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Wednesday, September 3, 2008

Financial Ninja Favs: August

In case you missed them, here are YOUR favorite Financial Ninja posts for the month of June:

1) Lehman To Be Acquired by Tooth Fairy
2) Freddie, Ambac, Morgan: This is the Sound of Credit Crunch
3) Another Bear Wedge, Financial Overbought
4) Fannie and Freddie: Poker, Bazookas and Paulson
5) US Treasuries, US Dollar and Commodities

The most popular post was about Lehman (LEH) from the WSJ. Although meant to be funny, it really does illustrate just how badly this crisis is being handled by the gang in Washington, and how badly everybody else is still hoping that ‘everything will be alright’.

Fannie Mae (FNM) and Freddie Mac (FRE) damn near imploded in August with traders jamming down both common and preferred prices. This inspired the now infamous brain fart from Hank Paulson; “If you've got a squirt gun in your pocket, you probably will have to take it out. If you have a bazooka in your pocket and people know it, you probably won't have to take it out.”

Financials did manage to rally most of the month as commodities collapsed. Oil lead the way down and the US dollar went parabolic on frenzied short covering.

9 comments:

Anonymous said...

it might be being handled badly, but you have to admit....our markets are not going down as much as the rest of the worlds!!!!!!

Greg said...

To the above comment...why would you want to slowly pull off a band aid instead of ripping it off and starting the rebuild ASAP?

The Fed is just prolonging the inevitable ahead of an election.

gnuttall said...

Hey Ben, any ideas why the sudden rally in financials over the last week? What has been pushing them higher? Everything I hear is bad news from the financial sector..so what gives?

Moyo said...

In response to gnuttall...I cant say that I know specifically why the market has rallied in the past week however i believe there was some short covering rally in the past 3 months, so what we see this past week is a spill over in my opinion.
Like you clearly pointed out, everything around is bad news, which the market tends to ignore, but it rallies, and such price action is not justified. The S&P is testing it's March lows again, it has been range bound for the past month, trading with lousy volumes, there is a lot of money that's out of the market with very few people trying to force the price up on the slightest sound of good news. There really isn't a case for the rally, however I do not like to argue with the market, however I would be shorting any rally I see in the S&P market this month.

gnuttall said...

Thanks Moyo....I was referring to XLF only though.

For instance, Ambak ABK is up over 300% in the last month (~50% increase in the last week)

Anonymous said...

Moyo and Gnuttall-

Everyone expects failed financials (if they're "big enough") will be bailed out. Trouble is, common usually gets nothin' in the bailout. In the case of ABK, MBI and the rest of the leveraged-to-the-hilt lot, though, their derivatives books will require that equity not be entirely wiped out, akin to the Bear debacle, so as not to bring down the whole system.

Just look at it as an even better chance to get short. BAC looking downright juicy at this point.

-Mike J.

Mista B said...

It may sound crazy, but I think it's the weakness in the financial companies that is causing the recent surge in their stock prices. Many of them were themselves shorting financials. Since they (including hedge funds) are stuck deleveraging, they have to unwind positions--long energy, long commodities, short financials. The companies are exiting these positions, thus energy and commodities are taking a pounding and financials are "leading". There is no way any rational value buyer is stepping in and buying financials at these prices. Home prices are still declining for crying out loud. Foreclosures are on a huge upswing. Prices in the bubble areas have at least another 25% to go.

Bottom line is that this is very typical bear market behavior for such a crisis. Imo, we ain't seen nothing yet. It'll be two years before stocks hit bottom. The bonds markets have crashed, yet the equity markets are still humming diddly do here comes the next bull! It'd be laughable were it not so sad.

fajensen said...

Danish property speculators are getting margin calls:

http://trader.borsen.dk/borsendk/site/miniweb/stockpop.page?magic=(cc%20(tsid%2020705))

Some of the largest property speculators have used stock as security for credit. Rumour is that at least 18% of the stock in Molslinien is up for sale. The sale of such a large block of shares will take until January so blood will flow.

The drop on the rumour appears large enough to trigger further margin requirements - usually the Danish banks want 20% collateral.

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