Merry Christmas

Dollar index

Baltic Dry Index

Down 95%

The index provides "an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain.

Bernie Madoff arrested in a $50 billion fraud;

Madoff, 70, head of Bernard L. Madoff Investment Securities LLC, was arrested today at 8:30 a.m. by the FBI and appeared before U.S. Magistrate Judge Douglas Eaton in Manhattan federal court. Charged in a criminal complaint with a single count of securities fraud, he was released on $10 million bond guaranteed by his wife and secured by his apartment. Madoff, wearing a white-striped shirt, dark-colored pants and no tie, looked down as he left the courtroom with his wife, declining to comment. “It’s all just one big lie,” Madoff told his employees on Dec. 10, according to the government. The firm, Madoff allegedly said to them, is “basically, a giant Ponzi scheme.”
Madoff faces as much as 20 years in prison and a $5 million fine if convicted. His New York-based firm was the 23rd largest market maker on Nasdaq in October, handling a daily average of about 50 million shares a day, exchange data show. It specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co. and Citigroup Inc

Goldman Says European Stocks may Fall Another 20% Before Rally

Dec. 5 (Bloomberg) -- European stocks may fall another 20 percent in the “short term” as investors grasp the possibility of deflation, before a rebound in the second half of next year, Goldman, Sachs & Co. strategists said.

The brokerage advised as part of its 2009 European equity strategy holding shares in industries less affected by an economic slowdown, including phone, healthcare and retail companies.
“While it is tempting to believe that a New Year will bring an entirely different set of market prospects the reality is often different,” Goldman wrote in a note to investors distributed today. “The start of 2009 is unlikely to bring a change in the dynamic of growth and the unlocking of credit that is required for risky assets to re-rate.”

The Dow Jones Stoxx 600 Index may drop 20 percent on a “downside risk” possibility, they wrote. A six-to 12-month rally may follow only after the first half, they wrote, lifting the European benchmark between 30 and 50 percent.
Retailers were upgraded to “overweight” from “underweight” in Goldman’s recommended allocation. The industry is dominated by food companies that are relatively less “cyclical,” it said.
The team of London-based strategists, including Jessica Binder, Peter Oppenheimer, Sharon Bell and Gerald Moser, downgraded household-goods shares to “underweight” from “neutral,” citing weaker consumer demand and cut utilities in the same way because of “high leverage and refinancing needs.”

“We expect an inflection point in economic activity and the pricing of markets in 2009, but it is likely to be from lower levels and later in the year,” they wrote. “We stay defensive in our portfolio and would underweight most cyclical sectors.”

Financial-services stocks were upgraded to “neutral” from “underweight.”

Goldman may post $2 billion loss

Wall Street firm Goldman Sachs may report a quarterly net loss of as much as $2 billion, according to a report in the Wall Street Journal.
The newspaper, citing industry insiders, said the loss of $5 a share for the quarter ended Nov. 28 would be five times the current analyst projection.
The expected loss would be Goldman's (GS, Fortune 500) first quarterly loss since it went public in 1999, the Journal said.

VIX

Black Friday

Happy Thanksgiving

ETFC - Strong buy

If E*Trade gets TARP funding.... increases it's well capitalized position along with $450M in debt it retired last week for "free".... and over the next 2 quarters puts virtually all loan losses behind it.... resulting in the Company being valued based on the brokerage value alone by mid to late 2009.... at $7 to $9 per share even in this bear market.....

New Highs-New Lows Index

As the name implies, new highs/new lows represents the number of all stocks making new 52-week highs or lows. The result is graphed, and the aggregate number of new highs and new lows is used as a market timing tool.

Citigroup Gets Guarantees on $306 Billion of Assets

Citigroup Inc., facing the threat of a breakup or sale, received $306 billion of U.S. government guarantees for troubled mortgages and toxic assets to stabilize the bank after its stock fell 60 percent last week.
Citigroup also will get a $20 billion cash injection from the Treasury Department, adding to the $25 billion the company received last month under the Troubled Asset Relief Program. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend. Citigroup rose as much as 41 percent in German trading today.

CBOE Put/Call Ratio

VXO-(fear)index

VIX

Dow Jones 11-13-08

Stocks on the day after presidential elections

NEW YORK, Nov 5 (Reuters) - Wall Street hardly delivered arousing welcome to President-elect Barack Obama on Wednesday,dropping by the largest margin on record for a day following a U.S.presidential contest. The slide more than wiped out the previous day's advance, the
largest Election Day rally ever for U.S. stocks. The following table shows the percentage rise or decline in the
Dow Jones industrial average .DJI, Standard & Poor's 500 index
.SPX and Nasdaq composite index .IXIC on the day after a U.S
presidential election and who won the Election Day vote.
Year Dow S&P Nasdaq President elect:

2008 -5.05 -5.27 -5.53 Barack Obama
2004 +1.01 +1.12 +0.98 George W. Bush
2000 -0.41 -1.58 -5.39 No decision: G.W. Bush v Al Gore*
1996 +1.59 +1.46 +1.34 William Clinton
1992 -0.91 -0.67 +0.16 William Clinton
1988 -0.43 -0.66 -0.29 George H. W. Bush
1984 -0.88 -0.73 -0.32 Ronald Reagan
1980 +1.70 +1.77 +1.49 Ronald Reagan
1976 -0.99 -1.14 -1.12 James Carter
1972 -0.11 -0.55 -0.39 Richard Nixon
1968 +0.34 +0.16 --- Richard Nixon
1964 -0.19 -0.05 --- Lyndon Johnson
1960 +0.77 +0.44 --- John Kennedy
1956 -0.85 -1.03 --- Dwight Eisenhower
1952 +0.40 +0.28 --- Dwight Eisenhower
1948 -3.85 -4.15 --- Harry Truman
1944 -0.27 0.00 --- Franklin Roosevelt
1940 -2.39 -3.14 --- Franklin Roosevelt
1936 +2.26 +1.40 --- Franklin Roosevelt
1932 -4.51 -2.67 --- Franklin Roosevelt
1928 +1.20 +1.77 --- Herbert Hoover
1924 +1.17 --- --- Calvin Coolidge
1920 -0.57 --- --- Warren Harding
1916 -0.35 --- --- Woodrow Wilson
1912 +1.83 --- --- Woodrow Wilson
1908 +2.38 --- --- William Taft
1904 +1.30 --- --- Theodore Roosevelt
1900 +3.33 --- --- William McKinley
1896 +4.54 --- --- William McKinley
* George W. Bush ultimately was determined the winner of the 2000
election.
Source: Reuters EcoWin

Andrew Lahde: The Hedge Fund Manager With a 1000% Return

To the pantheon including subprime shorter John Paulson and Amaranth vanquisher John Arnold we should probably now add Santa Monica hedge fund manager Andrew Lahde. Lahde almost certainly hasn't reached the billion-dollar-a-year club, but he does now officially oversee a fund – the poetically named US Residential Real Estate Hedge V Class A – which is up 1000% year-to-date.
Lahde's still very bearish on both housing (he has a new fund to short commercial real estate) and on the economy more generally (he's predicting a deep recession). But it seems he thinks the bloodletting in residential real-estate might be over: he's returning money to his investors, telling them “the risk/return characteristics are far less attractive than in the past”.
In a way, given the sheer number of hedge funds out there, and the increasing amounts of leverage they employ, it's a little surprising there aren't more funds which return 1000% in a year – and it's actually quite reassuring that such things are still rare. To have one enormously successful year, like Lahde or Paulson or Lahde, can make a man dynastically wealthy. But it doesn't make him an investing great like Buffett or Swensen or Lynch. Remember that during the housing bubble people were regularly making 1000% returns on their own money by buying and flipping condos with little or no money down. In a way it's only just that now a few hedge fund managers are making equally large returns by making bets in the opposite direction.

