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HomeMidday Market Update . . . U-G-L-Y
Posted by Larry Doyle on March 5th, 2009 12:45 PM |
I had written that yesterday’s 2-3% upward move in the market was very likely a Dead Cat Bounce. Well, that cat is burrowing further into the ground as markets have more than fully retraced yesterday’s upward move and are making new lows. This type of price action, known as lower highs and lower lows, confirms bearish trends.
I hope our readers know that all financial information you could possibly want is on the Market Data tab on the Sense on Cents header. That resource provided by the Wall Street Journal is not only a great way to get a quick and comprehensive snapshot of all sectors of the market, but also a great way to keep your brokers and financial planners on their toes and working for you!!
Let’s take a quick look at the markets and then I will offer some commentary. (more…)
Why is George Soros Short the Euro? MUST READ!
Posted by Larry Doyle on March 3rd, 2009 6:10 AM |
In very short order, I have gained a deep respect and regard for our Economic All-Star, John Mauldin. I have come to appreciate that Mauldin and I view the market through the same lens focused on the global economy. While many media outlets focus on the day to day, if not hour to hour trading activity, I believe they are truly missing the forest for the trees.
While I have written twice over the last week about eastern Europe being the weakest link in the world of global finance, Mauldin and his colleague Niels Jensen of Absolute Return Partners provided insights and analysis that is numbing.
Why is George Soros short the euro? Let me provide a synopsis of Mauldin’s and Jensen’s “Europe On the Ropes.” Assuming those visiting Sense on Cents have an interest in the markets and economy, this piece is somewhat lengthy, but a MUST READ!! A link is provided at the end of my review. (more…)
A Virtual Smorgasbord
Posted by Larry Doyle on March 2nd, 2009 4:24 PM |
On the heels of the news about AIG, Berkshire, and HSBC, the equity markets have found no support today and are down 4%. While the malaise of the markets has much of the focus, let’s review a few other items that I see on today’s menu:
1. In regard to AIG, current CEO Edward Liddy and former CEO Hank Greenberg have started some public feuding over the nature of AIG’s problems. Greenberg is trying to make the case that the risks underwritten at AIG occurred after his departure. Liddy responded that the culture, the compensation system, and the division housing the bulk of AIG’s risk all developed under Greenberg. Wow!! When our country is screaming for leadership, we have senior executives playing the blame game and pointing fingers. How pathetic!! (more…)
What’s Driving the Market Lower Today?
Posted by Larry Doyle on March 2nd, 2009 9:50 AM |
Stock markets are expected to open lower by another 1.5% on the open this morning. What’s driving them lower….again?
1. News that AIG reported an actual 4th quarter 2008 loss of $61 billion. The government will inject ANOTHER $30 billion into this black hole. WHY? Very simply because AIG is the largest holder of CDS (credit default swaps) that serve as insurance for a number of banks and money managers. These CDS cover a wide array of assets but primarily the sub-prime mortgage space. Kevin Doyle of 12th Street Capital, and a guest here on my weekly No Quarter Radio program back in early January, shares that the index that tracks the sub-prime market is at its lows. No surprise there.
While the various media outlets are highlighting this story now, I wrote extensively about AIG and How Does One Lose $125 Billion? on February 24th. I not only wrote about the losses, but also delved into the culture that developed over the years at AIG under Hank Greenberg. Not a pretty picture and seemingly not a lot of integrity in that company. Now we pay. (more…)
When the Oracle of Omaha Speaks..
Posted by Larry Doyle on February 28th, 2009 4:20 PM |
Warren Buffett’s annual letter to shareholders is always a highly anticipated event by market participants. Given the fact that Berkshire is effectively a diversified holdings company, Buffett has a unique perspective into a wide array of businesses. He also has the wisdom of investing over many years and through many challenging markets.
Well, if misery loves company, it has a solid partner in the person of Warren Buffett because 2008 was Berkshire Hathaway’s worst year ever. In reviewing Buffett’s letter allow me to offer some highlights. For those who have an even passing interest in the markets and investing, reading this letter is akin to attending an opera by Pavarotti.
I beg your indulgence as I attempt to be the opening act and provide an overview of the “Oracle of Omaha’s” thoughts on the markets and economy: (more…)
“My Mama Told Me . . .
Posted by Larry Doyle on February 28th, 2009 2:20 PM |
. . . You Better Shop Around.”
What does that wonderful song from Smokey Robinson and the Miracles have to do with our economy? I’ll tie that in a bit later.
More and more people are inquiring of me how and why banks are making credit tighter both in terms of availability and in terms of rates charged.
This tightening of credit is due to the “crowding out effect” from dramatically increased government borrowing along with the actuality and likelihood of increased defaults across all consumer and corporate loans. In the face of those defaults, banks will set aside more capital in reserve to cushion those losses.
What is a consumer to do? There are two tactics:
1. Everything’s Negotiable which I highlighted in a post dated December 23, 2008. Talk to your bankers and/or credit providers. Put your banks and other credit providers in competition. Where does one start and how does one easily comparison shop? I’m glad you asked because that leads me to point #2.
2. Shop around (thank you, Smokey)! Sense on Cents provides links via our Primers (in the right sidebar) for a look across the market to virtually every consumer credit need. Remember I have NO professional relationship with any of these entities. From borrowing needs to investing, with many stops in between, I hope these primers help you navigate the economic landscape going forward!!
And now, a trip down memory lane . . .
February 2009 Market Review
Posted by Larry Doyle on February 28th, 2009 10:13 AM |
Prior to going to the comments section of my son’s report card, human nature dictates that I first look at the grades. In that same vein, let’s see how the markets performed for the month of February:
Let’s review my specific projections from the January 2009 Recap: (more…)
Looking Back and Looking Forward
Posted by Larry Doyle on February 24th, 2009 2:41 PM |
John Mauldin, one of our Economic All-Stars (see sidebar on left), provides personal insights and perspectives that are truly cutting edge. Additionally, John has relationships that provide real clarity.
John Mauldin recently published commentary from Paul McCulley of Pimco and former Fed chairman Paul Volker. I had the good fortune of working with Mr. McCulley in the late ’90s at Union Bank of Switzerland. He is a true gem. Mr. Volker, like him or not, is regarded as one of the world’s leading central bankers. Their comments are both comprehensive and understandable as we look to navigate the economic landscape!
Mr. McCulley looks backward and reviews the following:
— the basics of our banking system
— a review of the “unregulated” shadow banking system
— the deleveraging process
— questions on the implementation of the government backstops, including the Term Asset-Backed Lending Facility to restart the consumer lending markets, and the public-private partnership. (more…)
Breaking News…Citi “National Bank??”
Posted by Larry Doyle on February 22nd, 2009 10:24 PM |
UPDATED from late last night . . .
I just proposed on LD’s Dollars and Sense the idea that the markets would force Citigroup into the government’s hands. I thought it would occur within a month. In just checking the WSJ newswire it appears that executives from Citi are negotiating with the government as I write this. The fact that Citi is looking to broker a transaction currently is effectively an admisson on their part that they are technically insolvent. While the U.S. Eyes Large Stake in Citi, the common shareholders in Citi would be seriously diluted. How would creditors be treated? At this stage I would guess that creditors will be untouched. I would imagine that if this transaction occurs, other banking shares will trade down in sympathy.
(more…)
