No Break in the Standoff of Microsoft and Yahoo (NYT) Still no sign of action from either side, and still no talking -- at least according every single published report we've seen anywhere. If Microsoft and Yahoo are having secret talks, they're doing a damned good job of hiding it.
Deutsche Bank reports 1Q loss on $4.2 billion in write-downs (AP) Another $4.2 billion, but only a $220 million quarterly loss for Deutsche Bank, so the writedown wasn't totally out of proportion with the rest of the quarter. Basically, they did worse than break even, but no losses into the billions. That's a victory. Also, worth noting that Deutsche Bank had telegraphed this result, so no real surprise either way.
Tuesday, April 29, 2008
Monday, April 28, 2008
Opening Bell: 28.4.08
Mars, Buffett Team Up in Wrigley Bid (WSJ) Next weekend's Berkshire Hathaway annual shareholder meeting is gonna be sweet (rimshot)! Word is that the company is going to team up with Mars to buy out Wrigley, really putting a strangleholde on the candy industry. The value for the deal is pegged at $22 billion. Exact terms are unclear. BRK may provided Mars with the financing to do the deal and then become a major Mars shareholder. But, given all the talk about how the chocolate makers may or may not have an oligopoly, probably smart for some other end sellers to find strength in numbers.
Continental Airlines Chooses Not to Merge Forget what ya heard. Continental does not plan to merge with another airline. Some reports over the weekend suggested the carrier was in talks -- mergers are the hot thing now, after 5 or 6 airlines have gone bankrupt, and while others have agreed to tie up. But Continental specifically sent out a press release saying it all wasn't true. From a letter sent to employees (and now to shareholders): "We have significant cultural, operational and financial strengths compared to the rest of the industry, and we want to protect and enhance those strengths -- which we believe would be placed at risk in a merger with another carrier in today's environment."
Eos Airlines Crashes (PE Hub) Oh right, speaking of bankruptcies, Eos is the latest. The company isn't doing some in-bankruptcy operation. Nope, just shutting down completely. Yesterday was its final day of flying between New York and London (Stansted). What we need is about 10 more of these, including some huge ones, and the remaining ones might actually be able to perform better. BTW, it looks as though the Eos website is down too. Who wants to pay for hosting? Nobody.
Oil Rises to Record on U.K. Pipeline Shutdown, Nigerian Attack (Bloomberg)You might be able to make the argument that this is the most common headline of the last four years. Like really. Anyway, oil is near $120 now, so that's probably a foregone conclusion. And that means $125 is too. Even without Nigerian attacks, the trend seems to be solidly up.
Continental Airlines Chooses Not to Merge Forget what ya heard. Continental does not plan to merge with another airline. Some reports over the weekend suggested the carrier was in talks -- mergers are the hot thing now, after 5 or 6 airlines have gone bankrupt, and while others have agreed to tie up. But Continental specifically sent out a press release saying it all wasn't true. From a letter sent to employees (and now to shareholders): "We have significant cultural, operational and financial strengths compared to the rest of the industry, and we want to protect and enhance those strengths -- which we believe would be placed at risk in a merger with another carrier in today's environment."
Eos Airlines Crashes (PE Hub) Oh right, speaking of bankruptcies, Eos is the latest. The company isn't doing some in-bankruptcy operation. Nope, just shutting down completely. Yesterday was its final day of flying between New York and London (Stansted). What we need is about 10 more of these, including some huge ones, and the remaining ones might actually be able to perform better. BTW, it looks as though the Eos website is down too. Who wants to pay for hosting? Nobody.
Oil Rises to Record on U.K. Pipeline Shutdown, Nigerian Attack (Bloomberg)You might be able to make the argument that this is the most common headline of the last four years. Like really. Anyway, oil is near $120 now, so that's probably a foregone conclusion. And that means $125 is too. Even without Nigerian attacks, the trend seems to be solidly up.
Thursday, April 24, 2008
Opening Bell: 24.4.08
Credit Suisse Q1 write-downs of $5.3B drives $2.1B loss (AP) The big write-downs just keep coming. A $5 billion write-down and a $2.1 billion loss at Credit Suisse. Surprisingly, its the banks first loss during this whole mess, so in some respects, they're really behind the curve. Said CEO Brady Dougan: "I am confident that we will continue to serve as a safe haven for clients in uncertain and volatile markets, and to seize the opportunities that arise in times of market dislocation to create long-term value."
Apple Riding a 51% Jump in Mac Sales (NYT)The Mac is back. Ok, it's already been back for awhile, and you'll have to forgive the obnoxious McCain reference. But it is back big. And now Apple is right back to square one: it's a computer company again. Sure, the iPhone is a big deal, and the iPod Touch (iPhone sans-phone) may be the future of the iPod, but for real growth, look no further than those things you find on tables at coffee shops, with stickers on 'em. And they're still just a sliver of the overall market.
CEO Says Microsoft Could Forgo Yahoo (WSJ)Ballmer is trying to make Yahoo shareholders nervous, implying that Microsoft could, in the end, change its mind, particularly if Yahoo balks at the current price. Negotiating tactic much? Probably. But also probably a little truth, since, well, Microsoft could live without Yahoo. Oh and Microsoft employees are said to be growing increasingly wary. Not surprisingly. It's like being 17, and your parents are about to have a new kid.
Shanghai index soars 9.3 percent on tax cut (AP)Interesting: it wasn't all that long ago, that the Chinese government was doing everything in its power to slow down the raging stock market. You know, just cool it off a little. These included various measures aimed at borrowing and margin requirements and the like. Well, those measures worked too well, some might say, and now they're busily reversing course, trying to pump up the flagging Shanghai market. Stocks soared over 9 percent last night, as the government slashed a general tax on share transactions. The original tax was just proposed last May, so this is a sharp reversal.
Apple Riding a 51% Jump in Mac Sales (NYT)The Mac is back. Ok, it's already been back for awhile, and you'll have to forgive the obnoxious McCain reference. But it is back big. And now Apple is right back to square one: it's a computer company again. Sure, the iPhone is a big deal, and the iPod Touch (iPhone sans-phone) may be the future of the iPod, but for real growth, look no further than those things you find on tables at coffee shops, with stickers on 'em. And they're still just a sliver of the overall market.
CEO Says Microsoft Could Forgo Yahoo (WSJ)Ballmer is trying to make Yahoo shareholders nervous, implying that Microsoft could, in the end, change its mind, particularly if Yahoo balks at the current price. Negotiating tactic much? Probably. But also probably a little truth, since, well, Microsoft could live without Yahoo. Oh and Microsoft employees are said to be growing increasingly wary. Not surprisingly. It's like being 17, and your parents are about to have a new kid.
Shanghai index soars 9.3 percent on tax cut (AP)Interesting: it wasn't all that long ago, that the Chinese government was doing everything in its power to slow down the raging stock market. You know, just cool it off a little. These included various measures aimed at borrowing and margin requirements and the like. Well, those measures worked too well, some might say, and now they're busily reversing course, trying to pump up the flagging Shanghai market. Stocks soared over 9 percent last night, as the government slashed a general tax on share transactions. The original tax was just proposed last May, so this is a sharp reversal.
Wednesday, April 23, 2008
Opening Bell: 23.4.08
The stock market is clutching the unchanged mark. The ten sectors are split down he middle, with five in the red and five in the green -- which reflects the indecisiveness of market participants this morning.
The Nasdaq Composite, led by large cap tech, is modestly outperforming as it posts a decent gain. Apple (AAPL 163.34, +3.14) is providing leadership ahead of its earnings report after this session's close. Shares of Broadcom (BRCM 26.06, +2.51) are up roughly 11% after the company's first quarter results exceeded expectations and the firm guided second quarter revenue above the consensus estimate.
The Nasdaq Composite, led by large cap tech, is modestly outperforming as it posts a decent gain. Apple (AAPL 163.34, +3.14) is providing leadership ahead of its earnings report after this session's close. Shares of Broadcom (BRCM 26.06, +2.51) are up roughly 11% after the company's first quarter results exceeded expectations and the firm guided second quarter revenue above the consensus estimate.
Tuesday, April 22, 2008
Futures Exchanges Get Hammered
The major indices are unable to gain in momentum as eight of the ten sectors remain in the red.
CME Group (CME 475.48, -48.02), operator of the Chicago Mercantile Exchange, is facing some notable selling interest after reporting earnings that failed to meet expectations. A 25% year over year increase in revenue and earnings of $4.67 per share was not enough to meet Wall Street's expectation of $4.80 per share. As a result, the firm's shares are down 9.2%.
Shares of Nymex (NMX) are falling in conjunction of CME, as under the previously announced acquisition each share of Nymex will be worth 0.1323 shares of CME.
CME Group (CME 475.48, -48.02), operator of the Chicago Mercantile Exchange, is facing some notable selling interest after reporting earnings that failed to meet expectations. A 25% year over year increase in revenue and earnings of $4.67 per share was not enough to meet Wall Street's expectation of $4.80 per share. As a result, the firm's shares are down 9.2%.
Shares of Nymex (NMX) are falling in conjunction of CME, as under the previously announced acquisition each share of Nymex will be worth 0.1323 shares of CME.
Monday, April 21, 2008
Opening Bell: 21.4.08
S&P futures vs fair value: -6.2. Nasdaq futures vs fair value: -7.8. Futures suggest a lower start to the trading day. Earnings reports have been mixed this morning. Bank of America (BAC) missed its estimate by $0.18, and Eli Lilly (LLY) fell four cents short. But there were some bright spots, as Merck, (MRK), Novartis (NVS), Hasbro (HAS) and Halliburton (HAL) all topped expectations. Meanwhile, crude oil has hit an all-time high of $117.40 per barrel.
