Europe agrees to prevent a boot stomping of the banks
The key measures announced today are: a pledge to guarantee new bank debt issuance until the end of 2009; permission for governments to shore up banks by buying preferred shares; and a commitment to recapitalize any “systemically” critical banks in distress.
Fed’s Fisher says bank shorts will be flame broiled, shortly
“This morning I am casting that convention aside,” he said. “I speak for all of us when I say that the Federal Reserve will continue to explore every avenue and consider every option to see the credit markets through the credit crisis.”
Financial Crisis may hurt Nextel sale
According to a report on FT.com, Sprint CEO Dan Hesse recently questioned whether any potential buyer of the Nextel unit could raise the necessary capital to fund the purchase. That means the credit crunch could place any deal in jeopardy. No matter, said Hesse, who has vowed to continue improving the Nextel operation whether a buyer comes along or not.
CHK’s Slide was Not only Due to Stupid Margined Out CEO
Morgan Stanley is Chesapeake’s biggest counterparty. Morgan Stanley shares fell 39 percent, dropping for a fifth straight day, after Moody’s Investors Service said it may cut the investment bank’s credit rating. Allman said that if gas falls to $6 per thousand cubic feet, Chesapeake would have to sell $3.5 billion of assets. “In our view, getting through 2009 is tough, but Chesapeake has a lot of non-producing assets it could sell and discretionary spending it could cut,” Allman said.
Deposit Insurance Varies Amongst Nations
Until the latest statements suggesting unlimited guarantees, legal coverage was highest in Norway, France, Italy and Mexico. In the US the amount covered has been raised temporarily to $250,000 from $100,000 per account.
Luigi Zingales Weighs in on G7 Package
Time has come for the Treasury secretary to listen to some economists. By understanding the causes of the current crisis, we can help solve it without relying on public money. Thus, I feel it is my duty as an economist to provide an alternative: a market-based solution, which does not waste public money and uses the force of the government only to speed up the restructuring. It may not be perfect, but it is a viable avenue that should be explored before acquiescing to the perceived inevitability of Paulson’s proposals.
GM May Merge With Other U.S. Carmakers, Before Going Out of Business
After Ford decided to remain independent amid an increasingly difficult auto market, G. M. turned its attention to Chrysler. For the last month, it has been in preliminary merger talks with Chrysler’s owner, the private-equity firm Cerberus Capital Management.
Japan May Offer 1 Trillion in FX Reserves to IMF Rescue Plan
Although Asia and other emerging economies have so far avoided largely the worst of the credit crisis sparked by burst of bubble in U.S. housing markets, deepening woes in Western financial markets are now infecting robust growth in many emerging economies.
“The crisis has over the past few days entered into a phase that makes it intolerable to opt for procrastination and a go-it-alone approach.”
Fannie/Freddie Ordered to Buy 40 Billion in Bad Mortgages, Per Month
The purchases would be separate from the U.S. Treasury’s $700 billion bailout plan, which was signed into law earlier this month, Bloomberg noted.
Lehman CDS Settlement May Bankrupt the Entire Banking Industry
“If we see defaults from the standpoint that protection sellers don’t pay up, then we’re going to have a huge problem in the market,” Telpner said. “But we don’t have any explicit evidence indicating that sellers ultimately are not going to be able to pay the amounts owed to buyers.”
Israeli Stocks Pare Losses After Steep Drop
In the first 20 minutes of trading the main index briefly dropped by 8.59 percent to 729.40 points, reflecting falls in world markets that took place over the long Yom Kippur holiday weekend.
Soros: Morgan Stanley Needs Government Rescue
The Treasury should match the Japanese company’s injection by acquiring preferred stock that converts to shares at a price higher than Mitsubishi UFJ’s purchase price, Soros wrote in the column, published today on the Web.
Gas to Drop To $3.00 Per Gallon
Trilby Lundberg, publisher of the nationwide Lundberg Survey of gasoline prices, said the average price for self-serve unleaded across the United States dropped to $3.31 a gallon — the largest drop in the six-decade history of her survey. “This could be one the largest drops in history,” Lundberg said.