S&P Futures Limit Down

The overnight market made a 5% move down causing the market to go
to a "Limit Down" situation. Today will undoubtedly be an
important day in the global markets.

TED - Spread

Who gave the Wall Street bull those blue balls?

Fox Business - Jim Cramer

Dow Jones 1900-2008

VIX Index Tops 80 for First Time

The benchmark index for U.S. stock options exceeded 80 for the first time in its 18-year history, driven higher by equities extending the biggest slide since 1987 on concern the economy will continue deteriorating. Europe's volatility benchmarks also jumped to records.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose a third day, adding 9.6 percent to 75.92 at 12:50 p.m. in New York after climbing as high as 81.17. The index measures the cost of using options as insurance against declines in the Standard & Poor's 500 Index, which fell 0.6 percent. The stock benchmark earlier slid as much as 4.6 percent, extending a 9 percent plunge yesterday.

There's no historical context for the VIX at 80, said Dean Curnutt, president of Macro Risk Advisors LLC, a New York- based firm that advises institutional investors on derivatives strategy. ``Investors are scrambling for protection and it's driving up the price of options.''
The VXO Volatility Index, a predecessor to the VIX that reflects the price of options on the S&P 100, climbed 23 percent to 84.30. It jumped to 103.41 on Oct. 10. The old VIX set an intraday record of 172.79 a day after the October 1987 stock- market crash.

Libor is inching down

Icelandic Stocks Drop 77% as Trading Resumes After 3-Day Halt

Iceland's benchmark stock index plunged 77 percent, the biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country's largest banks.
Investors demanded a higher premium to hold Icelandic government bonds, while the price of the country's currency remained ``undetermined,'' according to TD Securities.
The global financial crises sparked the collapse this month of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf with debts equivalent to as much as 12 times the size of Iceland's economy. The three banks accounted for about 76 percent of the OMX Iceland 15 Index's value prior to the nationalization.
``We are quite far away from having it up and running in terms of anybody being able to invest, or disinvest in the Icelandic stock market,'' said Lars Christensen, a senior strategist at Danske Bank A/S in Copenhagen. ``Given that we don't have a normally functioning exchange-rate market, a fixed income market, we don't have a clearing system between the banks internally, it's hard to talk about any well-functioning stock market.''
The OMX Iceland 15 fell 2,326.22 to 678.40, the lowest since April 1996. The gauge has lost 89 percent this year, making it the worst performer among 88 equity indexes tracked by Bloomberg News. Four of the 13 other stocks in the index didn't trade, while the six that did accounted for about 8.5 percent of the measure's weighting before today.
Global Stocks Rally
Iceland's record decline came as the U.S. plan to inject $250 billion in banks helped send Europe's Dow Jones Stoxx 600 Index to its biggest two-day gain on record. The regional benchmark added 3 percent today, while the Standard & Poor's 500 Index rose 0.7 percent.
Trading in Icelandic stocks was halted since Oct. 9 after the OMX Iceland 15 lost 30 percent in nine days as the country's financial system collapsed. Iceland started talks in Moscow today to secure an emergency loan of as much as 4 billion euros ($5.47 billion) from Russia.

New all-time high in the VIX

Some contrarian-minded advisers have gotten what they've been hoping for -- a new all-time high in the VIX -- and are now ready to issue a buy signal.

The VIX, of course, is the CBOE's Volatility Index Last: 70.98 +7.06 +11.05% ,which many believe to be an investor fear gauge. Contrarians therefore are prone to consider any spike upwards in the VIX as a positive sign.

Wachovia's Board Approves Wells Fargo Merger Proposal

Wells Fargo (NYSE: WFC - News) last night presented Wachovia with a signed and Board-approved offer to purchase Wachovia Corporation as an intact company and without government assistance in a stock-for-stock merger transaction. Under the Wells Fargo proposal, each share of Wachovia common stock will be exchanged for 0.1991 shares of Wells Fargo common stock, representing a value of $7 per share, based on Wells Fargo's closing stock price on Oct. 2, 2008.

When Congress goes to work, it's time to sell. . .

"According to two economists, Mike Ferguson of the University of Cincinnati and Hugh Douglas Witte of the University of Missouri at Columbia (paper link here) , if you had invested $1 in the Dow Jones Industrial Average back in 1897 when the index first started and invested only when Congress was in or out of session until the year 2000, here's how much money you would have:Invested When Congress is In Session:$2Invested When Congress is Out of Session:$216"Paper Abstract:"We find a strong link between Congressional activity and stock market returns that persists even after controlling for known daily return anomalies. Stock returns are lower and volatility is higher when Congress is in session. This “Congressional Effect” can be quite large - more than 90% of the capital gains over the life of the DJIA have come on days when Congress is out of session. The Effect varies systematically with the public's opinion of Congress: returns are lower and volatility higher when a relatively unpopular Congress is active. Public opinion appears to play a fundamental role in market prices. This is consistent with a mood-based explanation that sees Congress as ‘depressing’ the average investor. Alternatively, our results can also be reconciled with rational explanations that view Congressional activity as a proxy for regulatory uncertainty or rent-seeking behavior.

Cramer on his Wachovia recommendation: "I let you down, because I wasn't skeptical enough"..."I screwed up, I apologize"

U.S. House Rejects $700 Billion Financial-Rescue Plan

The financial-rescue plan intended to restore confidence in the U.S. banking system collapsed in partisan wrangling as the House of Representatives voted down the proposal backed by the Bush administration and congressional leaders of both parties.
Markets plunged as the House rejected, by a vote of 228 to 205, the $700 billion measure to authorize the biggest government intervention in the markets since the Great Depression. The Dow Jones Industrial Average fell 564 points, or 5 percent to 10,579, at 3:05 p.m.

JPMorgan to Buy WaMu

JPMorgan Chase & Co is expected to acquire the deposits of Washington Mutual Inc, the largest U.S. savings and loan, in a government-brokered bailout, the Wall Street Journal reported on Thursday.

The purchase could be a major step in cleaning up a U.S. financial system littered with toxic mortgage debt.
Acquiring the deposits could fulfill JPMorgan Chief Executive Jamie Dimon's long-held goal of becoming a retail banking force in the western United States. It comes six months after JPMorgan, the No. 3 U.S. bank, agreed to acquire the failing investment bank Bear Stearns Cos at a fire-sale price. Branches would also be included in the transaction, the newspaper said.
JPMorgan said it would hold an investor conference call at 9:15 p.m. EDT on Thursday, but it did not say why. Neither company returned calls for comment.
The deposit acquisition is not likely to affect the roughly $45.2 billion insurance fund of the Federal Deposit Insurance Corp (FDIC), which analysts expect will be tapped dozens of times in the next few years to cover bank failures.

How low will it go?

The Biggest Financial Story of the Past 50 Years

-After failing to finagle a government bailout, Lehman Brothers (NYSE: LEH) filed for bankruptcy.
-Bank of America (NYSE: BAC) spurned Lehman Brothers and instead agreed to acquire Merrill Lynch (NYSE: MER).
-Insurer AIG (NYSE: AIG) begged the Fed for as much as $40 billion of assistance.

