citigroup (C - commentary - Cramer's
Take) and Washington Mutual (WM - commentary - Cramer's
Take) that so desperately need to raise capital -- of course, they
would deny that in a heartbeat.
How can all of this obvious
collapse-to-be not be stopped?
Simple: Because they don't
want it stopped. On the one hand, they leak to Barron's that they are going to
take over FNM and FRE; on the other hand, they strenuously deny it.
One or the other.
Can't have both.
So uncertainty breeds reckless
short-selling, an inability of the bulls to actually deploy capital -- they
really want to!! -- to these situations, and the
despair and ruin they are precipitating.
Just beyond-belief dumb. And
nobody says a thing.
*****
We bought JPM at $35.7297 and Wachovia at
$14.6659. The financials are under pressure but we think there is at
least a trade from these levels. We have been whipped around by Wachovia but
the $14 level- at which we sold twice, once for gain and once for loss, - has
been a good support level for the past month. We also repurchased the GE we sold. GE and
JPM both yield over 4%.
*****
We think this is going to be a
turnaround Tuesday. The DJIA is down 300 points since Friday and the S&P
500 is on a support line at 1270 an hour into the trading day. Time will tell.
We repurchased Yahoo at $19.75 in accounts.
*****
We were wrong and the DJIA and S&P 500 were both down
another 1% and the NAZZ down 1.5%. Volume was light. Oil was down at $114.
*****
20 August
China plus 7% overnight on the
hopes of a stimulus package. That is the largest up move in that market for a
long time. Hewlett Packard beat last night and the futures are higher on
that news this morning. Investors Intelligence had 40% bulls (31% two weeks ago) and 38% ( 45%)
bears.
*****
Sam Zell bought the Tribune
in a leveraged buyout through an employees stock ownership plan. Supposedly the
employees now own the company as Zell took advantage of the tax laws to finance
the buyout. Zell will get the first profit on the deal and the employees will
probably never be made whole. And in order to make the deal work Zell is firing
employees. The tax laws that allow these types of leveraged buyouts are not
capitalism. They are chicanery and immoral.
*****
Stocks were lower.
*****
21 August
Oil is up $4 pre-open. Russia is
not making nice in Georgia and is upset up Polish/US missile agreement. Europe
is lower and Asian markets were down 2% and more.
*****
Jobless claims were down 13,000
but still over 400,000 at 432,000. Stocks are going to open down as it is a
glass half full morning with Fannie and Freddie news helping the bears.
Actually it is non news that is helping the bears since the companies cannot
disprove a negative, i.e. that they don’t need capital.
*****
JDSU disappointed and
warned and it is lower by 10%. We have more to buy.
*****
OIL is up $6 at 10am. Do you
think Putin knows that if he keeps the heat on Georgia traders can talk up the
price of oil? Ya think?
*****
Gold was up $24 and Oil gained
$6. Stocks were a tad better. Decent summer volume.
*****
Bought JDSU at $10.20 in accounts that own and
also bought Texas Instruments a buck lower than we sold two weeks ago in
accounts where we sold. Making a buck every month is a nice dividend if we can.
We think we can we think we can we think we can.
*****
A nice story on Mickey Drexler and J Crew at:
http://money.cnn.com/2008/08/18/lifestyle/king_cool_brodie.fortune/index.htm?postversion=2008082008
*****
Stocks gained 0.6% on the day.
*****
22 August 2008
Gap beat with lower sales
but better margins and cost cutting. Oil is down $1.40. Foreign markets down
small.
*****
The Government Terror Watch List
has 1 million names on it. From WSJ: The government's main
terrorist-watch-list system is hobbled by technology challenges, and the $500
million program designed to upgrade it is on the verge of collapse, according
to a preliminary congressional investigation. The database, which includes an
estimated 400,000 people and as many as 1 million names, has been criticized
for flagging ordinary Americans. Now, the congressional report finds that the
system has problems identifying true potential terrorists, as well.