Hedge Funds Fell 4.68% in September
The HFRI Weighted Composite Index fell 4.68 percent in September, marking the fourth consecutive monthly decline and extending the loss this year to 9.41 percent, according to Chicago-based Hedge Fund Research Inc. The worst monthly performance since the firm began tracking the industry in 1990 was an 8.7 percent decline in August 1998.
Democrats Want Another Massive Stimulus Plan
U.S. House Speaker Nancy Pelosi last week said a $150 billion economic stimulus plan was needed to help counteract a faltering economy shaken by a paralyzed banking system and steep stock market falls.
The Dow could go as low as 5,886, he said.
Warren Buffett sells another 1.95 million shares of put options of Burlington Northern Santa Fe (BNI) on Oct. 8, two days after he sold 1.3 million shares on Oct. 6, as the latest filings of Berkshire Hathaway shows.
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I need a drink…
spx up 100 points on monday
One more from the boo-yah man himself. Gives me the chills
Why I’m Negative Now
By Jim Cramer
RealMoney.com Columnist
10/12/2008 2:02 PM EDT
URL: http://www.thestreet.com/p/rmoney/jimcramerblog/10441974.html
Editor’s note: Jim Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Click for details.
As I write, it appears that the finance ministers of the industrialized countries have not been able to come up with a plan for what to do about the equity and fixed income markets. Our own response now smacks of total panic. There is the recognition that the U.S. Treasury’s original rescue plan is not going to solve things fast enough and that a more direct investment in banks is needed.
But without some sort of deal that would force these banks to loan the invested capital, there is little hope that this new plan will matter.
In fact, the best hope is a cordoning-off approach where the government agrees to invest huge amounts in the big well-capitalized banks — Bank of America (BAC) , Wells Fargo (WFC) and JPMorgan Chase (JPM) — and the big stretched banks — Citigroup (C) (really important because it’s in danger of being obliterated), Goldman Sachs (GS) and Morgan Stanley (MS) , the latter two because of a need to keep them alive next week.
This strategy, which I presume will not be adopted, but which makes the most sense, would allow for shotgun weddings for all the weak banks to eliminate the bleeding. Without this kind of action I am reverting to a downside target of 6,700 for Monday and then 4,700 for Tuesday in keeping with the hopeful ’87 playbook.
Why am I so negative? Because the forced selling is just beginning, the only people being margined out now are the most stretched, and in the ensuing weeks we will discover that most annuities cannot meet obligations as the piecemeal nature of the insurance reports will inspire even less confidence than the government.
That means we are not in a “fear itself” moment, because the losses haven’t begun to take their toll.
The newspapers are filled with stories saying there are buying opportunities and stocks selling at incredibly discounted prices. They are incredibly discounted only if unemployment does not skyrocket. My take is this: Without a comprehensive worldwide plan you should still be thinking about buying only small amounts into desperate selling tomorrow, and then Tuesday commit more into what could be a concluding gap down.
To be more aggressive about buying is impossible given the inability to take off the table a 1929-1932 scenario with an almost a total wipeout of capital. Don’t forget that we had an 80% decline in the Nasdaq 100 in 2000-2003 without a recession. Why is that less likely? Because there are too many dividend-yielding names that will cushion the blow and eliminate that kind of decline unless we get the severe depression scenario that comes with unemployment and major bank closings.
This is a work in progress. Stay tuned for more; an analysis beyond Tuesday seems reckless at this point.
At the time of publication, Cramer was long JPM, GS and MS.
Downside at 4,700? What the fuck is he smoking, we’re going down 4000 points in two days? what a fucking jackass
I hope they never get rid of crammer. He’s been the best contrary indicator since 2000!!
Hey, I’m just giving you guys an opportunity to fade me again. Somehow, my call to “get out” a few days ago was actually correct. I sincerely apologize, and my research team will make sure you never hear a correct call from me again.
Can you imagine the blood in the streets if we get obliterated tomorrow? Now that would make for a fun day watching CNBC.