This is bigger than either JPMorgan Chase's (NYSE: JPM) buyout of Bear Stearns or the government bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Our colleague Bill Mann, in fact, has deemed this weekend's credit-crunch-inspired string of bailouts, buyouts, and bankruptcies "the biggest financial story of the past half century."
Bigger than the dot-com bust? Yep. Bigger than Black Monday in 1987? Yep. Bigger than the oil shock of the 1970s? Mmmhmm.
NYU economics professor Nouriel Roubini, George Soros, and the International Monetary Fund have all called the overall credit crisis the worst since the Great Depression.

U.S. to Take Over AIG in $85 Billion Bailout

The U.S. government seized control of American International Group Inc. -- one of the world's biggest insurers -- in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system.
The step marks a dramatic turnabout for the federal government, which had been strongly resisting overtures from AIG for an emergency loan or some intervention that would prevent the insurer from falling into bankruptcy. Just last weekend, the government essentially pulled the plug on Lehman Brothers Holdings Inc., allowing the big investment bank to go under instead of giving it financial support. This time, the government decided AIG truly was too big to fail.

Fed Refuses To Bail Out Markets With A Rate Cut

Despite market turmoil, a plunging stock market, the predictions of many investors and vocal calls for interest rate cuts from traders, the Federal Open Market Committee left its interest rate target at 2 percent this afternoon.
My favorite take on this was from MarketWatch. "Just as it had over the weekend to Lehman Bros. and AIG, the Fed said, 'No, you are on your own,'" MarketWatch said.

Goldman, J.P. Morgan Are Asked To Lead $75 Billion AIG Loan Effort

In an effort to prop up giant insurer American International Group Inc., the Federal Reserve on Monday asked Goldman Sachs Group Inc. and J.P. Morgan Chase to help make $70-$75 billion in loans available to the company, according to people familiar with the situation.
The move came as officials on both the state and federal level scrambled Monday to help AIG find ways to come up with as much as $40 billion to help prevent a downgrade of its credit rating, an outcome that could ultimately prove fatal for the firm. It wasn't immediately clear whether the banks would agree to the government's request.

Lehman Files for Bankruptcy

Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.
The 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, has filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan today. The collapse of Lehman, which listed more than $613 billion of debt, surpasses WorldCom Inc.'s insolvency in 2002 and Drexel Burnham Lambert's failure in 1990.
Lehman was forced into bankruptcy after two suitors, Barclays Plc and Bank of America Corp., abandoned takeover talks yesterday and the company lost 94 percent of its market value this year. Chief Executive Officer Richard Fuld, who started working for the New York-based firm in 1969 and turned it into the biggest underwriter of mortgage-backed securities at the top of the U.S. real estate market, joins his counterparts at Bear Stearns Cos., Merrill Lynch & Co. and more than 10 banks that couldn't survive this year's credit crunch.

Bank of America to Buy Merrill for $50 Billion as Crisis Widens

Bank of America Corp., the biggest U.S. consumer bank, agreed to acquire Merrill Lynch & Co. for about $50 billion as the credit crisis claimed another of America's oldest financial companies.
Bank of America will pay $29 a share for New York-based Merrill in stock, 70 percent more than the Sept. 12 closing price, the company said in a statement today. Merrill, battered by $52.2 billion in losses and writedowns from subprime-mortgage- contaminated securities, has plunged more than 80 percent from its peak of $97.53 at the start of last year.
The takeover ends 94 years of independence for Merrill and gives Charlotte, North Carolina-based Bank of America a sales force with 16,690 brokers who manage $1.6 trillion for customers. Merrill, led by Chief Executive Officer John Thain, was in danger of becoming the next subprime casualty after Lehman Brothers Holdings Inc. filed for bankruptcy court protection earlier today.

No Government Funding For Lehman

The Treasury Department is adamantly against any plan to rescue Lehman Brothers that would put taxpayer money at risk, according to a person familiar with the matter.

Negotiations over the fate of Lehman are underway right now, with officials from the Treasury Department and the Federal Reserve playing a pivotal role. But the government's assistance is mainly confined to offering waivers of certain banking regulations rather than any direct financial role, the person said.

September 11,We will never forget

Lehman To Lose $3.9 Billion

Lehman Brothers said this morning that it expects to lose $3.9 billion for the third quarter, or $5.92 a share. The bank will spin off spin off to its shareholders $25 billion to $30 billion of commercial mortgages into a new public company called to be called Real Estate Investments Global. LEH also has plans to sell a majority stake in its investment management division. And they are "committed to examining all strategic alternatives," including a complete takeover (though no one actually said that). According to CEO Dick Fuld, "Intense public scrutiny has been a distraction for clients and employees."

Take A Load Off Fannie

Lehman Shares Spike Downward

For a second day in a row, Lehman Brothers shares are getting pounded downward. The stock is off more than 30 percent as I file this entry, and had traded as low as $8 a share earlier this morning.

Before He Trades a Carrie Underwood Parody

End of an era

The Treasury Department announced Sunday a plan to bail out and recapitalize collapsing home mortgage giants Fannie Mae and Freddie Mac in one of the biggest government rescues in U.S. history.

Lehman rises on new KDB talk

NEW YORK (MarketWatch) -- Shares of Lehman Brothers rose as much as 5% in early trading Tuesday after Korea Development Bank confirmed it's in talks to buy a stake in the troubled bank as part of a consortium of banks in the region.

Damn It Feels Good To Be A Banker

Pickens to NBC: My Army Will Get to You and You Will Run My Ad

For those of you following the Pickens Plan these last two months, the legendary oilman turned de facto national energy policy director has not seen a camera he doesn’t like. And for good reason… no one likes paying $4 a gallon for gas. So if people in Iran are converting their cars to natural gas so that they can sell us more oil at triple digit prices, we ought to know about it, NBC.

We have four new ads which are either on the air, or ready to go on the air. The ads have been “cleared” by every network… except for NBC which has refused to clear a :15 second ad about Iran.
In the ad Boone talks about how the Iranians are moving quickly to vehicles powered by natural gas so they can free up their $120 a barrel oil to sell to us. Boone says: “Get this one. Iran is changing its cars to run on natural gas and we’re not doing a thing here…”
The problem? NBC wants us to PROVE that “we’re not doing a thing here.”
Sometimes you just have to wonder.

Fannie and Freddie Rally

Stocks post modest gains, slightly below session highs. Nine of the ten sectors are posting a gain. The energy sector (+1.3%) is no longer the leader, overtaken by telecom (+1.3%) as crude futures, up 1.2% to $117.64 per barrel, give up some gains.
Crude oil traded up as much a 2.9% at $119.63 earlier in the session.
Financials are up 0.5%, with Fannie Mae (FNM 6.17, +0.55) and Freddie Mac (FRE 4.44, +0.47) once again leading the way as traders speculate about the future of the two government-sponsored enterprises. Over the last five sessions, shares of Fannie and Freddie are up 39% and 34%, respectively. However, the gains do not come even close to making up recent losses. During the last 30 sessions, shares of Fannie and Freddie are still down 34% and 36%, respectively.

Why dressing for success now means looking like hell.