Sunday, April 20, 2008
Sustained Or Temporary Rally?
The futures market is now betting that the Fed will not cut its 2.25% target lending rate by 50 bp on April 30, compared with 46% chance a week ago. It is pricing in a 98% chance of a quarter-point rate cut. The US dollar is likely to start the new trading week with a bullish tone, rubbed off by optimism in the stock markets, but if US data such as durable goods and housing fail to meet consensus, any rebound could slow down or be hampered again. The greenback will also be influenced by US companies’ earnings reports next week.
Saturday, April 19, 2008
Is The Worst Over?
This week the markets ended on a positive note after generally positive earnings data from major companies like Intel (INTC: 22.55 +0.44 +1.99%), JP Morgan (JPM: 45.76 +0.64 +1.42%), Caterpillar (CAT: 85.28 +6.69 +8.51%), Google (GOOG: 539.41 +89.87 +19.99%) and Coca Cola (KO: 60.11 -0.57 -0.94%). The Dow [[^dji]] rose 4.3% for the week and is down around 3.1% for the year; the S&P 500 [[^gspc]] is up 4.3% for the week and down around 5.3% for the year, and the Nasdaq [[^ixic]] is up 4.9% for the week but still off 9.4% for the year.
Surprisingly, financials outperformed the overall market for the week. Citigroup (C: 25.11 +1.08 +4.49%), AIG (AIG: 0.00 N/A N/A) and JP Morgan (JPM: 45.76 +0.64 +1.42%) up around 10% this week. Even more surprisingly, this was due in large part to those terrible numbers from Citi which announced $16 billion in writedowns, $5.1 billion in losses and around 9,000 job cuts. With such huge writedowns and the bank trying to “come clean” on its losses, investors hope that the worst may soon be over. On Thursday, after Merrill Lynch (MER: 47.35 +0.64 +1.37%) announced $6.5 billion in writedowns and that it would axe around 3,000 employees, investors showed the same optimism and the stock rose an astonishing 7%.
All of this despite a worsening outlook with Citi expecting a 20% drop in home prices of which 9% has already occurred and Citi’s CFO Mr. Crittenden saying that “if historical trends were to repeat, there is a potential for higher loss in our cards portfolio into 2009.” What these results show is that investors want transparency, but are these banks transparent enough among themselves that CEOs have a clear picture of where all the assets lie and what writedowns might be forthcoming?
Apart from financials, tech stocks also got a boost from Google’s (GOOG: 539.41 +89.87 +19.99%) strong earnings which grew 30% to $1.31 billion or $4.84 a share. This was far more than the $4.52 that analysts expected. The stock shot above $500 for the first time in over a month but is still far below its high above $740 in November last year. Price targets now are far more modest than the $900 that was predicted back then, although analysts are already giving targets in the mid $600s.
On a sidenote, these improved earnings from Google may give Yahoo (YHOO: 28.43 +0.40 +1.43%) more leverage when negotiating with Microsoft (MSFT: 30.00 +0.78 +2.67%) or other suitors of a proposed takeover as it shows that internet advertising is still healthy and growing strong. Of course the real clincher will be when Yahoo reports earnings this coming Tuesday.
Surprisingly, financials outperformed the overall market for the week. Citigroup (C: 25.11 +1.08 +4.49%), AIG (AIG: 0.00 N/A N/A) and JP Morgan (JPM: 45.76 +0.64 +1.42%) up around 10% this week. Even more surprisingly, this was due in large part to those terrible numbers from Citi which announced $16 billion in writedowns, $5.1 billion in losses and around 9,000 job cuts. With such huge writedowns and the bank trying to “come clean” on its losses, investors hope that the worst may soon be over. On Thursday, after Merrill Lynch (MER: 47.35 +0.64 +1.37%) announced $6.5 billion in writedowns and that it would axe around 3,000 employees, investors showed the same optimism and the stock rose an astonishing 7%.
All of this despite a worsening outlook with Citi expecting a 20% drop in home prices of which 9% has already occurred and Citi’s CFO Mr. Crittenden saying that “if historical trends were to repeat, there is a potential for higher loss in our cards portfolio into 2009.” What these results show is that investors want transparency, but are these banks transparent enough among themselves that CEOs have a clear picture of where all the assets lie and what writedowns might be forthcoming?
Apart from financials, tech stocks also got a boost from Google’s (GOOG: 539.41 +89.87 +19.99%) strong earnings which grew 30% to $1.31 billion or $4.84 a share. This was far more than the $4.52 that analysts expected. The stock shot above $500 for the first time in over a month but is still far below its high above $740 in November last year. Price targets now are far more modest than the $900 that was predicted back then, although analysts are already giving targets in the mid $600s.
On a sidenote, these improved earnings from Google may give Yahoo (YHOO: 28.43 +0.40 +1.43%) more leverage when negotiating with Microsoft (MSFT: 30.00 +0.78 +2.67%) or other suitors of a proposed takeover as it shows that internet advertising is still healthy and growing strong. Of course the real clincher will be when Yahoo reports earnings this coming Tuesday.
Friday, April 18, 2008
Opening Bell: 18.4.08
Citi Reports First Quarter Net Loss of $5.1 Billion, Loss Per Share of $1.02 What's another $10 billion or so in writedowns? After all, the company booked a 63 percent gain in transaction income and international revenues were strong. And it hardly needs mentioning that ex-writedowns, Citi actually turned in something like a $5 billion gain, which is actually a monster quarter. Pandit: "During the first quarter, valuations of our sub-prime related exposures in fixed income markets and leveraged finance assets have further declined and credit costs in our consumer lending businesses have increased."
Citi beats doomsday scenario (Fortune)Well, you've gotta start somewhere, and beating a doomsday scenario is better than beating nothing, so we're sure they're glad to take it. The $10 billion writedown was less than the most dire forecasts of an $18 billion write down (again, hats off).
Google Quiets Growth Fears (WSJ)It was probably one of the most scrutinized quarters of all time, as analysts pored over morsel after morsel of Google data. And the general view was that it was going to be tough, with only an outside chance of a solid score. Well they did it, solidly beating expectations on the revenue and earnings front, while sending shares of comScore into a tailspin after hours -- comScore being the traffic analysis firm that had been warning the loudest of a deceleration in paid clicks.
Citi beats doomsday scenario (Fortune)Well, you've gotta start somewhere, and beating a doomsday scenario is better than beating nothing, so we're sure they're glad to take it. The $10 billion writedown was less than the most dire forecasts of an $18 billion write down (again, hats off).
Google Quiets Growth Fears (WSJ)It was probably one of the most scrutinized quarters of all time, as analysts pored over morsel after morsel of Google data. And the general view was that it was going to be tough, with only an outside chance of a solid score. Well they did it, solidly beating expectations on the revenue and earnings front, while sending shares of comScore into a tailspin after hours -- comScore being the traffic analysis firm that had been warning the loudest of a deceleration in paid clicks.
Thursday, April 17, 2008
New Rules: Sell The Rumor, Buy The Fact – Or Whatever
If everything on Wall Street has gone arse-backward and pear-shaped, is it any wonder that the usual tenets of trading have also reversed? Just look at how the stocks of JP Morgan and Wells Fargo rallied shamelessly yesterday, despite the banks’ clear confirmation that Rome continues to burn – and with no indication of when the firestorm will be put out. Are traders engaging in wise garbage-picking...or just suffering from another round of bank-apologist Stockholm Syndrome?
Investors sometimes get excited by bad news just because it isn't as bad as it could have been.
Wednesday's profit slide at J.P. Morgan Chase & Co. and Wells Fargo & Co. triggered a rally by beleaguered bank stocks. Earnings reports and comments by top executives of the two big U.S. banks included a slew of troubles -- more souring mortgages, write-downs of toxic securities and economic gloom -- but no particularly nasty new surprises for shareholders who have been pummeled by the credit crunch since summer.
It was almost as if Wachovia Corp. hadn't rattled Wall Street two days earlier by slashing its dividend and getting a $7 billion cash infusion to plug its leaky balance sheet -- or as if the rocky bank-earnings season didn't have a long way to go, including Citigroup Inc.'s results Friday.
The forecast for the banking industry has left investors feeling like they are on a seesaw, up one day and down the next. That isn't likely to end anytime soon, judging from the sobering words that came from J.P. Morgan and Wells Fargo yesterday, even as their stock prices were rising.
"Obviously, the worse a recession gets, the worse it gets for us," said James Dimon, chairman and chief executive at J.P. Morgan, the second-largest U.S. bank in stock-market value behind Bank of America Corp. After being hit hard in recent months by rising delinquencies in its $95 billion home-equity portfolio, J.P. Morgan warned its prime-mortgage business is experiencing higher charge-offs as more borrowers fail to repay their loans.
Investors sometimes get excited by bad news just because it isn't as bad as it could have been.
Wednesday's profit slide at J.P. Morgan Chase & Co. and Wells Fargo & Co. triggered a rally by beleaguered bank stocks. Earnings reports and comments by top executives of the two big U.S. banks included a slew of troubles -- more souring mortgages, write-downs of toxic securities and economic gloom -- but no particularly nasty new surprises for shareholders who have been pummeled by the credit crunch since summer.
It was almost as if Wachovia Corp. hadn't rattled Wall Street two days earlier by slashing its dividend and getting a $7 billion cash infusion to plug its leaky balance sheet -- or as if the rocky bank-earnings season didn't have a long way to go, including Citigroup Inc.'s results Friday.
