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Saviors and Survivors

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Today's credit is tomorrow's debt.

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You can hide `neath your covers and study your pain
Make crosses from your lovers throw roses in the rain
Waste your summer praying in vain
For a savior to rise from these streets

(Bruce Springsteen)

Good morning and welcome back to the quarter-end track. There's a lot on our plate so let's dive right in as the critters get set for the end of June spin. With the Fed on our left and some deals to our right, the bulls seem to think that they'll party tonight. "I know that the first half hasn't been fun," said Hoofy the bull after being outrun, "but that's in the past when it's all said and done as we ready to take a run in the sun." Can Elmer unleash the lion within or will Boo once again wipe the grin off his chin? We'll know soon enough--stand up and be counted--the Hump of '05 is about to be mounted!

The first half of the year is seven hours away from getting booked and Dano is on the edge of his seat. If the combination of quarter-end agendas and an FOMC rate decision wasn't enough to get him going, we've also received news that Bank of America (BAC) is gonna plunk down $35 beans (big beans) for Kirby the love bug (MBNA). While the bovine are quick to note that M&A is a sign of a healthy economy (and a boon to the brokerage sector), there are some other vibes to consider. For instance:

  • In a debt bubble (consumer, corporate, government), is being the largest credit card issuer in the world necessarily a good thing?
  • Bank of America looked poised to make an all-time high and spark the piggies through the vaunted BKX 100 level. This mega-deal will pressure the North Carolina Tar Heel and cloud (what was) our single best tell.
  • MBNA was a favorite short candidate in the hedge fund arena and, while it'll help the big holders (Barclays, AXA, Fido, State Street, Goldman), the 30% premium will likely mash a few hot potatoes.

Of course, and despite the considerable crosscurrents, the story du jour will revolve around Elmer when he steps to the podium at 2:15 EST. The gamesmanship surrounding the FOMC is borderline comical as traders watch the tape with one eye and a thesaurus with the other. My sense is that we'll get the obligatory ¼ point boost and he'll leave the language as is. Any inclination that we're close to the end of the tightening cycle will be cheered by the Street although, for what it's worth, I don't think it's by choice. Slowing growth and mounting debt have painted us into a rather tight corner with regards to policy.

Please note, as well, that the S&P reversed course following seven of the last eight rate decisions (that's 87.5% for those scoring at home). Professor Goepfert noted that on the Buzz this morning and the fact that this meeting arrives on the last day of the quarter supports his observation. For my part, and as you might expect, I'll be watching my tea leaves while remaining conscious that today's trade will be a tale of two tapes.

On a housekeeping note, I'll be heading west (young man) tomorrow for a ten day west coast critter carnival. While I'll try to keep an eye on the tape, my ability to post will be spotty at best (and absent at worst). Old school Minyans know that I don't like to stray too far from the 'Ville but I'm comfortable and confident that Team Minyan will carry the torch in my absence. And, of course, I very much look forward to breaking bread with the Bay Area Minyans on Tuesday starting at 4PM.

Good luck today and hit 'em hard!


R.P.

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