Get on an elevator in any Manhattan office building, and there's a good chance you'll find yourself surrounded by them: the tattersalls, the windowpanes, the mini-checks of Brooks Brothers' fleet of Non-Iron Dress Shirts.

Inoffensive? Yes, as are the often-accompanying oxfords with Nike Air technology in the soles. But as the patterns blend together, they start to form a vaguely disturbing picture.

Gone is the time when the Patrick Batemans of the world could hold pissing contests over the microscopic differences in their business card stocks, dismissing peons for the inferior weaves of their suits. These days, there are fewer distinctions between industries and power levels. Pretty much everyone looks more like they belong in tech support than in a partners' meeting. (View our slideshow to see how the captains of industry dress.)

That's because somewhere between His Girl Friday and casual Friday, between black-tie and BlackBerrys, our workforce morphed from Mad Men into marathon men—and the race is not to the sartorial top, but to the bottom of the laundry pile.

When the dotcom bubble burst, many predicted an end to Teva-wearing C.E.O.'s and even the curtailment of casual Fridays. Clearly the second tsunami of tech money, which brought twentysomethings in hoodies to the head of the conference table, has helped keep that from happening. But tech chic only has so much to do with the dressing down of the workforce. As Bill Clinton might say, it's "the economy, stupid.

"Before sitting down to write this, I emailed a bunch of friends in various professions and asked them about their work wear. The men overwhelmingly responded with an affinity for the aforementioned stiff shirts from Brooks Brothers, as well as half-brags about their disheveled appearances at the office. "I wind up wearing my lunch more often than not" one wrote [subtext: because I eat at my desk every day]. "I wear pleated-front pants because they're more comfortable," another admitted [subtext: I eat at my desk every day—and every night].

If you look good, you're obviously not working hard enough. Outdoing the next guy in terms of looking put-upon is the new pissing contest.

In a world where profits are down, bankruptcies are rampant, and the most entrenched I-bankers are getting the heave-ho, you can't afford to look as though you spared an extra second thinking about the cut of your Charvet shirt. Did you go shopping for a Breguet instead of billing that extra hour? Are you interviewing? Because seriously, who wears a suit these days? Who has time for that?

With subprime losses piling up, it's not just cubicle-bound young analysts who are being subjected to this sort of scrutiny. After all, Angelo Mozilo always looks like he put a lot of thought into his clothes. Company shareholders are more concerned with what the stewards of their wealth actually do. "Hey, nice suit, asshole. How much did it cost me?"

In fact, it's not uncommon for the messiest guy in the office to also be the most heralded, a phenomenon that has made its way into popular culture. In Dana Vachon's recent novel, Mergers & Acquisitions, the only clear hero is the poor overweight slob to whom all J.S. Spenser's dirty work has been outsourced. The other guys—the ones who can tell the difference between a Turnbull & Asser and a Thomas Pink shirt "blindfolded"—are not so laudable.

Women can take even more criticism if they seem overly concerned with their dress—often at the hands of female superiors. "I'm more 'fashiony,' which is definitely misunderstood and under-appreciated in my line of work," wrote a V.P. at one of New York's better banks. Sport more tailored and modern clothing and you get hit with a double-whammy—not only are you not working hard enough, you're trying to distract everyone else from their business.

If you think that's all hooey, I'd ask you to recall the time Hillary Clinton showed up on the Senate floor revealing a centimeter of cleavage under her rose-colored blazer. No one went so far as to accuse her of trolling for a date, but no one exactly congratulated her on the outfit either. (Or glance at the wardrobes of such titans as Meg Whitman, who just stepped down from her post as eBay's C.E.O., and Irene Rosenfeld, head of Kraft Foods. For them, the way to success was brains, hard work, and separates from Talbots).

There are, of course, the rare exceptions to the rule. Julie Macklowe, portfolio manager for Sigma Capital Management, was recently recognized as an "It" girl by Vogue. And, speaking of that venerable title, fashion is perhaps the one industry where showing up looking like a slob or like a buttoned-up matron can get you into hot water. Don something less-than and you could face the same question: "Who has time for…that?"

Traders' raging hormones cause stock market swings

The behaviour of impetuous teenagers is often blamed on hormones, but could the economy be suffering from the same influence? Research from the University of Cambridge suggests that the movements of money in the financial markets are correlated to stock traders' levels of two hormones: the steroids testosterone and cortisol.

John Coates and Joe Herbert took saliva samples from 17 male traders on a London stock trading floor twice daily over the course of eight days. They monitored the traders' levels of testosterone, the hormone most often associated with aggression and sexual behaviour, and cortisol, the so-called stress hormone.

They tracked those levels against the amount of money that a trader made or lost, and against the variation in the market. What they found was that when the traders made more money, they had elevated levels of testosterone. When the markets were particularly variable, they had elevated levels of cortisol.
In control?

But which is the cause and which is the effect? A further analysis showed that traders who started their days with elevated testosterone made more money than those who didn't. One trader went on a six-day winning streak, making twice as much money each day as the previous one. Over that period, his testosterone levels rose steadily, some 74 per cent.
"The popular view is that experienced traders can control their emotions," Coates says, "but in fact their endocrine systems are on fire."

There is a point of diminishing returns; too much testosterone leads to too much aggression and reckless decision making.
And while elevated cortisol levels probably contribute to better risk management in volatile situations, neuroendocrinologist Bruce McEwen of Rockefeller University, New York, says long-term elevation can ravage the body with anything from cardiovascular disease to arthritis.
Helplessness
"It also leads to shrinkage of the prefrontal cortex and hippocampus, brain regions associated with decision making and factual memory," McEwen says. "Meanwhile it contributes to growth in the amygdala, a region associated with emotional memory and anxiety."
That can lead to a condition called "learned helplessness", in which people feel that their actions in risky situations don't matter.
"What concerns me is not how far down the markets go, but for how long," Coates says. "I've been a trader, I know that learned helplessness can happen."

Defeat or victory
So both the short- and the long-term effects of the hormones can contribute to the overall health of the markets. "Maybe bubbles and crashes are coming from these steroids," Coates says. While it may be that less money would be made, "maybe if more women and older men were trading, the markets would be more stable."

Bob Rose, Director of the Mind, Brain, Body and Health Initiative at the University of Texas Medical Branch, did experiments in the 1970s with monkeys showing the rise and fall of testosterone with social interactions. "We know testosterone can be responsive to defeat or victory, but the directionality wasn't clear," Rose says. "We like to think of ourselves as emancipated from these biological processes, that the intellectual and emotional are totally separate. I like this study because it argues against that dualism."

Christian the Lion - Reunion!

Don’t Blame the Shorts. Blame the Longs

Dennis Berman digs up a fascinating excerpt on short-selling from the 1932 hearings on the stock market crash. it's a shame we don't seem to have anyone in Congress now even capable of formulating the question asked by New York Congressman Frank Oliver: "They blamed the 'shorts,' whereas, as a matter of fact, if the prices were inflated, they should have blamed the 'longs' for having inflated them?"

Insider Trading Scandals Rock London

Always cool: being an insider. Never cool: insider trading. The list of those acting, well, not very cool in Old Blighty is growing apace, with the U.K.’s Financial Services Authority taking swings at a Swiss bank (three guesses and the first two don’t count which one that is) and one of London’s oldest trading firms, which, incidentally, it already targeted less than a week ago. As office premises are duly raided and nearly a dozen traders are arrested, here are a few more reasons why it’s important to consider that just because you’re paranoid, doesn’t mean they’re not after you.

