Buzz Bits: Dow and Nasdaq End Lower
Your daily Buzz & Banter highlights.
Bell Buzz - Todd Harrison - 3:42 PM
My goodness, where does the time go? Today has been one of those days on a few different levels but alas, it's almost in the books. In a few hours, following the weekly vibe on Happy Hour, I'll be sharing some smiles with Mr. Practical and taking some time to enjoy the journey. Sometimes you gotta focus on just that, the journey thang. The smiles. Friendships. Pets. Funny words like "kumquat." Now, in fact, more than ever. Before I go...
- Hoofy would argue that following yesterday's rally, some backing and filling is healthy. And he'd be right, as a matter of course, so long as headline risk steers clear and credit creeps better. Neither is a certainty, of course, hence the word "risk" and, by extension, the word "reward."
- Does S&P 1310 and DJIA 1200 "matter" on the downside? To a point, but not as much as the intra-day double bottoms (S&P 1270 and DJIA 11640).
- Does Qatar rhyme with Babar (you know, the children's elephant) or guitar? I couldn't tell ya but either way, they're the latest country to rethink the peg to the dollar. And I would lay 10-1 that they won't be the last. The risk to the hyperinflation thesis is foreign holders of dollar denominated assets screaming "Uncle Sam!"
- Do you think now would be a good time to share that I'll likely be out of the 'Ville on Friday? That tends to lend to some wild volatility, we know, so I figured I sorta have a fiduciary responsibility to put it out there.
- Does anyone else feel like Mike Peters and Trent Walker lately? The funniest part of this post is that when I Googled "Swingers" to get the clip, someone walked by my desk and saw, well, what you might expect would pop up when you Google Swingers.
- I'm outie, yo. Have a great night and remember to take in the good stuff. Tomorrow, as they say, is promised to nobody.
Randoms - Fil Zucchi - 2:14 PM
- Yesterday Humana (HUM) tanked 25% because Wellpoint (WLP) warned. Today HUM warns and the stock falls another 25%. I won't even begin to make a valuation argument for HUM, although I am pretty sure one could be made. I got long this one because one of the two drubbings seems somewhat gratuitous to me. And the fact that everyone and their mother was hiding in "healthcare services" as an area safe from Boo's claws only exacerbated the exodus.
- So the Fed burns 25% of its balance sheet in one shot and all it's got to show for it is a piddly improvement in the credit markets, at least as reflected by the Credit Default Swaps of the main lenders. And then there is Rescap (partly owned by GMAC and Cerberus) which is seemingly heading for the exits.
- I have been unwaveringly clear about my current position: I think the financial markets are heading over the cliff. Yesterday's action has done very little to change my thinking, which is well summarized by this article from the UK Telegraph.
- I still think the catalyst for the next leg down in equity and credit markets will be the forced acknowledgment that we are in a full-blown dollar crisis. The way I am playing this is by legging into short Euros / long Yen.
- I agree with Toddo that the most bizarre aspect of the action of the last 24 hours is in the strength of the U.S. long bond (USM08). I don't believe it is sustainable in conjunction with higher equity prices, and I am acting accordingly.
Postions in HUM Euro USM08
On Texas, Gold and Troubled Loans - Minyan Peter - 11:22 AM
As a follow up to a couple of posts on yesterday's Buzz, I would offer:
Regarding Mr. Practical's piece, I would remind everyone that Texas Commerce Bank, or "TCB," went into the oil market collapse as one of only two banks in the country rated AAA and came out in receivership.
Regarding Prof. Lewis's piece, which highlighted that GLD -- Gold ETF -- is now the eighth largest holder of gold in the world, I would only ask the question, "When the market decides that gold is not going to go any higher and people flee GLD, who is going to take ownership of a stockpile in gold that is only slightly smaller than the gold holdings of Japan?"
Finally, I would just add one more thought to my late afternoon Buzz. While the large banks and investment banks may breathe a sigh of relief after yesterday's Fed action, it's not at all clear what the action does for small and medium sized banks whose problems are not in the AAA mortgage-backed securities they hold (or in these banks cases, don't hold). The problem for small and medium sized banks is in their loan portfolios, and none of the Fed actions from yesterday address troubled loans.
Position in SKF.
Selling Strength - Bennet Sedacca - 11:13 AM
I had bought some MBS late last week at the extreme wides. Now that the Fed is "here to the rescue" (with its $200 billion 28 day term repo in the context of a $6 trillion MBS market and a $45 trillion CDS market, their $200 billion looks like a guy standing on the beach with a sand bucket and an umbrella to stop a tsunami).
The Fed only had $825 billion of marketable securities and they have already used up $436 billion. So as spreads rip tighter, and I mean a lot tighter, by like 1 1/2 points in long MBS (relative to 10's), we sell. Are spreads still wide? Yes. But I expect them to blow apart again as the tsunami drowns the guy on the beach.
American Express (AXP) just announced a 10 year "benchmark" deal, supposedly +325. More supply is coming folks, and I am building cash: lots of it.
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