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Buzz Bits: Dow and Nasdaq End in the Red


Your daily Buzz & Banter highlights.

Editor's Note: This is a small sample of the content available on the Buzz & Banter.

Lehman Increases Dividend? - Bennet Sedacca - 12:56 PM

Lehman Brothers (LEH) has been selling debt at a fast clip, along with Merrill Lynch (MER) and Bear Stearns (BSC). The BSC deal yesterday that first looked cheap at +350 last traded into a +365 bid: so much for that concept.

Then it was disclosed that LEH Level 3 (Mark to management's best guess if its models are right, though I prefer"'mark to myth") increased $41.98 billion, or a 21% increase from the previous quarter. For those counting that is over 200% of capital. So what does it do?

The company announced a buyback and stock dividend. You have to be kidding me.

If I were on the board I would be cutting the dividend to protect shareholders. So the buyback and dividend increase is a sham in my book.

As for BSC, now it has $28.17 billion of Level 3 assets, up 39% quarter over quarter.That is 250% of shareholder equity.

In sum, these companies are on the ropes and I continue to get net short their credit via preferreds against a long agency preferred position.

Position in BSC, FNM, FRE, MER, LEH preferreds

Bull Ship! - Fil Zucchi - 12:47 PM

Editor's note: We saw liftage in the shippers and asked Pro. Zucchi if all the sentiment was due to the takeover of Quintana Maritime (QMAR).

No, actually for the first time in weeks there has been some activity in long-term Drybulk tanker leasing and prices have finally firmed up a bit. Previously the shippers have been getting hit because of weak shipping rates. Baltic dry index declining and falling spot rates and lack of long-term leases. Now that has settled down a bit.

My favorite names in this sector are Eagle Bulk Shipping (EGLE), Genco Shipping (GNK) and Paragon Shipping (PRGN). They already have a good chunk of their '08, '09' and '10 capacity booked up already – so there's less risk there compared to something like Dryships (DRYS) which operates mostly in the spot market. Of course if spot rates jumps, DRYS will benefit much more.

Position in PRGN, DRYS, QMAR

Impressions on the rally... - Jason Goepfert - 11:02 AM

I have a different impression than Prof. Quint when he noted earlier, "an incredible bias that the run is over and we will now head lower". At the worst point last week, we did see some hints of panic-type conditions, but more than that we saw folks pointing out the panic-type conditions as a reason to buy. Among the guides I follow, we reached an extreme last week, but it was lesser than the ones we saw at almost every intermediate-term low during the bull market from 2003–2007.

It was not even close to the extremes that we saw at the several intermediate-term lows during the bear market from 2000–2002. The price action last week was on a par with prior crashes, and from those conditions it's natural to expect a rebound, but sentiment-wise the extreme was "just barely".

And some of those extremes were dubious. "Everyone" was looking for a spike in the VIX, which we got, but as Prof. Warner has pointed out, the spike lasted all of a minute. Since then, we've seen volume rush back into call options, something we did not see for several weeks after the lows last March and August. It happened quickly after November's low, though of course that rally was ill-fated.

There are other examples, too. Rydex traders were three times more likely to buy into a "safe" fund than a "risky" at the lows last week, but have quickly switched back to a 2-to-1 preference for "risky" funds as of yesterday. Odd lot traders, who were busy selling last week, by yesterday were buying shares on a pace that rivaled the highest readings of the last six months.

Anecdotally, I've read article after article about the panic readings from last week, the massive reversal bars, and the good performance in the financials – all of which signify we've seen the worst of the selling pressure.

Maybe we have - I don't have a good feel for the intermediate-term here - but my impression about folks' attitudes towards last week's developments is that a big sigh of relief has been ushered, and I'm unconvinced that it's completely warranted.

The Joy of Fed Day - Jeff Macke - 10:15 AM

Greetings from rainy New York, where, as is generally the case on Fed Days, I'm wrestling with the desire to go out and play 18 holes ahead of what is traditionally "ungameable" and a wildly over-covered news event.

Then again, we've got more news than usual and a funky fresh GDP number thrown into the mix, making this more compelling than normal. Let's run some thoughts up the flag pole and see who salutes:

  • 0.6% GDP? Folks, that's close enough for "gub'ment" data, from where I'm sitting. We're in a recession; let the healing begin and the already crazed stimulus continue.

  • My cousin called last night to ask me if I was emotionally okay after Yahoo (YHOO). "You seemed... Um... Pretty worked up on Fast Money there, cuz", he gently offered. I haven't watched the tapes (I'm a House guy) but "worked up" sounds fair. Let's just say I'm not a huge fan of the Yang return, thus far.

  • On the other hoof, I am becoming more of a fan of Eddie Lampert and his Sears Holdings (SHLD).

  • People continue to send me links and questions about my Daily Show appearance (of sorts) last week, reviewed here at the Frankly, I was just sort of happy to find myself represented. The fact that I was bashed for spouting gibberish is simply part of the game.

  • A final thought regarding TV, the Fed and the field position of the tape. I think I may have overstated my bearishness in suggesting that it's time to sell ahead of the Fed. Which is to say I remain much more constructive on the markets and I think the path of least resistance is higher. My point was simply this: we've had a greater than 10% run since the MLK Day sell-off. If you loaded the boat, prudence dictates trimming some of those winners now. I'm not inclined to short it here, I'm just stepping away from a situation that seems much more edgeless than the panic in the streets last Tuesday morning.


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