PS – I swear Erin was acting all coked up the other day. TC mentioned she was talking fast. She was manic.
They put the donkey-hat in Ironman…like he has influence.
I would love to do some blow off of Erin’s creamy ass. I can picture it now.
ahhhhhh.
I bet she has a really hairy beaver…huge bush.
http://slopeofhope.com/2008/10/the_earliest_signal.htm
*shakes head and sighs*
A-N-Mike, you need help.
Fly wins again on Monday thanks to Cramer’s asshat comments!
ditto
Sorry Boca. I got carried away.
Off to Church now.
Im meeting my dealer there!
Bah, Erin is a chipmunk. Maria is my gal. She’s got decades of experience. She’s polished more knobs than the cleaning crew at the Bellagio.
News on Morgan Stanley out. This is ok I guess, it doesn’t look like it’s falling through.
WSJ: Morgan Stanley, Mitsubishi UJF Negotiating Pact: Sources [JCQYCBB]
By Aaron Lucchetti, Matthew Karnitschnig and Jon Hilsenrath
Of THE WALL STREET JOURNAL
Morgan Stanley (MS) and Mitsubishi UFJ Financial Group (8306.TO) continued to
negotiate their $9 billion pact Sunday, as both sides pushed to keep the general
terms of the deal intact while sweetening a few details for the Japanese banking
giant, people familiar with the matter said.
While the international talks are expected to carry late into Sunday evening,
Morgan Stanley is moving toward announcing a renewed commitment to to sell a 21%
stake to MUFG for $9 billion.
The U.S. government is involved with the talks, but is not contemplating a
direct investment alongside MUFG, one person familiar with the talks said.
Instead, the government would express its support for the deal and work to
structure any potential future investment in Morgan Stanley in a way that
wouldn’t wipe out MUFG’s investment. MUFG has been under some pressure to change
terms of the deal because its original investment for 21% of the firm was agreed
to before Morgan Stanley’s 58% share price fall this month.
Morgan Stanley’s market value Friday stood at $10.3 billion, only marginally
above the amount MUFG had agreed to pay for a 21% stake in the New York
investment bank. To improve the terms for MUFG while giving Morgan Stanley the
$9 billion it wants, the two sides may increase the dividend MUFG gets on its
preferred shares in the deal, while also reducing the amount of common shares it
would get. The conversion price for the convertible shares might also change.
The deal is being closely watched as a sign for whether private international
deals can still work in a period of historic market declines that has brought in
government rescues of all types and sizes. As the two banks discussed finalizing
their deal by Tuesday, the U.S. government as well as European leaders discussed
ways to prop up a banking system that has lost the confidence of shareholders
and taxpayers amid waves of ill-timed mortgage and credit investments.
Friday evening, Treasury Secretary Henry Paulson said the U.S. government was
developing strategies to purchase equity in financial institutions where
necessary for market stability. The government may be be considering approaches
that would work broadly for the financial system instead of responding to one
company at a time in an ad-hoc way, which has been one criticism in recent
months as companies like American International Group Inc. (AIG), Fannie Mae
(FNM), Freddie Mac (FRE) and Bear Stearns Cos., have required the assistance of
the U.S governnment.
The U.S. Tresaury may provide more detail on its plans before Monday’s start
of trading. One challenge is to avoid diluting the value of stockholders in the
way the government did with Fannie Mae. Earlier on, this was viewed as a way to
protect taxpayers and minimize so-called moral hazard.
Structuring the deals to avoid such losses, possibly through warrants that
convert to shares at a later date, would provide relief to Morgan Stanley’s
shares. Some Morgan Stanley shareholders are hoping that the capital injection
from MUFG will be enough to get the firm through its current problems without a
government bailout.
no, cramer is a genius. the people are scared and he’s shaking that tree, to dislodge more fearful folks before he and his boys come and swoop in on a buying rampage.
what he’s doing isn’t technically illegal, but I think he deliberately leads people into the ambush. usually it comes about a week or two after he talks the stock up and the sweet folks at home have taken a position. AUY … bam.