The forecast for the banking industry has left investors feeling like they are on a seesaw, up one day and down the next. That isn't likely to end anytime soon, judging from the sobering words that came from J.P. Morgan and Wells Fargo yesterday, even as their stock prices were rising.
"Obviously, the worse a recession gets, the worse it gets for us," said James Dimon, chairman and chief executive at J.P. Morgan, the second-largest U.S. bank in stock-market value behind Bank of America Corp. After being hit hard in recent months by rising delinquencies in its $95 billion home-equity portfolio, J.P. Morgan warned its prime-mortgage business is experiencing higher charge-offs as more borrowers fail to repay their loans.
Opening Bell: 17.4.08
Merrill Lynch posts steep first-quarter loss on write-downs (AP) At first blush, Merrill's earnings don't look so good, though who knows how these things play out during the day. The company posted another wide loss -- $2.14 billion -- which was deeper than analysts estimated. Revenue also came in below expectations, which may be the real story here. Here's the actual release. While the headline gives the basic numbers, the subheadline trumpets: "Record Quarterly Net Revenues in Global Wealth Management." Well that's something. Another something: 4,000 jobs are expected to be cut, says the company in the report.
Wednesday, April 16, 2008
Financials, Tech Lift Market
The major indices are posting strong gains in excess of 1%, with all ten economic sectors are in positive territory.
Financials are providing leadership with a 2.4% gain. JPMorgan Chase (JPM 44.00, +1.88) and Wells Fargo (WFC 29.44, +1.63) are posting hefty gains as traders embrace their better than expected earnings results.
Tech (+1.6%) is also showing strength, with Intel (INTC 22.14, +1.23) Leading the way.
Financials are providing leadership with a 2.4% gain. JPMorgan Chase (JPM 44.00, +1.88) and Wells Fargo (WFC 29.44, +1.63) are posting hefty gains as traders embrace their better than expected earnings results.
Tech (+1.6%) is also showing strength, with Intel (INTC 22.14, +1.23) Leading the way.
Tuesday, April 15, 2008
Opening Bell: 15.04.08
Delta, Northwest Agree to Merge; May Start Trend (WSJ) Well, it finally happened. Delta and Northwest. At least they've come to an agreement. Now we'll see if they can pull it off (merging), and then we'll see if they can pull that off (making money). So just the first start in a long, long road to recovery. We wish 'em luck. Oh, speaking of Delta. Has anyone else noticed those ads in the subway where they talk about how Delta can bring you change? IE, you achieve change by flying from New York to Beijing or whatnot. Question: are they making change their slogan because their name is delta? If so, very clever, though your average subway rider probably isn't getting it.
Retailing Chains Caught in a Wave of Bankruptcies (NYT) Something about bankruptcies, whatever. The author really buried the lede on this one: At least 140 foot lockers are going to close in the next year. We're of two minds of course. On the one hand, we love sneakers, so any reduced channels to buy sneakers isn't good. On the other hand, Foot Lockers need some help to regain their luster. They're a little on the sterile side, and while you can find a good, standard Nike AF1 there, sure, it's not where you'd go for anything more interesting. Maybe they can work on that for the next time the consumer is strong.
As other staples soar, potatoes break new ground (Reuters)Sort of depressing when you think about it. With all these concerns over the global food supply, a renewed interest in the potato? The beginning of the article gets it half right: "As wheat and rice prices surge, the humble potato -- long derided as a boring tuber prone to making you fat -- is being rediscovered as a nutritious crop that could cheaply feed an increasingly hungry world." It does make you fat. What's wrong with broccoli or cauliflower or cabbage? Why eat a bland potato? What's the world coming to?
Retailing Chains Caught in a Wave of Bankruptcies (NYT) Something about bankruptcies, whatever. The author really buried the lede on this one: At least 140 foot lockers are going to close in the next year. We're of two minds of course. On the one hand, we love sneakers, so any reduced channels to buy sneakers isn't good. On the other hand, Foot Lockers need some help to regain their luster. They're a little on the sterile side, and while you can find a good, standard Nike AF1 there, sure, it's not where you'd go for anything more interesting. Maybe they can work on that for the next time the consumer is strong.
As other staples soar, potatoes break new ground (Reuters)Sort of depressing when you think about it. With all these concerns over the global food supply, a renewed interest in the potato? The beginning of the article gets it half right: "As wheat and rice prices surge, the humble potato -- long derided as a boring tuber prone to making you fat -- is being rediscovered as a nutritious crop that could cheaply feed an increasingly hungry world." It does make you fat. What's wrong with broccoli or cauliflower or cabbage? Why eat a bland potato? What's the world coming to?
Sunday, April 13, 2008
Hugh Hendry
Hugh Hendry, CIO of hedge fund Eclectica Asset Management, declared that financial stocks could take 25 years to recover from the subprime disaster and added that Citigroup Inc. would fall below $10 a share.
His logic: Subprime represents the puncturing of a bubble that began the last time Citi collapsed, in 1991 (bottoming at less than $10 a share). “The origination of the bubble in U.S. financing is circa 1991, with the bailout of Citigroup,” Hendry said. “It is my presumption that we will return to such levels.” Hendry argues that when a bubble is created in a sector’s stock it takes a quarter of a century to return to prebubble levels. Oil stocks, he said, made up a third of the S&P in 1980, then suffered a 25-year period of “scorched earth” before their recent recovery.
There are a number of oddities here, some of which may come from the rather sketchy Reuters story itself. Twenty-five years is a long period in the markets, and over that stretch market fundamentals tend to be swamped by real economy factors. The Japanese bust and deflation lasted more than a decade, despite multiple policy errors. Based on Hendry’s notion, it took until 1954 to recover from the Crash of 1929, with the ultimate real-world event — World War II — playing a small role in the middle. Is our situation analogous to that? What role will policy — good, bad, indifferent — play?
Hendry’s theory raises other questions. Does his 25-year cycle apply to single firms — Citi, say — or entire sectors? Is, say, Morgan Stanley on the same treadmill as Citi? The usual notion is that real economy supply and demand — from OPEC to China — determined the ’70s bubble and our current runup in prices and shares. Did China suddenly get thirsty for oil because 25 years have passed? Why would the subprime bubble have begun in 1991 with the Citi “bailout” — technically it was less a bailout by the Fed than benign neglect — which involved highly leveraged loans and commercial real estate? We’ve had ups and downs since then, including a tech bubble, a recession and down real estate markets, all of which hammered financial stocks. Why is 25 years the magic interval? And what’s so magic about $10 a share? Hendry, a longtime bear, has suggested in the past that there’s a sort central bank conspiracy — he’s not an Alan Greenspan fan — to flood the world in liquidity and that we’ve been living a loose-money, false prosperity for years. Has that now come to an end? Or is he communing with some deeper technical wisdom that’s not evident? Has subprime exposed a fundamental flaw in financial stocks, beside a collective speculative boo-boo, that will keep them prostrate until 2033?
We may well be in for an ugly stretch here, and financials may be down for awhile. But the future is still uncertain, and Hendry is cavalier-bordering-on-the-absurd with his use of the term “bubble,” which, like any cycle theory, can be tossed around so promiscuously because the future is so unknowable. It’s good conference fodder, but just that, particularly in these gloomy times. Maybe Hendry has a quarter-century short on.
His logic: Subprime represents the puncturing of a bubble that began the last time Citi collapsed, in 1991 (bottoming at less than $10 a share). “The origination of the bubble in U.S. financing is circa 1991, with the bailout of Citigroup,” Hendry said. “It is my presumption that we will return to such levels.” Hendry argues that when a bubble is created in a sector’s stock it takes a quarter of a century to return to prebubble levels. Oil stocks, he said, made up a third of the S&P in 1980, then suffered a 25-year period of “scorched earth” before their recent recovery.
There are a number of oddities here, some of which may come from the rather sketchy Reuters story itself. Twenty-five years is a long period in the markets, and over that stretch market fundamentals tend to be swamped by real economy factors. The Japanese bust and deflation lasted more than a decade, despite multiple policy errors. Based on Hendry’s notion, it took until 1954 to recover from the Crash of 1929, with the ultimate real-world event — World War II — playing a small role in the middle. Is our situation analogous to that? What role will policy — good, bad, indifferent — play?
Hendry’s theory raises other questions. Does his 25-year cycle apply to single firms — Citi, say — or entire sectors? Is, say, Morgan Stanley on the same treadmill as Citi? The usual notion is that real economy supply and demand — from OPEC to China — determined the ’70s bubble and our current runup in prices and shares. Did China suddenly get thirsty for oil because 25 years have passed? Why would the subprime bubble have begun in 1991 with the Citi “bailout” — technically it was less a bailout by the Fed than benign neglect — which involved highly leveraged loans and commercial real estate? We’ve had ups and downs since then, including a tech bubble, a recession and down real estate markets, all of which hammered financial stocks. Why is 25 years the magic interval? And what’s so magic about $10 a share? Hendry, a longtime bear, has suggested in the past that there’s a sort central bank conspiracy — he’s not an Alan Greenspan fan — to flood the world in liquidity and that we’ve been living a loose-money, false prosperity for years. Has that now come to an end? Or is he communing with some deeper technical wisdom that’s not evident? Has subprime exposed a fundamental flaw in financial stocks, beside a collective speculative boo-boo, that will keep them prostrate until 2033?
