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Monday Morning Quarterback


Remember, when trading, to always ask "why" before making blind bets.


Like a moth to a flame burned by the fire.
My love is blind can't you see my desire?

(Janet Jackson)

Good morning and welcome back to the flickering pack. After a wild ride and Friday slide, we open our fresh five-session set to find mixed global markets and early stateside optimism. With a weekend of reflection and July expiration behind us, the Monday fun comes down to one simple question.

Will fresh Merger Mania be enough to stuff sub-prime contagion concerns?

These new deals are like a former flame seen after a long absence. You're reminded of the spark once shared and pine, in your mind or elsewhere, for the innocence of love and the passion it provides.

The M&A boom was the backbone of the recent rally and the morning news pitter-pattered the futures higher.

Cerberus Capital is buying United Rentals (URI), the world's larges equipment rental company, for $4 billion.

Transocean (RIG) and GlobalSantaFe (GSF), the world's two largest offshore oil and gas drillers, have agreed to nuptials that will create a $53 billion dollar behemoth.

Barclays Plc (BCS)
, which has been trying to buy ABN Amro Holding NV (ABN) in the biggest banking takeover ever, raised its bid more than 4% to $93.4 billion after lining up investments from China and Singapore.

Heck, even the rumortrage channels are in play as speculation spread late Friday that Nokia Siemens Networks (NOK) (SI) may bid $7 billion for Tellabs (TLAB), putting a 20% spring to the network equipment maker's step.

It's aaaaall good, as Snoop Dogg would say, but will it be good enough to shift psychology in the financials away from the dreaded credit woes?

By now, you know the story in the banks and brokers. Sub-prime, widely assumed to be a pimple in the broader financial complexion, is spreading like a rash through Wall Street portfolios. As the underlying securities of these complex derivative transactions are "marked-to-market," sudden losses and forced selling begets more of the same.

"There is $100 billion of bridges of high yield bonds in the pipeline looking forward, and there is $200 billion of leverage loans, the next four or five months and that's a lot, and I think that is causing re-pricing of covenants and picks and toggles." JP Morgan honcho Jamie Diamond said late last week, joining Citigroup executives who offered that deals would have to be sweetened to move them off it's balance sheet.

We've been closely monitoring this sector as it's the Dogg that wags the broader market tail. And the price action of late has been all you needed to know about the broader directional pull. The BKX failed mightily at triple resistance last Wednesday, falling 4% and ushering the S&P back through the uber-important S&P 1540 level.

That zone, which has morphed from resistance to support to resistance anew, is front and center as we power up our weekly pup.

Random Thoughts


No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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