Thursday, December 20, 2007
Brief News Bits
Just to reiterate, the bond insurers cover issues like munis, which should be largely uncorrelated to the mortgage debt. Thus weakness in these companies serves to abruptly correlate the ratings and market prices of many debt issues which would otherwise have only weak linkage. MBIA's announcement is a major blow to the groin for this market. MBIA's book value last quarter now appears to be less than its total exposure to those thar subprimey CDO thingies. Do you feel the analysts' pain now?
Initial unemployment claims came in high. 343,000 is the four week leading average for initial claims, and continuing claims are now over 2,700,000. There has been good seasonal employment in retail in many areas because of expanded hours, and the spate of early retirees should be cutting overall unemployment down. Still, the employment weakness is becoming marked enough to generate uneasiness.
Leading indicators dropped again. I don't pay any attention at all to them, because it seems like it is always addressing a few months ago. My feeling about leading indicators is that they should lead rather than lagging, and the Conference Board's leading indicators are composed of lagging signals. Still, the leading index is down 1.2% from May to November, which should provide considerable cover for the Fed to cut rates again in January. It's looking more like 50 bps than 25.
SunTrust is coughing up 1.4 billion to cover several of its money markets. They say they don't expect to be doing this again. One doubts they could afford to do it again.
Doesn't the SunTrust news make you feel better about Bear Stearns' dinky little 854 million dollar quarterly loss (stemming from 1.9 billion in losses on mortgages)? It is Bear Stearns' first loss in over 80 years, but there's a first time for everything. Management has announced that it feels great shame.
Over 90 banks arrived for the Fed's Oliver Twist line for workout soup. When you find yourself shoring up your money market funds, cash can get a bit tight. Naturally they couldn't all win the auction, and pitiful cries of "Please sir, can I have some more" resounded through the Halls of Finance. That kind avuncular Fed is going to hold another auction. Dickens would be so proud.
I intend to have a good Christmas, and I hope you all will also. The New Year can just take care of itself for the time being.
One should appreciate that the word "investing" sounds a lot better than "bailing out", "rescuing" or any other phrase that indicates that one is trying to extract oneself from the warm and smelly brown stuff which has just hit that rotating thingy on the ceiling!!.
There are many types of investing. Some lead to more profit than others.
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