Random Thoughts: Collecting the Crosscurrents
By Todd Harrison Feb 20, 2008 11:45 am
Markets squeezed towards the path of maximum frustration.
- Today is a Bob Sinclair day if I've ever seen one. World, hold on: One day you will have to answer to the children of the sky.
- I ran into a fellow Raider fan in the elevator this morning. There's something that doesn't happen everyday! Bad seasons define good fans just like bad times define good friends. Silver and Black--Just Win Baby!
- Everyone and their sister pointed to crude yesterday as a downside equity catalyst. We've talked about this for years in the 'Ville. Yes, it's a drag on the consumer but no, it's not correlated. When crude drops precipitously, albeit relatively less than other asset classes, that's when we need to worry.
- While we're speaking on the slippery slope, note that the drillers, while through initial resistance at OSX 270, aren't at new highs with crude at new highs. Potential negative divergence for the group? Me thinks so...
- I A.D.D.'d this point a few weeks ago but count me in the camp that lost mas respect for Pedro Martinez. There's nothing cool about cockfighting.
- Snappage to the Minyanville Profs on being all over and in front of the auction rate security debacle. Keeping you up to date, 202 out of 276 auctions failed yesterday, compared to 231 out of 288 on Friday.
- Hank Paulson said yesterday, when asked if the U.S. would follow in the nationalization footsteps of the U.K., "Absolutely not!" Circle this for a circle back as I'm not so sure he'll (we'll) have the latitude of choice.
- FOMC Minutes. 2:00 EST. See it, please.
- Green beans in the Red Sea at the opening? The semis (on the back of Hewlett-Packard (HPQ)), Amgen (AMGN), Research in Motion (RIMM), Apple (AAPL), Transocean (RIG) and Valero (VLO).
- You can learn a lot just by watching.
- Hot Popper? The dollar, which is up fitty bips. Not surprisingly, asset classes are lower as we toggle between the two.
- Who's gonna be the 10,000th critter in Minyanland?
- If you haven't listened to Bob Sinclair yet, you may wanna hold off. I haven't been able to stop whistling all morning.
- The only difference between intervention and manipulation is communication.
- Mr. Practical pointed out credit spreads widening. The disparity between the credit markets and equities continues to build and one of these puppies will ketchup with the other.
- Bain Capital withdrew its 3COM (COMS) bid, KKR Financial (KFN) delayed repayments... and so it goes.
- Yeesh, this ain't good. It's sorta like the CFO of a troubled company leaving in the middle of an earnings report.
- Yo Ma Ma! Remember that S&P pennant? It's violated the lower end of the flag. The longer it remains under there, the higher the odds that it'll be a full-fledged fail.
- If I keep getting these SPAM messages on E.D. and "foreign affairs," I may begin thinking that someone is trying to tell me something.
- World, hold on.
- The green granny Goldman (GS) is adding spice to the Hump Day Mix.
- Wowzers, Baidu (BIDU) is at $236 (-4%)? $220 is the next support, I suppose, but it's not the best looking chart I've ever seen.
- And finally, I wanted to share this Buzz from Mr. Practical as I believe it's important:
Twist and Turn
In a twist of intrigue, here is the latest in the monoline saga. Behind the scenes the monolines are threatening to split their companies up into a "good collateral" company and a "bad collateral" company. This has banks shaking in their boots.
If this happened it would probably force the banks to recognize they are carrying their collateral at prices that don't make sense. This would force more write-offs.
So I estimate that this game of Russian Roulette might have a 50-50 chance of forcing banks to pump money into the monolines from pure fright. With government cajoling it is a real possibility.
Of course it would only delay the inevitable. But it would probably spark a rally in financials that should be sold into for it only addresses the symptoms of the problem (illiquidity) and not the cause (bad debt).
No positions in stocks mentioned.
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