*****
Oil tanked and stocks rallied to end the week.
*****
25 August
Retailers continue to announce sales
this week and tomorrow evening J Crew is at the fore for us.
*****
The solution to the Fannie and
Freddie mess is simple but folks want to make it complicated. And the Bushies
are constrained by philosophy versus reality. The Treasury should buy Fannie at
$10 per share and Freddie at $8 per share and make the GSEs government
entities. Borrowing costs would drop and their bonds would become government
obligations. But like Social Security which could be made whole by freezing the
top payout per month at $2300 with no inflation adjustment once a person
reaches that level the economists and politicians want complicated solutions to
simple problems. Just look at the tax code.
By the way, where were the
experts when BankAmerica and Wachovia and Citi were making their dumb loans and
buys of dumb loans.
*****
Google is no longer going to give
free dinner to employees but it will continue to provide free breakfast and
lunch.
*****
Asia was higher, Europe lower, U.S. stocks lower by 2%. Oil
was up 50 cents and Gold down $6 at $824. Treasuries had a bid. Stocks were
down all day. Light volume.
*****
26 August
Asia was lower small as was
Europe and Oil is
at $113 with gold down to $820.
*****
JP Morgan owns $1.2
billion in Fannie and Freddie preferred shares which it has written down by
half. If the government wipes out the equity JPM will have to write off the
other $600 million. As we said in the August 25 post it makes more sense for
the Treasury to pay a nominal amount for the common shares and then make the
preferred and bond holders whole. Such an action would
avoid bankruptcy and seamlessly do what the Resolution Trust Corp did in the
early 1990s. And as we said yesterday, that would be too simple a solution.
*****
Chico's earned $6.7
million, or 4 cents per share, in the three months ended Aug. 2. Chico's earned
$38.7 million, or 22 cents per share, in the year-ago quarter. Sales fell 7
percent to $405.2 million from $436 million. Wall Street analysts, who
typically exclude one-time items from their estimates, expected a per-share
profit of 3 cents and $405 million in sales. Same-store sales declined 15.9
percent across the company. They fell 19 percent at Chico's namesake brand and
12 percent at its White House Black Market stores.
*****
American Eagle
announced a 26 percent drop in second-quarter profits and said that earnings
for the third quarter will be in a range of 31 cents to 36 cents. Analysts
polled by Thomson Reuters expect, on average, 39 cents per share. AEO said
month-to-date same-store sales are down 6 percent for August. AEO said it
earned $59.8 million, or 29 cents per share in the three-month period ended
Aug. 2. That compares with $81.3 million, or 37 cents per share, in the year-ago
period.
*****
U.S.
house prices fell nearly 16% from June 2007 to June 2008 according to an S&P
report.
*****
The euro dropped 0.9
percent to $1.4617 at 8:53 a.m. in New York, from $1.4754 yesterday. It touched
$1.4571, the lowest level since Feb. 14.
*****
Citi is going to ban
off-site meetings among its own employees and cut back on color photocopying
as part of a plan to clamp down on expenses as investment banking revenue
declines. That will surely help.
*****
We switched Ericsson for a scratch to Micron
Tech which is at a new low. It was share for share so we raised a bit of
cash also. We also sold Crocs for a 30 pennies loss.
*****
There are now 117 troubled banks
with $80 billion in assets on the FDIC troubled banks list for Q2 which is up from
90 in the first quarter.
*****
Oil ended up $1 on the new
hurricane headed for the Gulf of Mexico. Gold ended up 43 on the same news. Say
what?
*****
Stocks closed higher small with a last half hour
rally on low volume.
*****
27 August
Asia was mildly lower overnight
and Europe is off 1% and more at midday. Gold is up and Oil is $117. Investors’
Intelligence has 39% bulls and 39% bears in the latest reporting period.
Durable Good orders were up 1.3% and ex transport up 0.8% when negative numbers
were expected.
