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Thursday, August 23, 2007

Risk is Back

The appetite for risk is back.

Bank of America's Countrywide Purchase Boosts Stocks (Update1): "The yen fell the most in three years against the euro as stocks rallied, reviving confidence in trades that depend on borrowing in the Japanese currency to buy riskier assets.

Investors sold yen and bought the higher-yielding Australian and New Zealand dollars, which rose around 3 percent versus Japan's currency. "

Bank of America's Countrywide Purchase Boosts Stocks (Update1): "Bank of America Corp. bought $2 billion of preferred stock from Countrywide Financial Corp., erasing concern the nation's largest mortgage lender will go bankrupt and boosting investor confidence in stocks worldwide."

Countrywide will survive this mess and it may rally as the shorts are squeezed out, but business will still be very weak for a few years.

Bank of China Holds $9.7 Billion of Subprime Assets (Update2): "Bank of China Ltd., the nation's second-largest bank, said it holds almost $9.7 billion of securities backed by U.S. subprime loans, the most of any Asian company."

Globalization spreads risk around, which is good. However, it becomes very difficult to know exactly where it is and how much.

Goldman Global Equity Hedge Fund Rises 12% After Cash Infusion: "Goldman Sachs Group Inc.'s Global Equity Opportunities hedge fund rose 12 percent last week after the securities firm shored up the money-losing pool with $3 billion of cash, investors said.

Assets more than doubled to $7.5 billion as New York-based Goldman put $2 billion into the fund and raised $1 billion from investors including Maurice "Hank'' Greenberg, the former chairman of American International Group Inc., and billionaire Eli Broad. The fund lost about 30 percent in early August as rising mortgage defaults caused stocks to tumble, upending the computer models its managers use to select trades.”

Looks like the models are starting to work better as markets around the world calm down a bit.


Richard said...

I'm still reading every day. Not sure that we're done with this shake out yet. Keep up the charts!

Ben Bittrolff said...

Thanks. Any charts in particular you'd like to see? Or anything else for that matter.

I expect another down leg. These credit problems should take quite a while to resolve.

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