Citigroup, Merrill Lynch and JP Morgan Chase will write down an additional $33 billion in the fourth quarter, predicted Goldman Sachs analysts this morning.
Goldman Sachs economists forecast a 40% cut in Citigroup’s dividend, coupled with an additional $18 billion write-down. Merrill and JP Morgan will write down an extra $11 billion and $3 billion, respectively.
The U.S. dollar fell again yesterday and overnight. The euro climbed back into the $1.45 range, and the pound regained its footing at $1.99. The dollar index now barely clings to a score of 77.
Crude oil prices took another shot at the $100 mark yesterday and this morning, rising over $2, to $97.
Analysyts are expecting today’s Energy Department report to show the sixth straight week of supply decline… coupled with the Turks and Kurds sharing some extra special holiday cheer this week, oil’s back on the rise.
Gold jumped to $825 overnight. “After Monday’s quiet half session,” reports Doug Casey, “gold came charging out of the box in New York yesterday. Combined with the strength showed during the latter part of last week, gold may well be signaling that the year-end position squaring is over and it’s ready to start the next leg up of this bull run. Of course, it didn’t hurt that yesterday also brought renewed weakness in the dollar and a rise in oil prices.”
This morning, as news of Benazir Bhutto’s assassination crossed the wires, we saw a small flight to quality into gold. The attack pushed gold up to $834.
Thursday, December 27, 2007
Wednesday, December 26, 2007
More news for MER
Merrill Lynch grabbed the biggest financial headlines while you enjoyed your yuletide festivities. The bank, like many before it, announced it needed a multibillion-dollar bailout to stay afloat, and consequentially scrambled abroad for SWF capital.
The bank announced it would raise over $6 billion in the near future, $4.4 billion of which will come from the Singaporean sovereign wealth fund Temasek.
Ironically, we were surprised to hear the remaining funds were originated on American soil. U.S. firm Davis Selected Advisors will snatch up $1.2 billion of Merrill common stock, while Outstanding Investments pick GE has agreed to buy most of Merrill’s commercial finance biz, Merrill Lynch Capital.
The bank announced it would raise over $6 billion in the near future, $4.4 billion of which will come from the Singaporean sovereign wealth fund Temasek.
Ironically, we were surprised to hear the remaining funds were originated on American soil. U.S. firm Davis Selected Advisors will snatch up $1.2 billion of Merrill common stock, while Outstanding Investments pick GE has agreed to buy most of Merrill’s commercial finance biz, Merrill Lynch Capital.
Tuesday, December 25, 2007
Brothers! --- Stand up!
Hi Folks, Merry Christmas! Though a tough 2007, we will never give up ourselves!
Saturday, December 22, 2007
Shall we buy Financial Stock now?
“We issue this highly qualified forecast on the basis of poetic irony…and not much else. Last week, Morgan Stanley analyst Betsy Graseck scorned the shares of Citigroup as Morgan's No. 1 short sale recommendation for 2008.
“Morgan's recommendation to sell short Citigroup shares arrived on a day the stock closed almost 50% below its all-time high. Throughout Citi's slow-motion collapse of the last 12 months, Morgan steadfastly maintained some version of a ‘Buy’ recommendation on the stock. In fact, as the nearby chart illustrates, Morgan reiterated its favorable forecast for Citi several times during the stock's drop from $57 a share last December.
“If Morgan's advice was so misguided during Citi's collapse, would the Fates and Furies of the financial markets permit Morgan's advice to be timely and accurate now? Not likely. To the contrary, Ms. Graseck's ‘sell short’ recommendation feels an awful lot like a contrarian ‘Buy’ signal.”
Therefore, we should not take the recommendation by analysts to sell short any financial stocks at current price. Because big money are continuously pumping into the US bank.
UBS, Citigroup, Bear Stearns, Blackstone, Morgan Stanley and now probably Merrill Lynch -- all handing over massive stakes in their businesses to funds controlled by foreign nations. The Free Market Investor’s Chris Hancock has composed a report on the effect of these sovereign wealth fund investments… read it here.