Workers at the Swiss bank UBS and JPMorgan Cazenove, one of the oldest names in the City of London, were arrested for alleged insider dealing on Tuesday as police raids sent a chill through the UK capital’s trading rooms.

The arrests mark the third high-profile action the Financial Services Authority has taken in the past week over insider trading, in a sign of a tougher approach to a problem the regulator believes is rife in the Square Mile and a threat to the integrity of the markets.

City of London police and 40 FSA officials arrested eight people and raided premises throughout London and England’s south-east in what the regulator described as “a major ongoing investigation into insider dealing rings”.

Rally Ahead?

As of Friday, the CBOE Put/Call Ratio had fallen below 0.85, which could be a sign of a bullish week to come for U.S. indices. What's more, with the WTO in global trade policy talks this week, we could also see some follow through in equity markets, via the strengthening of the U.S. Dollar. The last WTO meeting of this magnitude was in 2001, coincidentally just about when the greenback began tumbling south. Given the market's recent selloff (and the potential reversal looming in the U.S. Dollar) equity enthusiasts may want to keep a close eye on the put/call ratio on Monday and Tuesday.

Merrill to Sell $8.5 Billion of Stock

Merrill Lynch & Co., the third- biggest U.S. securities firm, will sell $8.5 billion of stock and liquidate $30.6 billion of bonds at a fifth of their face value to shore up credit ratings imperiled by mortgage losses.

Temasek Holdings Pte., the Singapore-owned fund that became Merrill's biggest investor by acquiring shares in December, will buy $3.4 billion of the new stock, Merrill said yesterday in a statement. The New York-based company is paying Temasek $2.5 billion to offset losses on its earlier investment. Merrill will also book $5.7 billion of writedowns in the third quarter.

Almost $19 billion of net losses in the past year forced Chief Executive Officer John Thain to backtrack from assurances that the firm had enough capital to weather the credit crisis. Since taking the post in December, Thain has raised $30 billion in an effort to keep pace with mounting charges on mortgage bonds amassed by his predecessor, Stan O'Neal. Standard & Poor's cut the firm's debt rating last month and signaled that more downgrades were possible.

``It does mark an attempt at curing the problem but at a tremendous cost to existing shareholders,'' said Charles Peabody, an analyst at Portales Partners LLC in New York who recommends selling Merrill shares. ``How can you be pleased by that? It's a necessity.''

Merrill rose 31 cents to $24.64 in German trading today. The company sold its 20 percent share of Bloomberg LP, the parent of Bloomberg News, earlier this month for $4.43 billion, 11 percent less than the $5 billion market value Thain placed on the stake in June. He also agreed to sell Financial Data Services, an in- house mutual-fund administrator worth $3.5 billion.

Lone Star

``While third-quarter results and the future capital raise would be yet another burden, we do believe there is light at the end of the tunnel,'' wrote Douglas Sipkin, an analyst at Charlotte-based Wachovia Corp. who has a ``market perform'' rating on Merrill, in a note to clients today.

In yesterday's statement, Merrill said it agreed to sell $30.6 billion of collateralized debt obligations -- the mortgage- related bonds that have caused most of the firm's losses -- for $6.7 billion. The buyer is an affiliate of Lone Star Funds, a Dallas-based investment manager.

``Our consistent focus has been to opportunistically reduce risk, and in order to take advantage of this sizeable sale on an accelerated basis, we have decided to further enhance our capital position,'' Thain, 53, said in the statement.

`Little Disheartening'

Merrill will provide financing for about 75 percent of the purchase price, according to the statement. The financing is secured only by the assets being sold, meaning Merrill would absorb any losses on the CDOs beyond $1.68 billion.

The sale will result in a third-quarter pretax writedown of $4.4 billion, Merrill said. Less than two weeks ago, the firm announced $3.5 billion of CDO writedowns for the second quarter that ended in June.

Bank of America Corp. analyst Michael Hecht increased his forecast for Merrill's full-year loss by 51 percent to $11.55 per share and cut his price target for the stock to $40 from $47, according to a note to clients.

``Why these assets are written down when you're selling them and weren't written down in your earnings is a question,'' said Ralph Cole, a senior vice president in research at Ferguson Wellman Capital Management Inc. in Portland, Oregon, which oversees $2.7 billion and doesn't own Merrill shares. ``This kind of announcement is surprising and a little disheartening.''

Thain declined to comment through Merrill spokeswoman Jessica Oppenheim.

22 Cents

Merrill has lost almost 55 percent of market value this year. Only Lehman Brothers Holdings Inc. has fallen more on the 11- member Amex Securities Broker/Dealer Index, dropping 77 percent. Merrill fell 12 percent yesterday in New York Stock Exchange composite trading.

Thain, who worked as a mortgage trader during his 25-year career at Goldman Sachs Group Inc., said July 17 that he was ``hopeful'' that Merrill could sell its CDOs, while adding he didn't ``want to do dumb things'' by selling them too cheap.

In yesterday's statement, Thain said, ``the sale of the substantial majority of our CDO positions represents a significant milestone in our risk-reduction efforts.''

The CDOs Merrill sold to Lone Star were carried on the securities firm's books at about $11.1 billion, indicating they already had been written down to about 36 cents on the dollar. The Lone Star sale values them at about 22 cents.

Fourth Share Sale

Merrill may sell as many as 356.5 million shares in the latest offering, the firm said yesterday in a presentation for potential buyers. That represents a 36 percent increase over the number outstanding at the end of June. The price of the new shares will be set today, according to the presentation.

The share sale is Merrill's fourth since Thain took over following O'Neal's ouster last October.

Thain raised $6.2 billion in December -- when Temasek bought its initial 9.4 percent stake -- and another $6.6 billion in January. That month, he told investors Merrill had attracted more than it needed. Since then, he has repeated that the firm's capital was sufficient.

``We're very comfortable with our position,'' Thain said on Jan. 30. ``We could have raised substantially more money. We turned people away.''

Three months later he sold $2.55 billion of preferred stock. Then, after Standard & Poor's cut Merrill's credit rating to A from A+ on June 2, Thain announced he was considering a sale of Merrill's stake in Bloomberg.

Temasek Compensation

When the firm reported a $4.65 billion second-quarter net loss on July 17, Thain said the firm's resources were adequate.

``We believe that we are in a very comfortable spot in terms of our capital,'' he said on a conference call with analysts.

In yesterday's statement, Thain said the new capital became necessary because the completion of the Lone Star deal meant additional losses had to be booked.

Merrill was contractually bound to compensate Temasek and other investors who bought shares in the December and January offerings. The stock has since plummeted almost 55 percent. So in addition to the new public offering, Merrill will pay $2.5 billion to Temasek and issue an additional 195 million shares to the other investors, according to yesterday's statement.

Losses on CDOs and the associated hedging contracts have accounted for about $27 billion of the total $41 billion of total writedowns taken by Merrill over the past year. The firm was one of the largest underwriters of CDOs before the credit crisis hit last year, and Merrill was stuck with more than $50 billion of them on its books when buyers fled the market.

XL Hedges

The remaining CDOs may be less worrisome to investors. About $7.2 billion of the $8.8 billion left are hedged with ``highly rated counterparties,'' the firm said in the statement.

In addition to the losses from the Lone Star sale, Merrill said it will record a $500 million loss related to the termination of hedging contracts on CDOs with XL Capital Assurance. It took another $800 million maximum loss related to the potential settlement of hedges with other bond-insurers.

