I think our President did a good job giving comfort to the markets.
Oh, sorry, I meant Obama, who gave made a very impressive and Presidential statement yesterday. Bush was pretty good too, actually doing a great job of delivering a factual explanation of the crisis and letting the people know why Congress must act to "bail out" Wall Street. McCain said he wants to suspend the campaign and postpone the debates. I'll just let Fox give the "fair and balanced" viewpoint without my own comment. Barney Frank had plenty to say about it though…
Kiplinger had a good summary of the crisis and I liked Ben Stein's take on what went wrong as well. I like the changes Congress is insisting on making, especially in light of the terms under which GS is willing to raise capital from Berkshire. If Buffett can lend money at 10% and get warrants for another 10% of the stock below market price – why can't the American people expect the same when they begin to hand out cash?
Speaking of cash, plenty was lost on Friday when the electronic exchanges were putting out erratic pricing, especially on securities affected by the short-selling ban and the exchanges are voiding thousands of transactions that went off at prices they considered outside the proper range.
"They wiped out all my winnings," Joe Strulowitz, an insurance broker in San Mateo Park, Calif. "I should be celebrating today." Mr. Strulowitz had placed an order to buy 100 shares of iShares Dow Jones US Index ETF, a broad-market ETF, at the opening price Friday morning. The price he got was $76.16, about $13 above the price the fund should have traded at based on the value of its holdings. Trading records compiled by FactSet show some investors bought the ETF as high as $85.88. Mr. Strulowitz says the loss on the ETF, which he sold Tuesday at $59.81, wiped out his gains on more successful bets on the stocks of Morgan Stanley and American International Group Inc.
After going over the oil inventory report yesterday, I was struck with the massive demand destruction that is evident in the numbers. It's surprising they they were able to hold $105 and hopefully we will begin to see some real downward movement now that we are past the 2 hurricane inventories. Refineries were operating at just 67% capacity last week and we only drew down 5.9Mb of gasoline, that is a stunning number considering we typically consume 65M barrels a week and 30% of capacity is off-line and we only draw down 10% of the total. Refiners have been operating in the low 80s all year anyway AND we are still EXPORTING 1.3Mb of refined products per day!
Despite the big headline draw numbers the big fact you should get from reading the above link is that we imported 13.9M barrels a day the week of 8/15, 13.1Mbd the week of 8/22, 12.6Mbd the week of 8/29, 11.3Mbd the week of 9/5, 11.3Mbd the week of 9/12 and just 10.5Mbd last week. That is 2.6M barrels each day less crude in a week so the net draw of 11.6M barrels is surprising only in that it is so low!
I'm disappointed that the current economic crisis has distracted Congress from doing something about the oil crisis, which was supposed to be the top of the agenda this month but was forced onto the back burner when the administration allowed the rest of the economy to collapse.
The markets are indeed crazy and we'll just have to wait and see what tomorrow brings.