We may well be in for an ugly stretch here, and financials may be down for awhile. But the future is still uncertain, and Hendry is cavalier-bordering-on-the-absurd with his use of the term “bubble,” which, like any cycle theory, can be tossed around so promiscuously because the future is so unknowable. It’s good conference fodder, but just that, particularly in these gloomy times. Maybe Hendry has a quarter-century short on.
Can New G7 Statement Reverse USD Slump?
The G7 has spoken. After discussions in Washington on Friday, G7’s finance ministers and central bankers issued a statement saying that the current financial market turmoil “remains entrenched and more protracted” than they had anticipated. They have also modified their statement on currencies by saying they are concerned about the possible implications brought about by sharp fluctuations in major currencies. They didn’t specifically mention the US dollar in the statement. As long as they don’t intervene in the currency markets, the USD is likely to look bearish. Although the US dollar’s rapid drop against currencies like the Euro, yen, Canadian dollar has caused some displeasure from policymakers and business lobby groups, traders and investors have difficulty in not shorting the USD seeing how the whole economic situation is worsening in the US. And even though US Treasury Secretary Paulson keeps repeating the politically correct phrase of being in support of a strong dollar, no one can deny the falling dollar has been helping US exports, which is a benefit in itself. US policymakers are likely to appreciate that, but that is something they can’t really reveal. Martin Feldstein, president of the US-based National Bureau of Economic Research, said Friday the dollar “needs to fall further” because “the United States needs to continue to reduce its trade deficit”. He also said “European countries need to get ready for a falling dollar”.
Although Bernanke and Greenspan are forecasting an improvement in conditions as early as later this year, there is a chance things may not pan out that way. After all, Bernanke had been late in recognising the cracks in the economy, and Greenspan has had a part to play in the current financial and economic situation. 77-year-old George Soros, billionaire investor, said last Monday that he considered this the biggest financial crisis of his lifetime.
Although Bernanke and Greenspan are forecasting an improvement in conditions as early as later this year, there is a chance things may not pan out that way. After all, Bernanke had been late in recognising the cracks in the economy, and Greenspan has had a part to play in the current financial and economic situation. 77-year-old George Soros, billionaire investor, said last Monday that he considered this the biggest financial crisis of his lifetime.
Friday, April 11, 2008
GE Earnings Drop Spooks Markets
There are always people trying to call a bottom during a bear market like the one we are in, but as hard as they try, it seems to be very elusive indeed. General Electric’s (GE: 32.31 -4.44 -12.08%) nearly 6% drop in profit at $4.3 billion, or 43 cents per share, from $4.57 billion, or 44 cents per share, last year, and below the 50-53 cents per share forecast by GE, sent already jittery investors running to dump stocks and sending GE’s shares down by up to 12%. GE also lowered profit forecasts for the next quarter to 53-55 cents per share.
GE said the decline was due to troubles in its financial services business which fell by 28%, due to the erosion in commercial finance. One of the main causes according to GE, was the Bear Stearns (BSC: 10.06 -0.14 -1.37%) fiasco which made it very difficult for them to complete asset sales as planned, and that it was too late in the quarter to give a warning.
Industrial earnings for GE were up substantially, and the fact that around half of their earnings come from overseas helped balance out the problems they had with their financial unit. Investors were not convinced though, and think GE’s business may be suffering in more than just the financial sector.
Since GE is sometimes considered a bellwether of big companies, this unexpected drop in profit sent stocks reeling across the board as investors are once again reminded that the economy may have a long road to recovery.
GE said the decline was due to troubles in its financial services business which fell by 28%, due to the erosion in commercial finance. One of the main causes according to GE, was the Bear Stearns (BSC: 10.06 -0.14 -1.37%) fiasco which made it very difficult for them to complete asset sales as planned, and that it was too late in the quarter to give a warning.
Industrial earnings for GE were up substantially, and the fact that around half of their earnings come from overseas helped balance out the problems they had with their financial unit. Investors were not convinced though, and think GE’s business may be suffering in more than just the financial sector.
Since GE is sometimes considered a bellwether of big companies, this unexpected drop in profit sent stocks reeling across the board as investors are once again reminded that the economy may have a long road to recovery.
Opening Bell 2008-04-11
S&P futures vs fair value: -14.4. Nasdaq futures vs fair value: -18.5. It is shaping up to be a sharply lower start to the trading day. March import prices rose 2.8% month over month, which is larger than the expected 2.0% increase. Year-over-year, imported prices are up 14.8%.
General Electric (GE) provided a disappointing earnings report and outlook, citing weakness in financial services. GE said it earned $0.44 per share in the first quarter, which falls short of the consensus estimate of $0.51. Its revenue came in at $42.2 billion, which missed the consensus estimate of $43.7 billion. Looking ahead, GE expects its second quarter earnings per share will be $0.53 to $0.55 per share, which misses the expected earnings of $0.58. For full year 2008, GE expects to earn between $2.20 and $2.30 per share, versus the $2.43 consensus. European markets fell into the red after GE's report, with the FTSE shedding 0.9% and the Dax down 1.2%.
General Electric (GE) provided a disappointing earnings report and outlook, citing weakness in financial services. GE said it earned $0.44 per share in the first quarter, which falls short of the consensus estimate of $0.51. Its revenue came in at $42.2 billion, which missed the consensus estimate of $43.7 billion. Looking ahead, GE expects its second quarter earnings per share will be $0.53 to $0.55 per share, which misses the expected earnings of $0.58. For full year 2008, GE expects to earn between $2.20 and $2.30 per share, versus the $2.43 consensus. European markets fell into the red after GE's report, with the FTSE shedding 0.9% and the Dax down 1.2%.
Thursday, April 10, 2008
Goldman's Blankfein Says Credit Crisis Close to End
April 10 (Bloomberg) -- Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said the credit crisis that's forced almost $250 billion in losses and writedowns at the world's biggest finance companies may be approaching an end.
``We're closer to the end than the beginning,'' Blankfein, 53, said today in response to an investor question at the company's annual shareholder meeting in New York.
Blankfein's comments follow similar remarks by Morgan Stanley Chief Executive Officer John Mack, who said earlier this week that the end of the credit-market contraction that began with subprime mortgages may be in sight. Mack said it would probably last ``a couple of quarters'' longer.
Likening the crisis to the periods in an American football game, Blankfein said that ``we're maybe at the end of the third quarter, or the beginning of the fourth.'' He warned that fourth quarters often last longer because of time-outs, and sometimes go into overtime. ``No promises on how long that is,'' he said.
After the collapse of the subprime mortgage market in the past year, losses spread to leveraged loans, commercial real estate and municipal bonds. Goldman, the biggest securities firm by market value, posted record profit last year, avoiding writedowns that caused historic losses at Merrill Lynch & Co. and Citigroup Inc.
`Say on Pay'
All 12 of Goldman's board members won re-election for another year with more than 97 percent of the vote, the company said at today's meeting. Support for a so-called say-on-pay proposal that would give investors a non-binding advisory role on executive compensation was backed by 42.7 percent of the vote, a higher percentage than the 36.8 percent of Morgan Stanley shareholders who backed a similar proposal.
Goldman's first-quarter earnings fell 53 percent, the biggest decline since the company went public in 1999, on losses from investments and lower revenue from trading and investment banking. The drop followed four consecutive years of record profit.
Market participants remain skeptical and the cost to protect corporate debt from default rose for a third day today as concerns resurfaced that banks and securities firms face more losses. Credit-default swaps tied to Goldman, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. rose, signaling a decline in investor confidence.
``As the world is nervous, so are we,'' Blankfein told shareholders. ``Our resting state, in good times, is to be very nervous.''
U.S. Economy
Blankfein also said that, while economic growth in the U.S. has slowed and is currently ``fluctuating around zero'' percent, he doesn't foresee a deep recession.
``It feels relatively shallow,'' Blankfein said. ``By the end of the year we think we will be on a growth curve again.''
Banking stocks may be poised for a recovery, Tobias Levkovich, Citigroup's chief U.S. equity strategist, said in an interview today in Frankfurt. He has an ``overweight'' rating on the industry after the Standard & Poor's 500 Financials Index fell 21 percent last year and another 12 percent this year.
``We have probably passed the worst point,'' Levkovich said today. ``But I expect the volatility to continue.''
``We're closer to the end than the beginning,'' Blankfein, 53, said today in response to an investor question at the company's annual shareholder meeting in New York.
Blankfein's comments follow similar remarks by Morgan Stanley Chief Executive Officer John Mack, who said earlier this week that the end of the credit-market contraction that began with subprime mortgages may be in sight. Mack said it would probably last ``a couple of quarters'' longer.
Likening the crisis to the periods in an American football game, Blankfein said that ``we're maybe at the end of the third quarter, or the beginning of the fourth.'' He warned that fourth quarters often last longer because of time-outs, and sometimes go into overtime. ``No promises on how long that is,'' he said.
After the collapse of the subprime mortgage market in the past year, losses spread to leveraged loans, commercial real estate and municipal bonds. Goldman, the biggest securities firm by market value, posted record profit last year, avoiding writedowns that caused historic losses at Merrill Lynch & Co. and Citigroup Inc.
`Say on Pay'
All 12 of Goldman's board members won re-election for another year with more than 97 percent of the vote, the company said at today's meeting. Support for a so-called say-on-pay proposal that would give investors a non-binding advisory role on executive compensation was backed by 42.7 percent of the vote, a higher percentage than the 36.8 percent of Morgan Stanley shareholders who backed a similar proposal.