Moody's Investors Service affirmed Merrill's A2 credit rating today after the securities firm announced the asset sale.

``We think they have taken care of much of their troublesome exposure in structured finance and real estate,'' said David Hendler, a bank analyst at CreditSights Inc. in New York.

Is Wall Street Hammered?

SEC's Emergency Order on Short-Selling

The SEC issued an emergency order to enhance investor protections against "naked" short selling in the securities of Fannie Mae, Freddie Mac, and primary dealers at commercial and investment banks. The SEC's order will require that anyone effecting a short sale in these securities arrange beforehand to borrow the securities and deliver them at settlement. The order will take effect at 12:01 a.m. ET on Monday, July 21. In addition to this emergency order, the SEC will undertake a rulemaking to address these issues across the entire market.

The Commission's emergency order, pursuant to its authority under Section 12(k)(2) of the Securities Exchange Act of 1934, will be effective at 12:01 a.m. ET on July 21, 2008 and will terminate at 11:59 p.m. ET on July 29, 2008. The Commission may extend the order to continue it in effect thereafter if the Commission determines that the continuation of the order is necessary in the public interest and for the protection of investors, but for no more than 30 calendar days in total duration.

The securities identified in the Commission's order:

BNP Paribas Securities Corp.
Bank of America Corporation.
Barclays PLC Citigroup Inc.
Credit Suisse Group Daiwa Securities Group Inc.
Deutsche Bank Group AG.
Allianz SE.
Goldman, Sachs Group Inc.
Royal Bank ADS.
HSBC Holdings PLC ADS.
J. P. Morgan Chase & Co.
Lehman Brothers Holdings Inc.
Merrill Lynch & Co., Inc.
Mizuho Financial Group, Inc.
Morgan Stanley UBS AG.
Freddie Mac.
Fannie Mae.

Lower Manhattan 2010

Short-Selling Saga: A Thing Of Unmitigated Awfulness

Whenever SEC Chairman Christopher Cox speaks, we just have to get under our desks to hide. It’s like the old “duck and cover” reflex from our childhood war days kicks back in. So, if we correctly understand the methodology behind his latest move to change short-selling rules, Cox isn't opposed to legitimate short selling, but he is opposed to “unlawful manipulation through 'naked' short selling” that might undermine the stability of financial institutions. OK, fine. But if it’s now being acknowledged that no such uptick in naked short selling took place isn’t that sort of the same thing as admitting this particular emergency action is toothless?

The federal crackdown on short selling is causing a scramble on Wall Street, with brokerage firms racing to implement new controls before the rules take effect on Monday.
The unprecedented get-tough action by the Securities and Exchange Commission means that securities firms will have to fine-tune their back-office operations to comply with the requirements.
The biggest potential headache: Existing rules allow brokers to sell stock short as long as they reasonably believe they can locate the needed shares and deliver them on time. Under the new curbs, short sellers will need to make formal arrangements to borrow the shares before selling them.
"You need to have certainty that you have the stock," one Wall Street executive said Wednesday.
The mechanics of such arrangements, as well as the charges likely to be levied for the extra legwork, are still being discussed. Wall Street brokerage executives held a conference call Wednesday morning with the Securities Industry and Financial Markets Association, a trade group, to discuss how to respond to the SEC's new rules and seek clarification from the agency.
SEC Chairman Christopher Cox acknowledged that the crackdown will create additional work for brokerage firms, though he said he sees "no obstacles to implementation." Agency officials delayed the effective date of the stricter short-selling requirements to "provide appropriate operational relief to the exchanges," he added.

Meredith Whitney Ingratiates Herself To Wachovia Chief

Dollar Dominatrix Meredith Whitney has probably not made a lot of friends with her sack-rippingly bad reports. Merrill Lynch CEO John Thain, always up for a heel in his ass, is not much of a fan of the Oppenheimer analyst, and Citi CEO Vikram Pandit, who likes everyone, refers her to as "that devil woman" in mixed company. One pal she's probably made via downgrade is new Wachovia CEO Robert Steel. Apparently Steel's options were priced yesterday, the same day Whitney downgraded the stock to underperform. And now the timing of this morning's marshmallow company morale building exercise--and the subsequent sixteen percent jump in stock price-- makes perfect sense.

Opening Bell: 14.7.08

S&P futures vs fair value: +14.6. Nasdaq futures vs fair value: +24.0. Futures suggest a sharply higher open following news that two goverment sponsored enterprises are getting some support from the Fed and U.S. Treasury. Treasury Secretary Paulson announced a plan to temporarily increase the line of credit that Fannie Mae (FNM) and Freddie Mac (FRE) have with the Treasury, give temporary authority for Treasury to purchase equity in the companies and give the Federal Reserve more oversight on the companies. Congress needs to approve the plan. Meanwhile, both Fannie and Freddie will be allowed to access the Fed's discount window. Separately, IndyMac Bancorp (IMB) was taken over by the FDIC after a run on the bank prompted its collapse. In merger and acquisition news, Anheuser-Busch (BUD) accepted a acquisition offer from InBev, after the Belgian company sweetened its offer to $70 per share, or $52 billion, from $65 per share.

Still Down, But Not as Bad

Stocks have climbed off their opening lows, but the Dow Jones Industrial Average remains nearly 100 points lower. Though not as severe as earlier, the tone remains generally pessimistic as declining stocks on the NYSE outnumber advancers by almost 6-to-1.

The preliminary July Consumer Sentiment Survey from the University of Michigan came in at 56.6, which is better than the 55.5 economists forecast and just above the previous 56.4 reading.

Treasury Secretary Paulson will issue a statement related to GSEs.

Attack of the Pump

Financials Slump, Energy Advances

The Dow and S&P 500 join the Nasdaq in negative territory, with Tuesday's best-performing names under selling pressure. Conversely, the two worst-performing sectors yesterday -- materials (+1.8%) and energy (+1.5%) -- lead the market in the early going.

The financial sector (-1.2%) is under selling pressure after its 6% advance yesterday. Fannie Mae (FNM 16.78, -0.84) and Freddie Mac (FRE 12.62, -0.84) are giving back some of the hefty gains that they made yesterday.

After opening with a 4% gain, Wachovia (WB 15.22, -0.33) slumps to a 2% loss. The bank was upgraded to Neutral from Underperform at Merrill Lynch. Merrill feels that if Wachovia decides to merge with a larger firm, it could receive between $16 and $20 per share.

Happy 4th of July

Selling Pressure Comes Quickly

The major indices opened in positive territory, but quickly encountered a bout of selling pressure. In turn, the Nasdaq has been taken into the red.
Financials (+0.8%) are currently the best performing sector. Only energy (-0.3%), telecom (-0.2%), and technology (-0.2%) are trading with losses.
Oil is currently trading near $144.10 per barel, up roughly 0.4%.

