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Friday, August 24, 2007

Now What?


The bounce should be running out of steam right about now. Futures looked strong yesterday pre-market but not could hold the gains even into the open and all US equity indexes ended the day flat or worse. I'm looking for short entries.

U.S. July Durable Goods Orders Rise 5.9%; Ex-Transport Up 3.7%: "Orders for U.S.-made durable goods rose more than forecast in July, suggesting business spending remains a bright spot in an economy hobbled by a housing recession.

Demand for products meant to last several years rose 5.9 percent after a revised 1.9 percent gain the prior month, the Commerce Department said today in Washington. Excluding orders for transportation equipment such as airplanes, durable-goods orders rose 3.7 percent, the most since August 2005."

A little something for the Bulls to rally around.

European Manufacturing, Services Expansion Slows (Update4): "Growth in Europe's manufacturing and service industries slowed in August as the pace of orders cooled, indicating turmoil in world credit markets may be starting to weigh on the economy."

A little something more sobering.

Home Depot May Lower Supply Unit Price by $1 Billion (Update2): "Home Depot Inc., the home- improvement retailer that agreed in June to sell its contractor- supply business, may cut the original $10.3 billion price by about $1 billion to salvage the deal, two people with knowledge of the matter said."

Some of the big deals are starting to get re-priced. None of the major ones have yet been cancelled... Although spreads on deal stocks have started closing again, I think its to early to sound the 'all clear'.

This was yesterday: Coventree Fails to Renew C$5.12 Billion in Notes (Update4). BUT, people have to understand the consequences:

"Russel Metals Inc. (TSX: RUS.TO) says Coventree Inc. (TSX: COF.TO) failed to repay $11 million when asset-backed commercial paper, or short-term loans, held by Russel came due Thursday.

The funds represent five per cent of Russel's $207 million in cash and cash equivalents, the metal distributor said. " (YahooFinance)

Imagine that, you hold a commodity play and suddenly you're exposed to subprime inspired credit woes... What do you REALLY have in your portfolio?

While most of this will resolve itself satisfactorily, its still nerve wracking and messy.