Goldman's first-quarter earnings fell 53 percent, the biggest decline since the company went public in 1999, on losses from investments and lower revenue from trading and investment banking. The drop followed four consecutive years of record profit.
Market participants remain skeptical and the cost to protect corporate debt from default rose for a third day today as concerns resurfaced that banks and securities firms face more losses. Credit-default swaps tied to Goldman, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. rose, signaling a decline in investor confidence.
``As the world is nervous, so are we,'' Blankfein told shareholders. ``Our resting state, in good times, is to be very nervous.''
U.S. Economy
Blankfein also said that, while economic growth in the U.S. has slowed and is currently ``fluctuating around zero'' percent, he doesn't foresee a deep recession.
``It feels relatively shallow,'' Blankfein said. ``By the end of the year we think we will be on a growth curve again.''
Banking stocks may be poised for a recovery, Tobias Levkovich, Citigroup's chief U.S. equity strategist, said in an interview today in Frankfurt. He has an ``overweight'' rating on the industry after the Standard & Poor's 500 Financials Index fell 21 percent last year and another 12 percent this year.
``We have probably passed the worst point,'' Levkovich said today. ``But I expect the volatility to continue.''
Opening Bell: 4.10.08
S&P futures vs fair value: -2.3. Nasdaq futures vs fair value: -4.5. After falling to session lows, futures pare some losses immediately following the release of the weekly initial jobless claims number. Just hitting the wires, new unemployment claims for the week ended April 5 fell to 357,000 from 410,000. Economists expected a reading of 383,000. Separately, the February trade deficit grew to $62.3 billion, compared to the expected deficit of $57.5 billion. Meanwhile, Target (TGT) reported March same-store sales fell 4.4%, compared to consensus that called for a delcine of 2.7%.
News Corp., AOL Pursue Yahoo Deals (WSJ) Microsoft's bid for Yahoo was thrown into utter disarray last night as rumors emerged of both AOL and News Corp. getting into the mix. Yes. News Corp is said to be partnering with Microsoft on a renewed deal, while AOL may announce a merger with Yahoo, as early as next week. This was all of course in the hours after Yahoo and Google unveiled an ad trial designed to show that an independent Yahoo had levers to pull in juicing its revenue. Microsoft did the old antitrust freakout, but suffice to say, all those discussions about how this conclusion is all a matter of "when", not "if" probably should be thrown out the window.
News Corp., AOL Pursue Yahoo Deals (WSJ) Microsoft's bid for Yahoo was thrown into utter disarray last night as rumors emerged of both AOL and News Corp. getting into the mix. Yes. News Corp is said to be partnering with Microsoft on a renewed deal, while AOL may announce a merger with Yahoo, as early as next week. This was all of course in the hours after Yahoo and Google unveiled an ad trial designed to show that an independent Yahoo had levers to pull in juicing its revenue. Microsoft did the old antitrust freakout, but suffice to say, all those discussions about how this conclusion is all a matter of "when", not "if" probably should be thrown out the window.
Wednesday, April 9, 2008
Goldman Had More Trading-Loss Days Than Morgan Stanley, Lehman
April 9 (Bloomberg) -- Goldman Sachs Group Inc., the biggest U.S. securities firm by market value, lost money on more trading days during the first quarter than rivals Morgan Stanley or Lehman Brothers Holdings Inc., according to regulatory filings.
In the three months through Feb. 29, Goldman lost money on 17 days, compared with eight days at Morgan Stanley and seven at Lehman Brothers, the filings show. Goldman's trading department also had more big wins, raking in $100 million or more on 28 occasions, compared with 20 days at Morgan Stanley. Lehman reported it made more than $90 million on 13 days.
``Goldman Sachs takes a more aggressive posture on trading and feels confident doing so because they have some of the most talented people,'' said David Killian, a portfolio manager at Stoneridge Investment Partners in Malvern, Pennsylvania, which manages about $700 million including shares of Goldman, Lehman and Morgan Stanley. ``They're in the business of trading and taking on risk, and they've shown that they're better than peers over the cycle.''
Goldman, under Chief Executive Officer Lloyd Blankfein, depends on trading for 68 percent of the New York-based firm's revenue, more than either Morgan Stanley or Lehman. While Goldman's first-quarter trading revenue slumped 27 percent to $5.66 billion from a year ago, it remained higher than Morgan Stanley's $5.13 billion or Lehman's $1.67 billion.
The filings also show that Goldman lost $100 million or more on five trading days during the quarter. Morgan Stanley lost more than $100 million on one day, while Lehman reported that it lost more than $60 million on three separate occasions.
Lucas van Praag, a spokesman for Goldman, declined to comment.
Goldman declined $2.99, or 1.67 percent, to $175.91 at 10:54 a.m. in New York Stock Exchange composite trading. Lehman dropped $1.27 to $42.40 and Morgan Stanley fell 96 cents to $46.39.
In the three months through Feb. 29, Goldman lost money on 17 days, compared with eight days at Morgan Stanley and seven at Lehman Brothers, the filings show. Goldman's trading department also had more big wins, raking in $100 million or more on 28 occasions, compared with 20 days at Morgan Stanley. Lehman reported it made more than $90 million on 13 days.
``Goldman Sachs takes a more aggressive posture on trading and feels confident doing so because they have some of the most talented people,'' said David Killian, a portfolio manager at Stoneridge Investment Partners in Malvern, Pennsylvania, which manages about $700 million including shares of Goldman, Lehman and Morgan Stanley. ``They're in the business of trading and taking on risk, and they've shown that they're better than peers over the cycle.''
Goldman, under Chief Executive Officer Lloyd Blankfein, depends on trading for 68 percent of the New York-based firm's revenue, more than either Morgan Stanley or Lehman. While Goldman's first-quarter trading revenue slumped 27 percent to $5.66 billion from a year ago, it remained higher than Morgan Stanley's $5.13 billion or Lehman's $1.67 billion.
The filings also show that Goldman lost $100 million or more on five trading days during the quarter. Morgan Stanley lost more than $100 million on one day, while Lehman reported that it lost more than $60 million on three separate occasions.
Lucas van Praag, a spokesman for Goldman, declined to comment.
Goldman declined $2.99, or 1.67 percent, to $175.91 at 10:54 a.m. in New York Stock Exchange composite trading. Lehman dropped $1.27 to $42.40 and Morgan Stanley fell 96 cents to $46.39.
Opening Bell: 4.9.08
Citigroup May Sell $12 Billion of Loans, Person Says (Bloomberg) Lots of chatter that on a thawing in certain a-liquid markets, or at least an attempt at holding a hairdryer to the iceberg. Word is that Citigroup may be able to unload $12 billion in loan off of its books, which at this point would be like getting a free $12 billion. It's practically found money. Optimism that such a sale could take place pushed Citigroup shares 3 percent higher in German trading.
China Said To Ready Bid For BHP (Forbes) As the article calls it, it's a bit unbelievable, but there's renewed talk of a China-led buyout of BHP. Talk to this effect has come up in the past, though it didn't seem very credible at the time. And it's still not clear how serious the reports are -- the original report was in The Australian, and it didn't seem very specific. Also, the suggestion is that the main thrust would be about thwarting BHP's bid for Rio Tinto, which is understandable, but seems like overkill.
Oasis HK Air halts operations amid swelling losses (MarketWatch) Did you realize that there were like four airplane carrier shutdowns in the past week in the US? Yup, all the budget airlines that don't charge are finding things a tad difficult in the current environment. Looks like the pain is being ilternationally, as budget airline HK Air, in Hong Kong, has shuttered its service on high fuel prices. All flights have been canceled, and it plans to bring about a liquidation
China Said To Ready Bid For BHP (Forbes) As the article calls it, it's a bit unbelievable, but there's renewed talk of a China-led buyout of BHP. Talk to this effect has come up in the past, though it didn't seem very credible at the time. And it's still not clear how serious the reports are -- the original report was in The Australian, and it didn't seem very specific. Also, the suggestion is that the main thrust would be about thwarting BHP's bid for Rio Tinto, which is understandable, but seems like overkill.
Oasis HK Air halts operations amid swelling losses (MarketWatch) Did you realize that there were like four airplane carrier shutdowns in the past week in the US? Yup, all the budget airlines that don't charge are finding things a tad difficult in the current environment. Looks like the pain is being ilternationally, as budget airline HK Air, in Hong Kong, has shuttered its service on high fuel prices. All flights have been canceled, and it plans to bring about a liquidation
Tuesday, April 8, 2008
Trader Monthly's 5th Annual Top 100 Highest Earning hedge fund manager list is out....