Buy `Crash Protection' Puts on European Stocks, Goldman Says

June 30 (Bloomberg) -- Investors should buy ``crash protection'' against a plunge this year in European stocks because losses are likely and insurance costs are low, according to Goldman Sachs Group Inc.
The world's most-profitable securities firm recommended Dow Jones Euro Stoxx 50 Index puts that expire in December and have a strike price of 3,000, or 11 percent less than the measure's closing level today.
``High inflation/low growth is an increasing downside tail risk,'' London-based derivatives analysts at Goldman, which had the second-ranked equity derivatives research team in Institutional Investor magazine's 2007 survey, wrote in a report dated June 26. ``If that risk crystallizes, we think it means material rather than modest downside.''
The Euro Stoxx 50 plunged 24 percent to 3,354.20 in 2008 and closed at the lowest since November 2005 last week. The December 3,000 puts on the index fell 6.7 percent to 83.50 euros today. They cost as much as 189.30 euros in March.
European-style puts convey the right to sell a security for a certain amount, the strike price, on a given date. Some investors buy or sell options to guard against changes in the prices of securities they already own. Others use the contracts to bet price swings, or volatility, will increase or decrease.

Volatility Drops Most Since 2001 as Dollar Fall Slows

June 30 (Bloomberg) -- Currency volatility fell by the most since 2001 this quarter, reducing the chances central bankers will seek to bolster the dollar.
JPMorgan Chase & Co.'s index of implied volatility on dollar options against the euro, the yen, the British pound, the Swiss franc and the Australian and Canadian dollars declined 2.21 percentage points to 10.28 percent. It's the biggest drop since the second quarter of 2001.
Diminished price swings are a sign to Goldman Sachs Group Inc., Mizuho Corporate Bank Ltd. and Australia & New Zealand Banking Group Ltd. that central banks will avoid intervening in foreign exchange even after the dollar depreciated 25 percent against its biggest trading partners in the past five years.
Currency swings were muted after finance ministers from the Group of Seven nations said on April 11 they were concerned about the impact of ``sharp fluctuations in major currencies'' and the ``implications for economic and financial stability.''
``Policy makers have been trying to engineer more stability in foreign exchange markets and they've succeeded,'' said Tony Morriss, a Sydney-based currency strategist at ANZ, Australia's third-largest bank. ``They need a stable dollar to ensure commodity prices don't continue to rise.''
The euro traded at $1.5759 at 8:46 a.m. in New York from $1.5794 late last week when it strengthened 1.2 percent against the dollar. The U.S. currency rose 0.7 percent against a basket of six currencies since March 31, ending a 16 percent slump that started Sept. 30, 2006. The Dollar Index traded on ICE Futures U.S. in New York rose to 72.366 from 71.802 on March 31. The last time central banks stepped in to arrest a slide in the greenback was 1995.
`Warming Up'
``More players are warming up to the idea that the dollar will remain in a range,'' said Ryousei Ishida, senior vice president of foreign exchange options in Tokyo at Mizuho, a unit of Japan's second-largest publicly traded bank. The outlook is spurring traders to use strategies that benefit when currencies are little changed, he said.
The median estimate of 46 strategists surveyed by Bloomberg is for the dollar to trade at $1.54 per euro by Sept. 30. The median yen forecast is 104 per dollar. It last traded at 105.49 against the dollar.
Double-No-Touch
Some traders are buying ``double-no-touch'' options to bet the dollar will be little changed against the yen, Ishida said. Another strategy is to sell ``straddles'' with strike prices near the current level in the spot market as they would benefit from a further decline in volatility, he said.
A double-no-touch pays the buyer a fixed amount should the underlying currency remain between two levels during the life of the option. A straddle is a call and put with the same strike price and duration. Calls grant the right to purchase currencies, while puts allow sales. The strike price is where an option may be exercised.
Finance ministers and central banks object to rising volatility because it complicates the assessment of economies, interferes with monetary policy and gives companies little time to adjust by cutting costs. The dollar's plunge also contributed to rising prices for raw materials that sent oil, copper and iron ore to record highs.
`Getting Close'
``I thought that around $1.60 we were getting close'' to intervention, Jens Nordvig, a strategist with Goldman Sachs in New York, said of the possibility central bankers would buy and sell currencies to influence exchange rates. ``But after the recent events I would say we're not getting close until we reach $1.65.''
Volatility implied by dollar-yen options expiring in one month fell to 12.4 percent from 17 percent on March 31, the biggest quarterly percentage drop since the second quarter of 2000.
Volatility may rise as credit market losses from the U.S. subprime mortgage collapse spread, according to Sean Callow, senior currency strategist in Sydney at Westpac Banking Corp., Australia's fourth largest lender. Financial companies posted $400 billion in losses related to subprime-contaminated securities, according to data compiled by Bloomberg.
``We're expecting a very volatile quarter,'' Callow said. ``There are plenty of signs of ongoing stress in capital markets. We're bearish on the dollar.''
Bernanke's Attentive
The dollar decline ended this quarter as Federal Reserve Chairman Ben S. Bernanke said on June 3 he is ``attentive'' to the possibility that the dollar's slump will cause inflation expectations to rise. Treasury Secretary Henry Paulson said June 9 he hasn't ruled out intervention to prop up the U.S. currency.
The Fed ended a run of seven interest-rate cuts last week, keeping its target rate for overnight loans between banks at 2 percent. The dollar traded between $1.5303 per euro and $1.5843 since June 3.
``The market appreciates the unusual nature of Bernanke's and Paulson's comments,'' said Takeharu Miki, a currency options manager at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly traded lender. ``This should help support the dollar and keep volatility stable.''
Miki said he is looking for opportunities to sell options to profit from further declines in volatility. The dollar will swing between 105 yen and 110 yen next quarter, he said.

Loser Wins, Winner Loses

Once again, the wisdom of the markets rules, finding favor with France Telecom, whose stock rose after it scuttled its $42 billion takeover bid for TeliaSonera, whose stock promptly crashed on word it would not be transforming into Europe's largest telecom by revenue. Odd that it was TeliaSonera that kicked and screamed so hard, when it looks like it had the most to lose…

France Telecom abandoned its $42bn bid for TeliaSonera on Monday after failing to agree a price with the Nordic telecommunications company and its main shareholder, the Swedish government.
“Following its proposal for a friendly combination with TeliaSonera announced on 5 June, France Telecom has today decided not to submit a firm offer to TeliaSonera’s shareholders,” the French group said in a statement.

Selling Resumes

The stock market has made a precipitous drop and is now trading in negative ground. The Dow Jones Industrials Average is at its worst level of the session and the Nasdaq is testing its session low.
A day after Goldman Sachs noted that Merrill Lynch (MER 32.48, -0.57) may incur additional write-downs, other reports are indicating the same notion. Also likely to incur write-downs is financial services giant American International Group (AIG 27.48, -0.61), according to Bloomberg.com. The report also indicated that AIG's write-downs may push the company to a quarterly loss.
The financial sector is trading lower, currently down 0.6%.

Dow Down Over 200 Points

The stock market has trended further downward to hit a new session low. The S&P 500 is now down approximately 1.9%, while the Dow is down by the same percentage and the Nasdaq is down 2.5%.
All ten of the major economic sectors are in the red. Eight have losses in excess of 1.0%. Four have losses in excess of 2.0%.
Dow component General Electric (GE 27.16, -0.83) is struggling this session as its stock hits a new 52-week low. Reports indicate the company is having difficulty finding a buyer for its credit card business.

