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The Fed's Rescue
Tweet Share on Facebook July 14, 2008 Comment (1)The Federal Reserve's decision on Sunday to lend to troubled government-sponsored lenders Fannie Mae and Freddie Mac—using the same terms it extended to ailing investment banks suffering through the credit crisis—should be good news for stocks this morning.
The plan, which needs congressional approval, shows the government is fully committed to propping up the backbone of the U.S. lending market.
Shares of the two giant lenders—which hold or back some $5.2 trillion worth of American mortgages—fell nearly 50 percent last week on fears that rising mortgage defaults could force the pair to raise massive amounts of capital.
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GE and Markets
Tweet Share on Facebook July 11, 2008 Comment (3)General Electric's earnings today offer a stark look at what's going wrong (and a bit of what's right) in the market.
Second-quarter profits fell 6 percent, and the company said it's selling off its Japanese consumer finance business. That's the latest surprise just weeks after GE said it would consider selling its consumer and industrial unit, which includes its signature appliances and light-bulb divisions.
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Why the Fed's Job Is Hard
Tweet Share on Facebook July 10, 2008 Comment (1)Just a quick note on how tough it is to gauge the true direction of the economy and inflation right now, care of the WSJ 's latest survey of economic forecasters:
Of 53 economists surveyed, 22 said the Fed should be more concerned by economic weakness than inflation, while 21 said inflation should be the greater concern. The rest said the risks were equally balanced, or declined to answer.
Uncertainty on rates simply piles on to a seesaw day for markets as financial turmoil continues to overshadow hopes that the financial crisis is ebbing.
With government-sponsored lenders Fannie Mae and Freddie Mac reportedly on the verge of insolvency, according to former St. Louis Fed President William Poole (via this Bloomberg interview), there are mounting signs that central bankers won't manage to shift away from crisis-management mode anytime soon.
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Partying Like It's Japan, 1993
Tweet Share on Facebook July 9, 2008 Comment (2)Merrill Lynch's bearish chief economist, David Rosenberg , says it doesn't matter whether we're in a recession or not. Investors already believe that we are, and the important thing now is how long the downturn lasts.
He writes:
We published our last recession piece on Monday. And we'll give you the reason. We field too many questions on when the recession began, and when we expect it to end, all for trying to time the optimal date to leap back into the equity market. It's not that easy. As we said, the GDP data are going to be subject to multiple revisions. But more to the point, with the stock market down 20% and the 10-year note yield down 100 basis points over the past year, investors already recognize that a recessionary backdrop has arrived. Here is what is important: not the peak-to-trough decline in GDP, but rather the length of time it is going to take to make the transition to the next economic expansion and bull market.
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Pickens' Plan
Tweet Share on Facebook July 8, 2008 Comment (59)Billionaire oilman and corporate raider T. Boone Pickens is taking his fight for American energy independence public today, outlining his plan to wean America off its $700 billion-a-year foreign crude habit.
"Our dependence on imported oil is killing our economy. It is the single biggest problem facing America today," Pickens said. "As we import more and more of our energy, we are participating in the greatest transfer of wealth in the history of mankind, sending billions of our dollars overseas to buy oil for a commodity that lasts 90 days until burned in our gas tanks."
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Fannie, Freddie Slam Banks
Tweet Share on Facebook July 7, 2008 CommentIt's a new sell-off, care of the usual suspects in the financial sector. This time, the culprit is the government-sponsored lenders.
Today's damage:
Fannie Mae (FNM) — Down 17 percent
Freddie Mac (FRE) — Down nearly 18 percent
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Beyond the Bear
Tweet Share on Facebook July 7, 2008 CommentStocks are warily eyeing a young bear market this afternoon (that's a 20 percent drop from October highs if you're keeping track), and analysts are watching to see if we're in for another leg down.
There's a good chance pain could worsen, given the litany of head winds facing markets right now, including record oil prices, financial sector woes, and housing distress.
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Gaming Becomes a Bad Bet
Tweet Share on Facebook July 3, 2008 Comment (3)Today's collapse of the huge $6.1 billion deal between Penn National and a handful of private equity firms is the latest in a round of bad news for gaming stocks. Fortress and Centerbridge Partners terminated the 13-month-old deal, likely finding their $67-a-share price a bit rich given Penn's current price near $30. (The shares did rise, though, on a $225 million break-up fee.)
After several flush years from Las Vegas to Macao, it seems the players just aren't flocking to the tables (and hotels, and shops) as they have in years past.
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Coal's Bad Signal to Stocks
Tweet Share on Facebook July 3, 2008 Comment (3)Coal stocks got absolutely hammered this week. If heavy selling continues, it matters for markets.
On Wednesday, Arch Coal (ACI), Massey Energy (MME), Foundation Coal (FCL), and others slumped 10 to 15 percent, followed by high-flying steel companies. They rebounded a bit today, leaving Barron's to wonder whether investors are starting to separate the wheat from the chaff in the sector.
Van Eck's Market Vectors Coal ETF (KOL) is off an additional 7 percent this morning following a near 12 percent drop Wednesday.
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Solar Subsidy Mayhem!
Tweet Share on Facebook July 1, 2008 Comment (11)A reminder about investing today in the solar sector: It's not about technology. It's not about earnings. Right now, it's all about government largess.
Witness Spain's disappointing plans for 2009 subsidies. Basically, Spain is reportedly considering an aggregate subsidy cap of 300 megawatts on new solar installation for 2009 and offering a lower price on electricity produced from solar systems. Discussion includes paying a rate about a third less for energy produced in rooftop systems and 41 percent less for ground-based systems. The total cap is also a far cry from the 3,000 MW of new capacity that some analysts said would be needed to keep Wall Street happy.
