Man, this week was going so well for a while…
Oh well, we've done our virtual portfolio reviews and, on the whole, things could be much worse so let's just lick our wounds and get back into bargain hunting mode over the weekend. There was nothing we heard yesterday that made things worse than they were last week and, as I said yesterday morning, this is what the market needs to make sure that buyers coming in now are real buyers, not delusional optimists that get chased out of their positions every time Bernanke's voice cracks.
Today we have some VERY inflationary import pricing, up 1.7% from last month. Adding insult to injury our export prices are only up 1.2% – mainly a reflection of the declining dollar but a net 0.5% disadvantage in our trade in just one month. Additionally, the Empire State Manufacturing Index was down a "shocking" 11.7, a very recessionary sign heading into a 3-day weekend. BBY cut guidance this morning and Citigroup has barred withdrawals from a $500M hedge fund as manager John Pickett walked off the job "following a bitter dispute with Citigroup executives and complaints from investors that he put too much money into a single investment that went bad." All I can say about the Citifund investors is they are lucky compared to their Falcon Plus Strategies, which plunged 52% last quarter and a letter sent to investors told them to expect additional losses ahead as the fund "tries to dump some of it's battered holdings."
Asia was generally flat this morning and China's export growth continued to accellerate (that's where our 1.7% monthly inflation is coming from) so we can expect Beijing to continue to tighten monetary policy, which is what sensible governents do when they want to support measured growth rather than put up some pretty numbers in order to win an election and dooming the economy for years to come. China is famous for its 5-year plans and it would be nice if we adopted A plan of any kind in this country!
Europe is well off, about 2%, ahead of our open after hearing all the bad news and our pre-markets are in shambles. There are signs of slowing in the EU economy and the heat is on Trichet to cut rates from the same Cramer crowd that pushed our Fed into setting our economy on the slippery downward slope have now set their sites and setting Europe ups as a funny money zone. Destabilizing currencies is fantastic for currency traders and, since the public has begun to discover options, trading houses are turning to more exotic derivatives where they can make their money unencumbered by real people.
The dollar continues to fall as more rate cuts are in the cards for the US. Hell, we still have 3 points left to cut before zero and surely that will fix everything because if everyone can borrow money for free then we can all afford to pay $1M for a 2 bedroom condo in Miami again and all will be right with the world. The fact that a tank of gas would cost $200 shouldn't bother us, after all, we only buy 5M barrels of oil a day from nation's that the administration says are sponsoring terrorism, but at least if they make a phone call (and they can afford REALLY good phones now!) we'll be able to listen in…
Barry Ritholtz says "The Monolines Are F#@%ed!" and it's hard to argue today as FGIC is giving up and asking to be split into two companies, presumably one that is totally f#@%ed and one that's just 90% f#@%ed. Meanwhile, BSC is getting probed and, just like with alien abductions, they won't be the last as these investigations seem to gather steam and this is probably not the best time for people to lose faith in our financial institutions.
Thank goodness for the 3-day weekend as we all need a little time to step away from the market and take a breather but we can just go back to my articles of the past two weeks (and I will on the weekend) and I will say again that there is nothing NEW in this news. Earnings are still going fairly well and I continue to say – show me the losses!
I'm very excited to be starting two new small virtual portfolios next week, there's a lot of irrational selling going on and we'll be evaluating many new opportunities as well as revisiting some of our old favorites that are going back on sale. I don't see how this economic crisis can possibly be handled more ineptly so I'd have to say this is a bottom unless they start another war (always on the table) or get Congress to give away even more money so let's give it a few days, let everyone have their say and make a realistic evaluation next week.
Meanwhile, happy President's Day!