SP futes up 30 at the open.
Mike: please bang some brains into Erin
I hate to admit it, but Cramer could be right. Early signs look promising tonight, but we are in the mother of all margin calls as Cramer points out. Neither Cramer nor I know when margin calls will run their course, but given that Cramer is trying to spook baby boomers into liquidating their retirement dreams, there could be more to come. It’s over when it’s over, then we rocket back up.
Honestly, I don’t think there’s been enough wealth transfer yet. Restaurants this weekend were still jam-packed with smiling people. What the hell kind of crisis/depression is this when you still have to wait 30 minutes for a table? The Euro still exists, and an informal survey of peers and neighbors / man on the street indicates no panic.
I bought puts on BNI last week. I guess I’m Buffet’s sucker… But I’ll be selling shortly.
thanks for the links, fly.
1) lol @ ass napkin and boca. =D
2) cramer isn’t an idiot, but his history of hyperbole and bi-polar swings make his assessments have large sampling errors, if you will.
I must confess that every time I see and hear Karen Tso on CNBC Asia, I have a strange fantasy of riding a horse on a beach with her on back after complete financial collapse (naked, of course) like Charlton Heston in Planet of the Apes.
pics.livejournal.com/la_petite_singe/pic/00036030/s320x240
REUTERS SOROS SAYS STEPS TAKEN IN EUROPE ARE VERY POSITIVE
REUTERS SOROS SAYS WOULD EXPECT MKTS TO TURN AROUND THANKS TO LEADERSHIP DISPLAY
Gah
http://www.fanboy.com/images/CharltonHeston-planet-of-the-apes.jpg
I hope the US Gov is smart enough to not rest on it’s laurels because of the initial positive market reaction and instead announce something big on top of it to force panic SP short covering.
Gas is 2.70 in northern Indiana
Fly,
Thanks for the links.
-Phil
I expect the snapper rally will get sold into, however, if the global bailout works to change the psychology/emotion, it could be an absolute buying riot – 30% up with a bullet.
Thunder, I always used to think to myself (of that shot) — “Damn, that musta been some nook-u-lar explosion to blow the Statue of Liberty all the way to the West Coast like that…
_____
Hyperinflation and a new 3rd wave commodity bubble here we come. Glad I’m short SMN as a hedge and long MON. New bull market to 2007 highs and then a crash to DOW 1500 due to the hyperinflation depression. At least the bankers will get rid of their derivatives problem to taxpayers in the process. Gotta love free money from thin air to solve the world’s derivative ponzi scheme for another couple of years. I much prefer this scenario as a trader. Buying GLD and DXO tomorrow. Fun times have returned. Go with the bullshit one more time.
Ok, Cramer is officially nuts:
2:02PM “Why I’m Negative Now”
9:01PM “Why You Shouldn’t Fade This Opening”.
The OEW weekend Summary:
“In reviewing the previous cycle bear bear markets we observed the following:
1929: started with a 50% crash drop, retraced 50%, and then eroded for months on end to much lower levels, took 34 months.
1937: started with a 50% drop over 12 months, with a 40% crash in the middle, retraced 62%, and then eroded for months on end to a double bottom, took 61 months.
1973: started quitely, had a 62% retracement after the first drop, then crashed 33% near the end, and the market lost a total of 47%, took 23 months.
2007: started quietly, is near a 50% drop, with a 34% crash near the end, and this has taken 12 months.
Notice the three previous cycle wave bear markets either dropped 50%, or dropped then rallied 50%-62%, and then bottomed months later. Near DOW 7100 this market would haver dropped 50% from the 2007 highs. There is technical support between DOW 7100 and DOW 7400, these levels equate to SPX 769 and 789. There is also great support for the DOW at the 1998 and 2002 lows, which is also around these levels. Should the market hold there, a 50% – 62% rally over the next 8 months is possible, then a retest of the lows in 2010 at the four year cycle low. We may still get our ABC flat, but from lower levels. Lots of technicals going back to 1932 support this POTENTIAL scenario.”