Here's the top 10:
1) John Paulson, New York, Paulson & Co. Estimated 2007 Income: $3 billion
2) Phil Falcone, New York, Harbinger Capital Partners Estimated Income: $1.5–$2 billion
3) Jim Simons, New York, Renaissance Technologies Corp. Estimated Income: $1.5–$2 billion
4) Steve Cohen, Connecticut, SAC Capital Advisors Estimated Income: $1–$1.5 billion
5) Ken Griffin, Chicago, Citadel Investment Group Estimated Income: $1–$1.5 billion
6) Chris Hohn, London, The Children’s Investment Fund Estimated Income: $800–$900 million
7) Noam Gottesman, London, GLG Partners Estimated Income: $700–$800 million
8) Alan Howard, London, Brevan Howard Asset Management Estimated Income: $700–$800 million
9) Pierre Lagrange, London, GLG Partners Estimated Income: $700–$800 million
10) Paul Tudor Jones, Connecticut, Tudor Investment Corp. Estimated Income: $600–$700 million
1) John Paulson, New York, Paulson & Co. Estimated 2007 Income: $3 billion
2) Phil Falcone, New York, Harbinger Capital Partners Estimated Income: $1.5–$2 billion
3) Jim Simons, New York, Renaissance Technologies Corp. Estimated Income: $1.5–$2 billion
4) Steve Cohen, Connecticut, SAC Capital Advisors Estimated Income: $1–$1.5 billion
5) Ken Griffin, Chicago, Citadel Investment Group Estimated Income: $1–$1.5 billion
6) Chris Hohn, London, The Children’s Investment Fund Estimated Income: $800–$900 million
7) Noam Gottesman, London, GLG Partners Estimated Income: $700–$800 million
8) Alan Howard, London, Brevan Howard Asset Management Estimated Income: $700–$800 million
9) Pierre Lagrange, London, GLG Partners Estimated Income: $700–$800 million
10) Paul Tudor Jones, Connecticut, Tudor Investment Corp. Estimated Income: $600–$700 million
Opening Bell: 4.8.08
As Price of Lead Soars, British Churches Find Holes in Roof (NYT) Pretty wild story that's been making the rounds lately, about how soaring commodity prices have led to commodity-related petty theft and vandalism. It's an old story, really. Back in 2005, stories about theft of copper wire and tubing were fairly common and at the time we wondered how long that could possibly last (ha!). Anyway, the hook here is a church in England, where thieves have been tearing out holes in the roof because there's lead in them thar roofs. Heathens.
Lost your luggage? RFID tags could help (News.com) Wow, was this story written in 2002? The hopes and dreams, that RFID tags could end lost luggage has been around for awhile, and for the most part hasn't really gone anywhere. Part of the problem: it's expensive. Good luck finding someone to shell out for the tags right now, when they're not even going to spring for in-flight almonds. And, even high tech tags have a hard time compensating for extreme human error, which is often a big problem.
Intel Capital Bets on China Growth (WSJ) Intel Capital, the famed VC arm of the big chip company, has raised a $500 million China fund, which will be invested in the country over the next several years. It will support a range of investment themes, including alt energy. The main point for us: see, we can invest over their too.
America's Mortgage Problem And Sarbanes-Oxley (Alan Meckler) I been impressed with the blog of Jupitermedia CEO Alan Meckler. For one thing, there aren't a lot of CEOs who blog (that's probably a good thing, because by and large, it could be argued, it's a waste of time). But Meckler's post come off as fairly unvarnished and, well, dashed out in a couple seconds -- which is exactly how I like my blog posts: quick and dirty. Anyway, this entry is particularly relevant, cause he's bashing SarbOx, which, as a public company CEO, is cool.
U.K. House Prices Fall the Most Since 1992, HBOS Says (Bloomberg)House prices fell 2.5 percent from February to March in the UK, the worst monthly drop since 1992. They ain't seen nothing yet.
Lost your luggage? RFID tags could help (News.com) Wow, was this story written in 2002? The hopes and dreams, that RFID tags could end lost luggage has been around for awhile, and for the most part hasn't really gone anywhere. Part of the problem: it's expensive. Good luck finding someone to shell out for the tags right now, when they're not even going to spring for in-flight almonds. And, even high tech tags have a hard time compensating for extreme human error, which is often a big problem.
Intel Capital Bets on China Growth (WSJ) Intel Capital, the famed VC arm of the big chip company, has raised a $500 million China fund, which will be invested in the country over the next several years. It will support a range of investment themes, including alt energy. The main point for us: see, we can invest over their too.
America's Mortgage Problem And Sarbanes-Oxley (Alan Meckler) I been impressed with the blog of Jupitermedia CEO Alan Meckler. For one thing, there aren't a lot of CEOs who blog (that's probably a good thing, because by and large, it could be argued, it's a waste of time). But Meckler's post come off as fairly unvarnished and, well, dashed out in a couple seconds -- which is exactly how I like my blog posts: quick and dirty. Anyway, this entry is particularly relevant, cause he's bashing SarbOx, which, as a public company CEO, is cool.
U.K. House Prices Fall the Most Since 1992, HBOS Says (Bloomberg)House prices fell 2.5 percent from February to March in the UK, the worst monthly drop since 1992. They ain't seen nothing yet.
Monday, April 7, 2008
Opening Bell: 4.7.08
Washington Mutual to Get $5 Billion (WSJ) Will the markets rally today, because WaMu is set to raise $5 billion? That would seem to be the pattern. The thrift, which apparently hasn't been so thrifty, will get a $5 billion cash infusion from PE firm TPG and other investors, reports WSJ. The investement would cause a massive dilution for WaMu shareholders, since their market cap is only $9 billion -- shares are off 74 percent in the last year. Of course, while they'd be diluted, they'd also have another $5 billion in cash on the books.
Novartis Buys Alcon Stake, Eyes Majority (AP) Swiss drug firm Novartis plans to buy its countrymate's stake in US eyecare firm Alcon for a cool $39 billion. First Novartis will just by a 25 percent stake, with an eye towards acquiring another 52 percent down the road. Those Swiss: pretty soon they're going to own the whole damn country.
Yahoo!'s Board of Directors Responds to Latest Microsoft Letter Microsoft sent a threatening letter to Yahoo's board on Saturday, saying that if Yahoo didn't start talking, it'd go hostile. Yahoo has responded, basically saying "no". Seriously, that's about it.
Buffett Pressed To Dump Chief Of General Re (WSJ) Berkshire Hathaway's re-insurance arm, General Re, continues to be a thorn. After four top execs were found guilty of some sort of fraud, Warren Buffett is being pressured by the Feds to dump the unit's CEO, Joseph P. Brandon. But basically, at this point, nobody has really accused of Brandon of doing anything wrong. It mainly looks like guilt by association, and rather than take matters into its own hands, prosecutors would rather have Buffett do their job for 'em.
Novartis Buys Alcon Stake, Eyes Majority (AP) Swiss drug firm Novartis plans to buy its countrymate's stake in US eyecare firm Alcon for a cool $39 billion. First Novartis will just by a 25 percent stake, with an eye towards acquiring another 52 percent down the road. Those Swiss: pretty soon they're going to own the whole damn country.
Yahoo!'s Board of Directors Responds to Latest Microsoft Letter Microsoft sent a threatening letter to Yahoo's board on Saturday, saying that if Yahoo didn't start talking, it'd go hostile. Yahoo has responded, basically saying "no". Seriously, that's about it.
Buffett Pressed To Dump Chief Of General Re (WSJ) Berkshire Hathaway's re-insurance arm, General Re, continues to be a thorn. After four top execs were found guilty of some sort of fraud, Warren Buffett is being pressured by the Feds to dump the unit's CEO, Joseph P. Brandon. But basically, at this point, nobody has really accused of Brandon of doing anything wrong. It mainly looks like guilt by association, and rather than take matters into its own hands, prosecutors would rather have Buffett do their job for 'em.
Saturday, April 5, 2008
Will Earnings Dampen Stocks Next Week?
There is almost no doubt the US is in recession now, and the bigger question is how severe this downturn is going to be. 80,000 jobs were lost in March, more than what most analysts had expected, and unemployment rate rose to 5.1%. Although the numbers are very bad on their own, many investors and traders have already factored this in; after all, the economy is indeed slowing down. US stock markets actually took the poor payrolls data quite well on Friday, ignoring the biggest job loss in five years. For the week, the Dow Jones Industrial Average (^DJI: 12609.42 -16.61 -0.13%) rose 3.2%; the S&P 500 index (^GSPC: 1370.40 +1.09 +0.08%) jumped 4.2% and the Nasdaq (^IXIC: 2370.98 +7.68 +0.32%) closed up 4.9%.
On Friday itself, the Dow lost 0.13%, pulled down by General Motors (GM: 20.58 -1.01 -4.68%) which dropped 4.7% on news that its largest auto parts supplier, Delphi, may not get its hands on the needed external capital to avoid bankruptcy as a group of investors led by hedge fund Appaloosa Management said it terminated its agreement to invest $2.55 billion in Delphi.
Meanwhile, banks can’t stop downgrading other banks. JPMorgan (JPM: 45.57 -0.71 -1.53%) cut its 2008 earnings forecast for banks like Citigroup (C: 24.08 -0.28 -1.15%), Wachovia (WB: 27.21 -1.16 -4.09%) and Bank of America (BAC: 39.41 -0.96 -2.38%).
Now that the first quarter has passed, we are heading into the earnings season, starting with Alcoa (AA: 39.00 +0.46 +1.19%) on Monday, Circuit City (: ) on Wednesday, Genentech (DNA: 79.73 +0.31 +0.39%) on Thursday and General Electric (GE: 37.56 -0.28 -0.74%) on Friday.
On Friday itself, the Dow lost 0.13%, pulled down by General Motors (GM: 20.58 -1.01 -4.68%) which dropped 4.7% on news that its largest auto parts supplier, Delphi, may not get its hands on the needed external capital to avoid bankruptcy as a group of investors led by hedge fund Appaloosa Management said it terminated its agreement to invest $2.55 billion in Delphi.
Meanwhile, banks can’t stop downgrading other banks. JPMorgan (JPM: 45.57 -0.71 -1.53%) cut its 2008 earnings forecast for banks like Citigroup (C: 24.08 -0.28 -1.15%), Wachovia (WB: 27.21 -1.16 -4.09%) and Bank of America (BAC: 39.41 -0.96 -2.38%).
