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.
Monday, June 30, 2008
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.
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.
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.
Friday, June 27, 2008
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%.
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%.
Thursday, June 26, 2008
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.
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.
Wednesday, June 25, 2008
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.
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.
Wednesday, June 18, 2008
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.
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.
Monday, June 16, 2008
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).
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).
Thursday, June 12, 2008
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.
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.
Tuesday, June 10, 2008
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.
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%).
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%).
Monday, June 9, 2008
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.
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.
Saturday, June 7, 2008
Friday, June 6, 2008
Market Under Oil Pressure
A spike in oil prices has been the biggest weight on the market this morning. Currently, they are up 5.0% at $134.20, but remarkably, they are up 10% from yesterday's low.
A weaker dollar, geopolitical concerns, and Morgan Stanley's view that prices could hit $150 by July 4 are all contributing to the spike. Not surprisingly, the top performers list for the S&P 500 is littered with oil-related industry groups.
The dollar index had been trading higher earlier, but reversed in the wake of an employment report that led many traders to conclude the Fed won't be raising interest rates soon. The pullback has been a source of support for gold prices, too, which are up 2.1% to $893.60/oz.
A weaker dollar, geopolitical concerns, and Morgan Stanley's view that prices could hit $150 by July 4 are all contributing to the spike. Not surprisingly, the top performers list for the S&P 500 is littered with oil-related industry groups.
The dollar index had been trading higher earlier, but reversed in the wake of an employment report that led many traders to conclude the Fed won't be raising interest rates soon. The pullback has been a source of support for gold prices, too, which are up 2.1% to $893.60/oz.
Thursday, June 5, 2008
A Broad-Based Rally Effort
Market bulls have been in command so far this session as the indices have pressed on to new session highs in the past half hour.
The latest move followed a dip in the averages that occurred when headlines hit the wires from a speech from Fed Vice Chairman Kohn who acknowledged the Fed has strongly urged banks to raise capital and that banks could face deteriorating loan quality.
Although the headlines didn't carry positive connotations, they also weren't anything the market didn't already known based on its own assessment of matters and previous commentary from other Fed officials. Accordingly, the market quickly regrouped from the aforementioned dip and is sporting solid gains in mid-morning trading.
All 10 economic sectors are in positive territory, with six sectors posting gains in excess of 1.0%. Telecom services, +2.7%, is the best-performing.
The latest move followed a dip in the averages that occurred when headlines hit the wires from a speech from Fed Vice Chairman Kohn who acknowledged the Fed has strongly urged banks to raise capital and that banks could face deteriorating loan quality.
Although the headlines didn't carry positive connotations, they also weren't anything the market didn't already known based on its own assessment of matters and previous commentary from other Fed officials. Accordingly, the market quickly regrouped from the aforementioned dip and is sporting solid gains in mid-morning trading.
All 10 economic sectors are in positive territory, with six sectors posting gains in excess of 1.0%. Telecom services, +2.7%, is the best-performing.
Wednesday, June 4, 2008
Is Oil the Next 'Bubble' to Pop?
Is there an oil bubble that is about to burst?
Some big voices on Wall Street think so, predicting the oil market could tilt sharply south soon if the U.S. dollar strengthens and demand for crude oil weakens in some key consuming countries. Tightness on the supply side could also ease, they say, as some big refineries and new oil fields come onstream over the next few months and the outlook for the Chinese economy clouds over.
But don't count on a price plunge just yet. While oil has eased off its record of just over $133 nearly two weeks ...
Some big voices on Wall Street think so, predicting the oil market could tilt sharply south soon if the U.S. dollar strengthens and demand for crude oil weakens in some key consuming countries. Tightness on the supply side could also ease, they say, as some big refineries and new oil fields come onstream over the next few months and the outlook for the Chinese economy clouds over.
But don't count on a price plunge just yet. While oil has eased off its record of just over $133 nearly two weeks ...
Tuesday, June 3, 2008
Opening Bell: 3.6.08
Losses Push Lehman To Weigh Raising New Capital (WSJ)
Lehman is expected to report losses in a couple weeks, and WSJ reports that in conjunction with this, the company may announce a raise of $3-$4 billion. From this timing, the report surmises that the loss will be worse than expected. Previously, analysts had expected a loss of around $300 million. The new round of capital raising will likely further dilute existing shareholders. It seems unlikely that Lehman could justify this kind of massive dilution, coming on top of $6 billion raised in prior quarters, unless it faced serious balance sheet challenges. How will Lehman justify several months of optimistic talk about its performance? Once again the bearish analysts and the shorts seem to have known more about the earnings of an investment bank than its own management.
