Strap on your safety belts, here we go!
It’s going to be a wild day as the panic is being shoved down our throats with the WSJ leading things off with rumors of a hedge fund collapse at JWM Partners, which is headed by the John Meriwether, the guy who busted Long-Term Capital Management and gave us our first great hedge fund crisis.
Aside from the fact that I find it impossible to feel sorry for people who give money to the same guy, WORKING IN THE SAME OFFICES, that caused a global financial panic in 1998 with his stupendous losses – this is also not news, just an expected side-effect of the municipal bond markdowns and it would be a bad idea for investors to pull out now but you don’t get that impression from the Journal, which takes several opportunities to remind readers that Monday is the deadline to request capital withdrawals.
We expected today to be a bad day since the weekend as we have the GDP report, which, of course, shows 0.6% growth as it’s the same number as we got in the last 3 preliminary reports so why would it change?
In addition to Meredith Whitney’s gloom and doom prophecies yesterday, Paulson decided it would be a good time to threaten the finanicals with greater scrutiny and David Merkel wrote an excellent summary of the current financial environment so I’ll keep quiet about it and move on to today’s business but we went with XLF calls amid all the carnage and picked up more C as it all just seems cheap to me.
Asia was mixed this morning with Hong Kong up just 47 points and the Nikkei down 102, still pretty much mirroring the Dow but the Shanghai Composite dopped a whopping 5%, bringing mainland China’s market down to the lowest point since April 9th, with all of last year’s gains being erased. PTR fell 8.3% despite another huge jump in oil and China Pacific fell another 7.5% as Baoshan Iron blew earnings and dropped 9%. China Construction Bank fell 5.5%, Air China dropped 9.1%, Ping An Insurance fell 6.1% and China Shenhua Energy dropped 9.8%. You would think something like this would be bigger news over here, but I have yet to hear a word about it on CNBC or any television station.
Remember folks, our goal is that US equities just look "less sucky" than other markets – I think we can call this a win against China at this point. Money has come out of housing, it’s coming out of bonds and it’s coming out of derivatives and the hedge funds who trade them, and soon it will come out of commodities. Where will it go? The fact that people did, in fact, buy our 2-year notes yesterday for 1.75% interest shows you how difficult it must be to find a good place to put cash so all we have to do is give global investors the opinion that we’re done going down and we should start going up.
I made my bottom call yesterday as we took out our callers for the 4th time this month and we made a lot of bullish plays so I’ll have to live with that decision but that’s my logic – that there simply isn’t a better place to put our money and we sure don’t want to leave our assets in dollars as those are dropping 5% a month!
European markets are trading up more than a point after yesterday’s mild pullback as they shook off the hyena attacks on their banks (and DB even gave actual bad news yesterday) as strong comments by Trichet gave investors confidence. The BOE has fired the first shot in the war to stabilize the dollar and has indicated they may cut rates while the ECB says they stand ready to inject more capital into the market as needed.
Everything is in place for a nice rally if we can just put a pin in the commodity bubble. We’ll see how today’s action goes as the jobs numbers were flat and LEN’s loss is being taken well. I think GOOG will be a BUYBUYBUY and we’ll certainly take out our callers on that one, hopefully picking up some close calls as a momentum play in the morning.
The Nasdaq will be very sluggish out of the gate due to ORCL, which is nonsense as we discussed in yesterday’s wrap-up so we’ll be looking for new plays there, probably adding more May $20s to our existing spread and, of course, taking out our April caller.
Looks like a fun day ahead!