“Morgan's recommendation to sell short Citigroup shares arrived on a day the stock closed almost 50% below its all-time high. Throughout Citi's slow-motion collapse of the last 12 months, Morgan steadfastly maintained some version of a ‘Buy’ recommendation on the stock. In fact, as the nearby chart illustrates, Morgan reiterated its favorable forecast for Citi several times during the stock's drop from $57 a share last December.
“If Morgan's advice was so misguided during Citi's collapse, would the Fates and Furies of the financial markets permit Morgan's advice to be timely and accurate now? Not likely. To the contrary, Ms. Graseck's ‘sell short’ recommendation feels an awful lot like a contrarian ‘Buy’ signal.”
Therefore, we should not take the recommendation by analysts to sell short any financial stocks at current price. Because big money are continuously pumping into the US bank.
UBS, Citigroup, Bear Stearns, Blackstone, Morgan Stanley and now probably Merrill Lynch -- all handing over massive stakes in their businesses to funds controlled by foreign nations. The Free Market Investor’s Chris Hancock has composed a report on the effect of these sovereign wealth fund investments… read it here.
Wednesday, December 19, 2007
The collapse of the housing market is worse than it looks
“Interesting story in the WSJ today about how sellers are offering bigger incentives to buyers. These incentives don't show up as part of the public record, which records housing transactions. But they can be substantial.
“What's happening is something like this: Someone sells a house for $200,000, but gives $20,000 in incentives. For purposes of tracking housing prices, $200,000 is the sale. In reality, of course, the true net price is only $180,000.
“This practice fools all the data-gathering services. Bottom line: Housing prices are falling more than reported.”
“What's happening is something like this: Someone sells a house for $200,000, but gives $20,000 in incentives. For purposes of tracking housing prices, $200,000 is the sale. In reality, of course, the true net price is only $180,000.
“This practice fools all the data-gathering services. Bottom line: Housing prices are falling more than reported.”
Tuesday, December 18, 2007
Agriculture will be a hot spot in 2008
The Chinese government has moved to discourage grain exportation. Encouraged by yesterday’s all-time high in wheat and 34-year high soy prices, officials announced yesterday that China will nix its 13% tax rebate on grain exports, including rice, soy, corn and wheat.
Food prices in China are up over 18% this year, according to the Times Online, and with 1.3 billion mouths to feed, China now seems less focused on selling won ton chips and soy sauce to gaijin.
“The farming situation in China is getting out of control,” , “China has five times the population of the United States, but less than half the farmable land.”
What’s more, each year, soil erosion causes China to lose some 61,000 square kilometers of land -- a plot about the size of West Virginia. If you’re betting on continued agricultural support from the Red Nation… think again.
Food prices in China are up over 18% this year, according to the Times Online, and with 1.3 billion mouths to feed, China now seems less focused on selling won ton chips and soy sauce to gaijin.
“The farming situation in China is getting out of control,” , “China has five times the population of the United States, but less than half the farmable land.”
What’s more, each year, soil erosion causes China to lose some 61,000 square kilometers of land -- a plot about the size of West Virginia. If you’re betting on continued agricultural support from the Red Nation… think again.
Thursday, December 13, 2007
Why does Fed only cut 0.25%?
Fed changes their wording of ‘balanced growth’. They didn’t go so far, but they did say, ‘Economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks.’
Hmmm...doesn’t sound as if growth is balanced with risk/inflation, does it? So why didn’t they just drop the bias? Because, they know that it could ‘spook’ foreign investors. And when foreign investors get spooked, they don’t buy our assets, and when they don’t buy our assets, the current account doesn’t get financed, and when the current account doesn’t get financed...the dollar gets weaker!
However, traders are not happy about that when they all trade on a minute basis today. If you follow their steps as a small investors, probably you could get wiped out soon.