*****
J Crew disappointed and suggests earnings of $1.50 for the year
versus expectations of $1.70. The shares are off what they were up yesterday
ahead of earnings. We are going to reduce outsized holding in our larger
accounts where we added shares hoping for an upside surprise but we remain
committed to owning a substantial holding in accounts. The reality is that with
flat earnings projected for the year JCG is doing better than 95% of retailers
and trading at 15 times earnings the shares are a buy.
With the money raised in the JCG reduction we are going
to increase our holdings in Starbucks in those accounts.
*****
Sun Micro is down 15% since we purchased it and is priced at 50%
of sales with net cash on hand of $2 per share. We are adding to positions at
$8.97.
*****
Stocks closed higher but off their best levels in light
holiday trading. Oil gained $2 to $118 ahead of the weekend hurricane.
*****
28 August
Asia was again lower as is Europe
at midday. Gold has an $834 handle and Oil is up another $1 to $119 as traders
take advantage of the Gustav the Hurricane scare to push prices higher although
supply hasn’t yet been affected.
2nd Quarter GDP has
been revised to up 3.3% from the first look of up 1.7%. Just in time for
the Republican convention we learn that there is no recession and the
economy is great according to the numbers folks. That is a 100% miss and gives
an idea of the worth of these numbers.
*****
Williams-Sonoma reported a
29 percent drop in second-quarter profit on Thursday and cut its third-quarter
and full-year forecasts as the weak U.S. economy and slumping housing market
hammered sales. Results topped Wall Street estimates as expenses fell. The
company, whose brands include Pottery Barn and West Elm, had net income of
$18.4 million, or 17 cents a diluted share, down from about $26 million, or 23
cents a share, a year earlier.
Net revenues fell 4.6 percent to
$819.6 million. Sales at stores open at least a year fell 11.7 percent in the
quarter. Pottery Barn and outlet stores, which had same-store sales declines of
16 percent and 12.6 percent, respectively, performed worse than Williams-Sonoma
stores, where sales fell 4.5 percent.
Williams-Sonoma has been reducing
its inventory levels and trying to hold down costs. Its selling, general and
administrative expenses fell about 9 percent in the quarter. WSM said it now
expects earnings of nil cents to 4 cents a share for the third quarter and
$1.03 to $1.15 a share for the full year. It had previously called for third-quarter
profit of 17 cents to 23 cents a share and full-year profit of $1.45 to $1.58 a
share. Analysts expected third quarter earnings of 18 cents a share and
full-year profit of $1.31 a share, according to Reuters Estimates.
*****
We bought shares of WSM at $16.60.
*****
Stocks closed on their highs with the DJIA up 212 points
and the NAZZ at 1300 up 20. Volume was light. After the close DELL missed
and so tomorrow may be a give back day.
*****
29 August 2008
Asia was higher while Europe is
mixed. Gold is up a few dollars and Oil has a $117 handle as traders try and
guess where the hurricane will go.
*****
Dell misses last night and
is trading $3 lower.
*****
This from Krugman is too good to
pass. It explains how McCain’s health advisor will solve the health insurance
crisis. Last week John Goodman, an influential figure in Republican health
care circles, explained that we shouldn’t worry about the growing number of
Americans without health insurance, because there’s no such thing as being
uninsured. After all, you can always get treatment at an emergency room. And
Mr. Goodman — he’s the president of the National Center for Policy Analysis, an
important conservative think tank, and is often described as the “father of
health savings accounts,” a central feature of the Bush administration’s health
policy — wants the next president to issue an executive order prohibiting the
Census Bureau from classifying anyone as uninsured. “Voilà!” he says. “Problem
solved.”
*****
We bought Dell at $22.05 down $3 on the day.
*****
Oil was flat at $115.08. Gold was
down $1 at $836. Stocks were
down giving back most of yesterday’s gain. Volume was light.
*****
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Summary of Business Continuity Plan
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