Now that the first quarter has passed, we are heading into the earnings season, starting with Alcoa (AA: 39.00 +0.46 +1.19%) on Monday, Circuit City (: ) on Wednesday, Genentech (DNA: 79.73 +0.31 +0.39%) on Thursday and General Electric (GE: 37.56 -0.28 -0.74%) on Friday.
Friday, April 4, 2008
A Cup of Tea Without Milk, or Sugar, or Tea
What happened to real crashes? I mean real crashes. When I was your age a financial crisis was a financial crisis. Kids today, they'd just never believe you if you told them about the Crash of '87, or LTCM. Today a hedge fund loses $6 billion and nothing happens. A nine decade old Wall Street mainstay collapses, banks write down $300 billion and people barely sneeze. VIX? Tradeable volatility? If we wanted volatility we'd walk home barefoot on broken glass and tell mom about dad's secretary's midnight call. We were lucky if we even had trading volume data back then. Yeah, we had chaos, but we were happy, I tell you.
Ugly Employment Numbers
That 80,000 job loss number for released by the Labor Department earlier this morning represents the biggest decline in jobs in five years, although it's only slightly worse than the 76,000 jobs lost in each of January and February. If we needed any more evidence that we're in a recession, well here it is.
Opening Bell: 4.4.08
Citi merger architect calls deal ‘mistake’ (FT) More reflection on a decade of Citigroup. In retrospect, says John Reed, who helped orchestrate the merger of Citi and Travellers, well it might not have been the best idea. In an interview with FT he called the company a sad story, adding: "The specific merger transaction clearly has to be seen to have been a mistake." He declined to say whether it was the management or the model that deserved the blame, although to some extent that's irrelevant. Sort of like those horrendous conversations kids have in college about whether communism could ever work if only it had the right leaders.
Ex-UBS chief pushes for bank’s break-up (FT) Luqman Arnold, ex-CEO of UBS, wants to see a break up of the bank, which isn't doing so hot. Specifically, he wants to see the separation of its investment and private banking arms. Beyond that he wants a total board overhaul. And oh yeah, he's quietly amassed a stake in the company. Well .7 percent of it. Yeah, probably not enough to push through any changes on his own. But, you never know.
Investors Stalk the Wounded of Wall Street (NYT) Nobody wants to be the one who tried to catch the falling knife... but to some extent a little obvious: with financial assets way down, folks are nibbling. And that's probably a good thing, though we smell a faint whiff of "vulturism" in this story.
J.P. Morgan buys $140.7 million in Bear Stearns stock (MarketWatch) JPM now owns a significant chunk of Bear, as it announced that it bought 11.5 million shares on the open market for $140.7 million. Taking no chances obviously -- that's at $12.20 per share, over 20 percent above what the company has an agreement to buy Bear at once the shareholders vote.
J.P. Morgan Said to Withdraw Bear Offers (Dealbook) Pretty predictable: Fresh Bear Stearns hires are having their job offers rescinded from JPM. Obviously not very appealing, but you have to figure that seniority counts for something at a time like this.
Ex-UBS chief pushes for bank’s break-up (FT) Luqman Arnold, ex-CEO of UBS, wants to see a break up of the bank, which isn't doing so hot. Specifically, he wants to see the separation of its investment and private banking arms. Beyond that he wants a total board overhaul. And oh yeah, he's quietly amassed a stake in the company. Well .7 percent of it. Yeah, probably not enough to push through any changes on his own. But, you never know.
Investors Stalk the Wounded of Wall Street (NYT) Nobody wants to be the one who tried to catch the falling knife... but to some extent a little obvious: with financial assets way down, folks are nibbling. And that's probably a good thing, though we smell a faint whiff of "vulturism" in this story.
J.P. Morgan buys $140.7 million in Bear Stearns stock (MarketWatch) JPM now owns a significant chunk of Bear, as it announced that it bought 11.5 million shares on the open market for $140.7 million. Taking no chances obviously -- that's at $12.20 per share, over 20 percent above what the company has an agreement to buy Bear at once the shareholders vote.
J.P. Morgan Said to Withdraw Bear Offers (Dealbook) Pretty predictable: Fresh Bear Stearns hires are having their job offers rescinded from JPM. Obviously not very appealing, but you have to figure that seniority counts for something at a time like this.
Thursday, April 3, 2008
Is Soros a Commi?
In times of financial crisis, job cuts seem the thing to do. Both Merrill Lynch (MER: 45.04 -0.30 -0.66%) and Lehman Brothers (LEH: 43.67 -0.40 -0.91%) may cut more employees than previously anticipated, and this time it seems they want to do it quietly without major announcements. The big question is whether these job cuts will help these companies by cutting costs or whether they will be too little too late and end up harming the company by getting rid of needed talent.
George Soros thinks the markets will fall further in the next year and that the current “bottom” is not the end of the fall. He thinks that financial institutions should be far better regulated and that many OTC products such as swaps should be conducted through regulated exchanges that have predetermined margin requirements and guarantee the credit-worthiness of the counterparties.
In many cases, it may be simply too complicated to set up an exchange for many of these products as there are so many ways of packaging them and each may not have enough daily volume to justify being listed. However, in a time like this where credit worthiness is of such importance, moving more products from OTC to exchanges may be something to look into.
George Soros thinks the markets will fall further in the next year and that the current “bottom” is not the end of the fall. He thinks that financial institutions should be far better regulated and that many OTC products such as swaps should be conducted through regulated exchanges that have predetermined margin requirements and guarantee the credit-worthiness of the counterparties.
In many cases, it may be simply too complicated to set up an exchange for many of these products as there are so many ways of packaging them and each may not have enough daily volume to justify being listed. However, in a time like this where credit worthiness is of such importance, moving more products from OTC to exchanges may be something to look into.
Opening Bell: 4.3.08
S&P futures vs fair value: -2.0. Nasdaq futures vs fair value: +0.5. Futures point to a muted start to trading. Research In Motion (RIMM) reported earnings and an outlook that topped expectations. UBS downgraded Cisco to Neutral from Buy. Fed Chairman Ben Bernanke will be joined by SEC Chairmon Cox and New York Fed Geithner to testify before the Senate Banking Committee at 10:00 ET. In economic news, market participants will get the March ISM services reading at 10:00 ET.
Wednesday, April 2, 2008
Goldman Sachs Buyback Rumors
Today the chatter is about Goldman Sachs. People say lots of things, but today they are saying that Goldman will announce a major stock buyback tonight after the market closes. They're even putting a number on it: $8 billion. Of course, the people saying this are in no condition to know and last week they probably would have told you that Lehman Brothers would be worth $2 on Monday. (But a couple weeks before that they were right about Bear Stearns.) Make of it what you will.
A side note: it's kind of nice to report on bullish rumors about an investment bank. When was the last this happened?
Goldman Sachs didn't comment on this because they wouldn't anyway...
A side note: it's kind of nice to report on bullish rumors about an investment bank. When was the last this happened?
Goldman Sachs didn't comment on this because they wouldn't anyway...
Opening Bell: 4.2.08
Stocks Surge as 2 Major Banks Advance Turnaround Plans (WSJ) It's a real relief that the worst is behind us. The big capital announcements from Lehman and USB obviously supposedly helped spur a major rally. And then all day yesterday we listened to the talking heads on CNBC debate whether a bottom had been put in. We have no idea, or even what that means (seriously). But if the worse was behind us, then it wasn't so bad. A crisis mainly confined to Wall St. and a few neighborhoods in Ohio, Detroit, Southern California, Arizona and Florida. Is that it? Cool.
A Bipartisan Bid on Mortgage Aid Is Gaining Speed (NYT) Reminder to self: never again click on an article with the world 'bipartisan' in the title. Check out the picture in there. Very very NSFW.
Europe Launches Northern Rock Probe (AP) Not clear exactly which part they're concerned with, but the EU will launch a probe of the Northern Rock bailout. Wonder if perhaps public funds were used to protect private interesting, which surely represents some sort of conflict. Just a thought.
Google's CIO leaves search giant for job at EMI (News.com) A bit of a surprise jump that at first looked like an April Fools joke: Google CIO Doug Merrill is leaving the search giant for record label EMI. Usually we see Google top brass leaving to get involved with startups of sort, but this is actually more impressive. Sure he probably could've gone to any startup he wanted, and yes, startups always face long odds of success. But for an old-school major record label, its prospects are incredibly daunting. EMI, it should be noted, is owned by UK PE firm Terra Firma. Apparently his exact title or job role has not been announced, but it's a position designed especially for him.
Revolution in Coachella (Aguanomics) Had to link to this cause of the name alone: Aguanomics -- it's a blog about water economics. And given how sexy water is these days, how could anyone not want to read that? This particularly entry is not about the music festival, but about a tiered pricing structure on water on consumption and its potential impact as a conservation inducing mechanism. We also like it, cause he ends his posts with a Bottom Line: "Coachella should meter AND the metering should be based on per-capita use -- why charge less to a guy with a golf course-sized lot than a family on a small lot. Meter and charge per capita rates that rise quickly when water is wasted." (via Marginal Revolution)
Congress to Take Testimony on Internet Gambling Ban (Bits) Miss the days when there were like 15 fresh stories on Bear Stearns each day, cause it made writing the Opening Bell so easy. Today for example, an article about the internet gambling ban is the only interesting/relevant thing seen all day. Anyway, the UIGEA -- the law "banning" internet gambling -- sought to limit bank transactions to foreign gambling enterprises. But actually it's still doable. Enforcement is tough and spotty. And right now, the banks aren't really on the hook if it happens to happen under their watch. So some are more serious about cracking down than others. So that's the debate now.