Hmmm...doesn’t sound as if growth is balanced with risk/inflation, does it? So why didn’t they just drop the bias? Because, they know that it could ‘spook’ foreign investors. And when foreign investors get spooked, they don’t buy our assets, and when they don’t buy our assets, the current account doesn’t get financed, and when the current account doesn’t get financed...the dollar gets weaker!
However, traders are not happy about that when they all trade on a minute basis today. If you follow their steps as a small investors, probably you could get wiped out soon.
Wednesday, December 12, 2007
Those economists are right the first time, not easy
According to poll results The Wall Street Journal published this morning, a poll says 38 out of 100 economists think the U.S. economy will be in recession in 2008. That number is up 5% from last month’s poll. The same group of economic thinkers also drastically lowered their GDP forecast for this final quarter of 2007, from an annualized 1.6% down to 0.9%.
Of the economists surveyed, 96% thought the Fed would cut rates today. Most said by 25 points. This time, they were right…
Minutes after the Fed cuts rate, Dows tanks 290 points, indicating that traders are all hoping 50 points cut. Well, let's put this into a short question. Do those traders know what the economic situation is?
Of the economists surveyed, 96% thought the Fed would cut rates today. Most said by 25 points. This time, they were right…
Minutes after the Fed cuts rate, Dows tanks 290 points, indicating that traders are all hoping 50 points cut. Well, let's put this into a short question. Do those traders know what the economic situation is?
Monday, December 10, 2007
US in Recession while China won't
the U.S. economy is already in recession. At least, that’s what Friday’s jobs report suggests.
“The Bureau of Labor Statistics (BLS) used a full suite of gimmicks on the November jobs report,” says John Williams of Shadowstats.com. “It was not credible and showed indications of heavy manipulation aimed at keeping jobs growth positive but still weak enough to pressure the FOMC toward an easing.
“Even so, the BLS reported seasonally adjusted November payrolls up by 94,000, following October's revised 170,000 gain. Unadjusted year-to-year payroll growth fell in November, to 1.04%. The decline in November annual growth, to 1.0%, has historic parallels seen only during recessions.”
This morning, the Chinese government made another attempt to cool down their bubbling economy. The central bank raised the required reserve ratio (RRR) -- the proportion of cash banks are required to keep on hand -- for the 10th consecutive time this year.
Under normal conditions, hiking the RRR has a cooling effect on the stock market. Not so in China. An RRR of 14.5%, the highest in China since the mid-1980s, barely gave buyers pause. The Shanghai Composite (SSE) rose a full 1% on the news.
Despite a hefty fourth-quarter correction, the SSE is still looking to return 90-100% this year.
Investors in Shanghai could barely spit on the sidewalk for the past two years without hitting a highflying stock.
“The Bureau of Labor Statistics (BLS) used a full suite of gimmicks on the November jobs report,” says John Williams of Shadowstats.com. “It was not credible and showed indications of heavy manipulation aimed at keeping jobs growth positive but still weak enough to pressure the FOMC toward an easing.
“Even so, the BLS reported seasonally adjusted November payrolls up by 94,000, following October's revised 170,000 gain. Unadjusted year-to-year payroll growth fell in November, to 1.04%. The decline in November annual growth, to 1.0%, has historic parallels seen only during recessions.”
This morning, the Chinese government made another attempt to cool down their bubbling economy. The central bank raised the required reserve ratio (RRR) -- the proportion of cash banks are required to keep on hand -- for the 10th consecutive time this year.
Under normal conditions, hiking the RRR has a cooling effect on the stock market. Not so in China. An RRR of 14.5%, the highest in China since the mid-1980s, barely gave buyers pause. The Shanghai Composite (SSE) rose a full 1% on the news.
Despite a hefty fourth-quarter correction, the SSE is still looking to return 90-100% this year.
Investors in Shanghai could barely spit on the sidewalk for the past two years without hitting a highflying stock.
Thursday, December 6, 2007
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