Grasso's Grit May Win After All (NYT)
Wait, the Grasso pay package case? This nonsense isn't over yet. What's next, are you going to tell me there's still some Enron-related stuff in the courts? Of course not. Oh Wait! Anyway, back to Grasso. With Spitzer gone and the whole story kinda faded from memory, Grasso doesn't have all kinds of negative headlines to deal with.
Soros Says Sell (Infectious Greed)
Just a heads up (mainly to the daytrime crew at The 'Breaker). Soros is apparently testifying today in front of the Senate, where he will argue on the "oil is a bubble" side of things. FT has more on what he'll be saying, including his argument that investing in energy via index funds is a problem. Gosh, would love the irony if lawmakers commenced a war on index funds.
Ryanair prepares to raise prices (FT)
Ryanair, popular among frugal travelers and airplane nerds will be forced to raise prices to cope with rising oil prices. After turning in record profits last year, the company's earnings will plunge to "only" break-even this year, which a lot of other airlines would be really jealous of. In addition to the fare hikes, there's also a company-wide pay freeze. While we're big fans of Ryanair (in theory), and its aggressive approach to capitalism and competition, we're not entirely convinced by it. For all the free-market rhetoric, the company has been accused of taking subsidies from the small airports it serves (that issue may have been resolved at this point, though last we heard, the charge made a lot of sense).
Lehman is expected to report losses in a couple weeks, and WSJ reports that in conjunction with this, the company may announce a raise of $3-$4 billion. From this timing, the report surmises that the loss will be worse than expected. Previously, analysts had expected a loss of around $300 million. The new round of capital raising will likely further dilute existing shareholders. It seems unlikely that Lehman could justify this kind of massive dilution, coming on top of $6 billion raised in prior quarters, unless it faced serious balance sheet challenges. How will Lehman justify several months of optimistic talk about its performance? Once again the bearish analysts and the shorts seem to have known more about the earnings of an investment bank than its own management.
Grasso's Grit May Win After All (NYT)
Wait, the Grasso pay package case? This nonsense isn't over yet. What's next, are you going to tell me there's still some Enron-related stuff in the courts? Of course not. Oh Wait! Anyway, back to Grasso. With Spitzer gone and the whole story kinda faded from memory, Grasso doesn't have all kinds of negative headlines to deal with.
Soros Says Sell (Infectious Greed)
Just a heads up (mainly to the daytrime crew at The 'Breaker). Soros is apparently testifying today in front of the Senate, where he will argue on the "oil is a bubble" side of things. FT has more on what he'll be saying, including his argument that investing in energy via index funds is a problem. Gosh, would love the irony if lawmakers commenced a war on index funds.
Ryanair prepares to raise prices (FT)
Ryanair, popular among frugal travelers and airplane nerds will be forced to raise prices to cope with rising oil prices. After turning in record profits last year, the company's earnings will plunge to "only" break-even this year, which a lot of other airlines would be really jealous of. In addition to the fare hikes, there's also a company-wide pay freeze. While we're big fans of Ryanair (in theory), and its aggressive approach to capitalism and competition, we're not entirely convinced by it. For all the free-market rhetoric, the company has been accused of taking subsidies from the small airports it serves (that issue may have been resolved at this point, though last we heard, the charge made a lot of sense).
Monday, June 2, 2008
ISM Index Tops Expectations
Buyers are not showing much interest as the month of June gets underway despite two better-than-expected economic reports.
Just reported, the May ISM Index, a national manufacturing survey, rose 2.1% to 49.6, topping the consensus estimate of 48.5. The index suggests a slight contraction in United States manufacturing activity, as the number falls short of 50.
Separately, April construction spending fell 0.4% month-over-month, which is modestly better than the expected decline of 0.6%. March construction spending was revised higher to a decline of 0.6% from a decline of 1.1%.
The major indices extend their losses in broad-based weakness.
Just reported, the May ISM Index, a national manufacturing survey, rose 2.1% to 49.6, topping the consensus estimate of 48.5. The index suggests a slight contraction in United States manufacturing activity, as the number falls short of 50.
Separately, April construction spending fell 0.4% month-over-month, which is modestly better than the expected decline of 0.6%. March construction spending was revised higher to a decline of 0.6% from a decline of 1.1%.
The major indices extend their losses in broad-based weakness.
Sunday, June 1, 2008
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