It’s Not Nice To Fool With The Stock Market (TechTraderDaily) Thank the lord that April Fools is gone for another year. Totally dumb. The one thing I were amused by was the debate about certain April Fools stories that directly related to public companies. InfoWorld, the dusty old trade rag, ran a story about Microsoft and Yahoo agreeing on a deal. Some people hated it. For one thing, it was classic InfoWorld. It was probably the least clever story they could've come up with and the story was pretty much devoid of wit.
IMF Cuts Global Forecast on Worst Crisis Since 1930s (Bloomberg)With a recession in the US considered to be done and done, all eyes turn to the globe to see if mother Earth can stay out of the big R. Right now the IMF is pegging the chances of a global recession at a meager 25 percent (apparently that's pretty big for the entire globe) citing the worst financial crisis since the great depression. Speaking of the US recession, on Intrade, the odds of one happening this year are down to 70 percent, from 74 percent a few weeks ago. That's a start.
A Bipartisan Bid on Mortgage Aid Is Gaining Speed (NYT) Reminder to self: never again click on an article with the world 'bipartisan' in the title. Check out the picture in there. Very very NSFW.
Europe Launches Northern Rock Probe (AP) Not clear exactly which part they're concerned with, but the EU will launch a probe of the Northern Rock bailout. Wonder if perhaps public funds were used to protect private interesting, which surely represents some sort of conflict. Just a thought.
Google's CIO leaves search giant for job at EMI (News.com) A bit of a surprise jump that at first looked like an April Fools joke: Google CIO Doug Merrill is leaving the search giant for record label EMI. Usually we see Google top brass leaving to get involved with startups of sort, but this is actually more impressive. Sure he probably could've gone to any startup he wanted, and yes, startups always face long odds of success. But for an old-school major record label, its prospects are incredibly daunting. EMI, it should be noted, is owned by UK PE firm Terra Firma. Apparently his exact title or job role has not been announced, but it's a position designed especially for him.
Revolution in Coachella (Aguanomics) Had to link to this cause of the name alone: Aguanomics -- it's a blog about water economics. And given how sexy water is these days, how could anyone not want to read that? This particularly entry is not about the music festival, but about a tiered pricing structure on water on consumption and its potential impact as a conservation inducing mechanism. We also like it, cause he ends his posts with a Bottom Line: "Coachella should meter AND the metering should be based on per-capita use -- why charge less to a guy with a golf course-sized lot than a family on a small lot. Meter and charge per capita rates that rise quickly when water is wasted." (via Marginal Revolution)
Congress to Take Testimony on Internet Gambling Ban (Bits) Miss the days when there were like 15 fresh stories on Bear Stearns each day, cause it made writing the Opening Bell so easy. Today for example, an article about the internet gambling ban is the only interesting/relevant thing seen all day. Anyway, the UIGEA -- the law "banning" internet gambling -- sought to limit bank transactions to foreign gambling enterprises. But actually it's still doable. Enforcement is tough and spotty. And right now, the banks aren't really on the hook if it happens to happen under their watch. So some are more serious about cracking down than others. So that's the debate now.
It’s Not Nice To Fool With The Stock Market (TechTraderDaily) Thank the lord that April Fools is gone for another year. Totally dumb. The one thing I were amused by was the debate about certain April Fools stories that directly related to public companies. InfoWorld, the dusty old trade rag, ran a story about Microsoft and Yahoo agreeing on a deal. Some people hated it. For one thing, it was classic InfoWorld. It was probably the least clever story they could've come up with and the story was pretty much devoid of wit.
IMF Cuts Global Forecast on Worst Crisis Since 1930s (Bloomberg)With a recession in the US considered to be done and done, all eyes turn to the globe to see if mother Earth can stay out of the big R. Right now the IMF is pegging the chances of a global recession at a meager 25 percent (apparently that's pretty big for the entire globe) citing the worst financial crisis since the great depression. Speaking of the US recession, on Intrade, the odds of one happening this year are down to 70 percent, from 74 percent a few weeks ago. That's a start.
Tuesday, April 1, 2008
Lehman: We Don’t Need Money But We’ll Raise Some
After the Bear Stearns (BSC: 10.73 +0.24 +2.29%) fiasco, it seems one of the most-used lines by financial company spokespeople or the CEOs themselves is something like “we don’t need money”. It’s rather ironic to hear them say that even as they are trying desperately to raise money. One case in point is Lehman Brothers (LEH: 41.47 +3.83 +10.18%) which says it doesn’t need money but that it’s selling at last $3 billion worth of shares to raise capital.
Lehman’s stock declined after this announcement although an “insider” claims that there is a lot of interest in subscribing to these new convertible preferred shares. Unlike normal shares, this offering will offer a coupon payment of 7% to 7.5% and a conversion premium of 30% above market. As with most convertible bonds/shares, it is simply a way of packaging a loan where the loan principal will be paid back as predetermined number of shares.
Some analysts have raised Lehman’s rating and say their share prices are below fair value. So while that may well be the case, one has to ask why a company that doesn’t need capital is putting together a deal to borrow money with what might under normal circumstances seem a relatively high premium both in coupon payments as well as in the low share price at which the shares would be issued.
Lehman’s stock declined after this announcement although an “insider” claims that there is a lot of interest in subscribing to these new convertible preferred shares. Unlike normal shares, this offering will offer a coupon payment of 7% to 7.5% and a conversion premium of 30% above market. As with most convertible bonds/shares, it is simply a way of packaging a loan where the loan principal will be paid back as predetermined number of shares.
Some analysts have raised Lehman’s rating and say their share prices are below fair value. So while that may well be the case, one has to ask why a company that doesn’t need capital is putting together a deal to borrow money with what might under normal circumstances seem a relatively high premium both in coupon payments as well as in the low share price at which the shares would be issued.
Opening Bell: 4.1.08
UBS Seeks Fresh Capital, Expects $19 Billion in Write-Downs (WSJ) Exactly as expected, UBS says it will raised up to $15 billlion (also about 15 billion CHF thanks to currency parity) and that it expects write downs of $19 billion. That's a lot of money. The company hopes to hive off all of its nasty, real estate-related assets by turning them into a separate unit, which may be spun off or sold. Perhaps the idea is that if you bundle a mountain of illiquid assets and turn them into their own company, you might be able to catch a bid for 'em. Also: The Chairman is stepping down.
Maybe not so nonsensical after all (Econbrowser) How hard could home prices fall? 50 percent? Economist Menzie Chinn thinks that number sounds a tad high, but it's possible. An interesting report, walking through the numbers and the math to figure our worst-case scenarios for the housing fall. 50 percent seems a bit beyond the range of what's realistic, but it's not totally impossible. Anyway, some interesting stuff in there to read through.
Dell Weighs Alternatives to Its Link With CIT (NYT) Dell's found itself tied up in the whole credit mess via its relationship with commercial finance firm CIT, which is having all kinds of problems of its own. Basically, CIT has been the backbone of the Dell Financial Services unit, which provides loans to finance Dell products. Anyway, no official word yet on what the company plans to do, except that it will, of course, explore some strategic alternatives. The article notes that both Microsoft and Avaya are CIT partners.
Microsoft Unlikely to Raise Yahoo Offer (WSJ) The Journal reports that Microsoft isn't interested in raising its offer, as Yahoo would like. Who knows though what's really going on. Hard to say whether this is news news, or whether this is spin coming out of Microsoft designed to send a message. That being said, the report says there haven't been any fresh talks lately, which is newsy, since a lot of folks have been interpreting the recent quiet as meaning that the two sides were busily hatching together a plan.
Record reserve growth, record dollar reserve growth and no evidence of diversification among the countries that matter (RGE Monitor) Foreign governments continue to sock away ginormous piles of cash and that cash is still in dollars. Despite the precipitous slide of the greenback, there really hasn't been a diversification away. Brad Setser takes a very long and detailed look at the asset compensation around the world. Definitely worth a scan if this is your bag.
Maybe not so nonsensical after all (Econbrowser) How hard could home prices fall? 50 percent? Economist Menzie Chinn thinks that number sounds a tad high, but it's possible. An interesting report, walking through the numbers and the math to figure our worst-case scenarios for the housing fall. 50 percent seems a bit beyond the range of what's realistic, but it's not totally impossible. Anyway, some interesting stuff in there to read through.
Dell Weighs Alternatives to Its Link With CIT (NYT) Dell's found itself tied up in the whole credit mess via its relationship with commercial finance firm CIT, which is having all kinds of problems of its own. Basically, CIT has been the backbone of the Dell Financial Services unit, which provides loans to finance Dell products. Anyway, no official word yet on what the company plans to do, except that it will, of course, explore some strategic alternatives. The article notes that both Microsoft and Avaya are CIT partners.
Microsoft Unlikely to Raise Yahoo Offer (WSJ) The Journal reports that Microsoft isn't interested in raising its offer, as Yahoo would like. Who knows though what's really going on. Hard to say whether this is news news, or whether this is spin coming out of Microsoft designed to send a message. That being said, the report says there haven't been any fresh talks lately, which is newsy, since a lot of folks have been interpreting the recent quiet as meaning that the two sides were busily hatching together a plan.
Record reserve growth, record dollar reserve growth and no evidence of diversification among the countries that matter (RGE Monitor) Foreign governments continue to sock away ginormous piles of cash and that cash is still in dollars. Despite the precipitous slide of the greenback, there really hasn't been a diversification away. Brad Setser takes a very long and detailed look at the asset compensation around the world. Definitely worth a scan if this is your bag.
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