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Monday Morning Quarterback: Write-Downs Continue to Affect the Tape

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The answer we really need to know is how the tape will digest the possibility of upwards of $100 billion in write-offs before year end...

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"Walking around like regular people. They don't see each other. They only see what they want to see. They don't know they're dead."
--Cole Sear, The Sixth Sense


Good morning and welcome back to the flickering pack. After a restful respite, we power up the Monday pup knowing three things. First, both the Pats and Colts are the best teams in the NFL (particularly when Indy is back at full strength). Second, New York City is chock full of energy during the Marathon , a 26.2 mile testament to will that I ran three times (albeit many years ago). Third, the financial world is throbbing with news, views and perhaps a fuse.

As we know from the weekend press, in perhaps the most anticipated pruning of a corner office in recent memory, Citigroup (C) finally said "See ya!" to CEO Chuck Prince. Given that the stock is at levels unseen since 2003, optimistic investors were quick to bid up shares overseas. That knee-jerk shouldn't come as a shocker given the 33% year-to-date haircut but the issue to focus on is more systemic and less stock specific.

I spent yesterday afternoon - sans the second half of the late games - working on a column that walks through the issues at hand for financial firms and, by extension, our finance-based economy. While I'm aware this fare has been covered-much of it in Minyanville many months ago, when investors could benefit-I wanted to dig deeper as it relates to the particulars of subjective accounting and my experience thereof.

That column will post later this week but in the interim, we gotta dance with our dates. As such, I'll continue to offer that I foresee upwards of $100 billion in write-offs before year end, a thought that doesn't seem that far-fetched given Citigroup's $8-$11 billion donation to the cause. The answer we really need to know, however, is how the tape will digest it all.

To date and to Hoofy's credit, the broader market has hung in rather nicely given the Art Carnage in the financial sector. You can credit sector rotation into tech, albeit with narrowing (troubling) leadership, question the moral hazard debate surrounding the emergency super-conduit or finger unforeseen forces at play. At the end of the day, the onus is on us to assimilate it all.

And that is what we'll continue to do for at the end of the day, we've got no other alternative. Americans have traditionally outsourced their financial acumen and THIS is what we've wound up with. Financial education and empowered understanding-along with capital preservation and debt reduction-are our most powerful allies as we dig in to fight the good fight.

Random Thoughts

  • If you want to surround yourself with the sharpest financial minds I've ever come across-and do so while giving back to a most worthy cause (at a nominal cost)-please lock your spot for the Minyanville Festivus on December 7th in NYC. It's a month away…

  • Petrochina (PTR) came public and almost tripled on its first day of trading in Shanghai, becoming the first company to be valued at $1 trillion, larger than Exxon Mobil (XOM) and General Electric (GE) combined or, put another way, it's bigger than the entire Russian stock market!

  • Think about it-this opening day rally makes PTR four times bigger than Exxon Mobil even though it has a quarter of the revenue. And it gives China, a communist nation, five of the world's ten biggest companies. Is anyone else picking up a theme here?

  • Is all the pressure in the pre-market futures a function of Citigroup? Prolly not. Odds are that further geopolitical risk is being priced into the tape after a hectic weekend in Pakistan.

  • I don't know about you but I'm loving this extra hour. We should do that more often!

  • We will inevitably see a "kitchen sink" style rally attempt (under the guise that the bad news is behind us). That could conceivably help the tape-and I'm gonna sell some, if not most, of my S&P and Goldman Sachs (GS) puts into the opening abyss-but I feel strongly that many more mea culpas are to come.

  • With 80% of S&P 500 companies reported, overall S&P 500 earnings growth is expected to come in at negative 2.1%, the first down quarter in over five years.

  • Watch S&P 1490 as a level of lore for bovine galore.

  • A short-term low for the dollar? Supermodel Gisele Bundchen is now insisting that she gets paid in currencies other than the greenback. There are a few snarky things I can say here but I'll hold my tongue (unless, of course, she wants to do it for me).


Good luck Minyans-I'll see you on the Buzz!

R.P.


Holiday Festivus is here! Come join us and support the Ruby Peck Foundation For Children's Education at an old-fashioned Southern-style hoe-down in the heart of New York City on December 7th. Click the image below to learn more!

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