Crude Stockpiles Unexpectedly Rise

Crude inventories for the week ended June 21 unexpectedly rose 803,000 barrels, compared to the expected decline of 1.1 million. Just prior to the release, Crude was trading down 1.0% to $135.69 per barrel.
Stocks bounce to session highs on the crude data. The Dow is up 0.4%, underperforming the S&P 500's gain of 0.8%.
Boeing (BA 70.62, -4.17) is the largest drag on the Dow, falling more than 5%. According to reports, Boeing was added to the Conviction Sell List at Goldman Sachs, citing the weak economy and record fuel prices. American Express (AXP 41.70, -0.40) is also in the news, after announcing it will receive $1.8 billion from MasterCard (MA 293.94, +13.57) after settling an antitrust lawsuit. American Express claimed that MasterCard had illegally blocked AXP from the U.S. bank-issued card business. AXP had previously settled its lawsuit with Visa (V 83.89, +1.23) for $2.25 billion.

Royal Bank Of Scotland Issues Crash Alert and BIS Warns of Great Depression

Global stock markets are braced for one of the worst crashes in 100 years, according to the Royal Bank of Scotland (RBS) credit strategy team. RBS credit strategy team, in a special report for clients, said it expects inflation to paralyse economies and spark the crash. The report advised investors to be prepared for a severe downturn in global stock and credit markets, saying the S&P 500 index is likely to fall by more than 300 points to around 1,050 points by September.
Mr Bob Janjuah, the report’s author is highly respected in the City after his foresighted warnings last year about the credit crisis proved accurate.
Meanwhile, the Bank of International Settlements (BIS) has continued to warn of a possible second Great Depression. The Bank for International Settlements, the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s. In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the U.S. sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.
According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.

Financials, Energy Stocks Outperform

Buyers are not showing much interest in the early-going as the major indices post modest losses. Eight of the ten economic sectors are in negative territory, led by weakness in telecom (-2.3%) and healthcare (-1.0%). Financials (+0.2%) and energy (+0.5%) are the best-performing sectors.
Although financials are outperforming, insurance giant AIG (AIG 34.02, -0.16) is posting a loss of 0.5%. The Dow component ousted its CEO in response to the company's poor performance and handling of the credit market turmoil. AIG said the management change is not in response to its second quarter results, which the company is expected to report sometime in August.
Crude oil futures are posting a substantial gain of 2.2% at $137.89 per barrel, although they did slip from their all-time high of $139.89 per barrel. Meanwhile, the dollar hits session lows, falling 0.9% against a basket of world currencies. The weakness in the dollar is giving a boost to gold (+2.0% to $887.80).

Tech Bounces Back

The stock market continues to trade roughly 1.0% higher. This session's primary leaders include financial players Bank of America (BAC 29.81, +0.96), JPMorgan Chase (JPM 38.20, +1.07), and Citigroup (C 19.98, +0.77).
Citigroup announced it is closing the hedge fund Old Lane Parterns, which it acquired less than one year ago, according to The Wall Street Journal. The hedge fund was co-founded by current CEO Vikram Pandit.
Tech (+1.6%) has regained its strength and the Nasdaq is back near its previous morning highs.
The dollar is showing some renewed strength, as indicated by the dollar index. The dollar index is up 0.8% this session.

Bloomberg: Brokerage analysts generally suck at picking stocks

Wanna lose money? Follow Brokerage analyst picks: Remember how last week Bernstein and Deutsche Bank analysts put out buys on Lehman? We see how well that's turned out so far given this morning's news. Bloomberg looked into just how well brokerage analysts do at opining on their own. It seems that in general, overall, you would have LOST money by following their picks over the longer run. And who was the worst analyst? Merrill's Guy Moszkowski. (Having seen this article over the weekend, and hearing him ask questions during the Lehman conference call, we must admit to cracking up). Even Meredith Whitney, who's turned into something of an industry star for her prescient brokerage opinions, hasn't fared so well over the longer term....

Investors who followed the advice of analysts who say when to buy and sell shares of brokerage firms and banks lost 17 percent in the past year, twice the decline of the Standard & Poor's 500 Index. Buying shares on the advice of Merrill Lynch & Co.'s Guy Moszkowski, the top-ranked brokerage analyst in Institutional Investor's annual survey, cost investors 17 percent, according to data compiled by Bloomberg. Deutsche Bank AG analyst Michael Mayo's counsel to purchase New York-based Lehman Brothers Holdings Inc. lost 59 percent. Citigroup Inc.'s Prashant Bhatia still rates Merrill ``buy'' after its 56 percent retreat from a January 2007 record.
``One would expect that if there was any industry Wall Street estimates would be more precise on, it would be their own,'' said Richard Weiss, who oversees $60 billion as chief investment officer at City National Bank in Beverly Hills, California. ``But this particular debacle was so global in nature and pervasive, you can't blame them for missing this one.''
In a May 5 report, Mayo said Lehman's earnings may vary widely as more writedowns are taken. The bank's long-term prospects make it an appealing stock, he wrote. Moszkowski cut his earnings estimate for Lehman in a June 4 report, saying it will post a second-quarter loss rather than his previously forecast profit. Bhatia forecast a 2008 loss for Merrill in an April 18 report, saying the firm faces a ``challenging market environment.'' Meredith Whitney, who correctly predicted Citigroup Inc. would reduce its dividend to preserve capital, lost 16 percent collectively at Oppenheimer & Co., her current employer, and CIBC World Markets, where she worked until mid-January. Whitney's advice included buying Lehman shares up until March 24 as the stock lost 35 percent.
The analysts who made investors the most money were Charles Peabody of New York-based Portales Partners LLC and Richard Bove of Ladenburg Thalmann & Co. in Miami, Florida, whose ``sell'' ratings on Merrill, Morgan Stanley, Lehman and Goldman Sachs Group Inc. produced profits of 47 percent and 18 percent, respectively, according to data compiled by Bloomberg. Citigroup's Colin Devine made 4.8 percent by rating Ameriprise Financial Inc., the only brokerage stock he covers, ``sell'' before moving to ``hold'' in July.

Large-Cap Financials Rebound

A recovery attempt sputters as broad-based weakness offsets a 0.7% gain in financials and a 0.2% advance in consumer staples.
Large-cap financial names are providing early leadership, with strength in JPMorgan (JPM 38.30, +0.79), Bank of America (BAC 30.18, +0.60) and Citigroup (C 20.18, +0.58). The sector fell 7.2% over the last two sessions, hitting a fresh multi-year low in yesterday's trade.
The remaining sectors are under pressure, with notable weakness in telecom (-2.0%), materials (-1.7%) and energy (-1.4%).

Opening Bell: 9.6.08

Lehman Set To Raise $5 Billion Amid Losses (WSJ)Here's the latest reckless rumor mongering from the WSJ (joke): Lehman will announce today or tomorrow that it's raised more than $5 billion from various parties including the New Jersey Division of Investment. Not clear how much the hard working folks of New Jersey will be kicking in, and how much, say, will be kicked in by the hard working folks of Singapore. Actually, mainly the cash will be coming from the US, which is a bit of a surprise. Word is, the company may decide to wait to see what happens today in the market (whether it stabilizes or not) before announcing the investment. Ultimately, it's hard to see what difference one day makes with this sort of thing though,no? Then again, you can ask Bear what kind of difference a day or two makes and get a real answer.

Heat expected to reach 100 degrees in NYC on Monday (Newsday)Seeing as it's only 5:30 AM right now, and the air conditioner is going full bore (but to no effect) and we're pounding iced unsweetened green tea, this doesn't seem too implausible. With humidity it's supposed to feel like 105... also pretty easy to believe. Let us know if your workplace switches to its own power or takes any other measure to reduce strain on the grid.

Happy Trading