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Is The Bull Market Back?
Tweet Share on Facebook April 30, 2009 Comment (1)More brave souls are willing to call an end to this bear market, a notoriously tough moment to catch given the fear and uncertainty that marks the switch from downturn to rally. But with the Dow up more than 25 percent since those March 9 lows, more people are starting to see a bull market in the works. Here's a rundown of the recent optimism:
Anthony Bolton, president of investments at Fidelity International, via Bloomberg:
Low valuations indicate advances that began in March are the start of a bull market, Bolton said. He favors financials, consumer cyclical, technology, and “value stocks,” such as retailers, automakers and construction-related shares.
“All the things are in place for the bear market to have ended,” Bolton said in an interview with Bloomberg Television in Hong Kong. “When there’s a strong consensus, a very negative one, and cash positions are very high, as they are at the moment, I’d like to bet against that.”
And his contrarian take:
“Nearly all the broker research I read says ‘bear-market rally,’ that’s one of the other things that makes me think it’s the beginning of a bull market, not a bear-market rally,” Bolton said. “When everyone is extremely negative, I want to bet against that. If you wait for things to get better, you’ll miss the rally.”
CBS head Sumner Redstone sounds bullish too, who told the Milken Institute conference, "I think we're in the beginning of a bull market. When a bull market begins, nine months later the economy turns around." (via Reuters). More:
"It was always tough, but today we are in the throes of something we have never seen in our history. It's clear in recent times the market is looking for a bottom."
"The news was extremely bad on the GDP and the market went up. In a bull market, the market ignores bad news. Today, we ignored extremely bad news," Redstone said in a Q&A session with CNN's Larry King.
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Swine Flu Fallout: Stocks, Trade And The Economy
Tweet Share on Facebook April 28, 2009 Comment (2)As fears of a swine flu pandemic increase (emphasis on fears) market jitters are rising accordingly due to the uncertain scale and cost of the current outbreak. Citigroup strategist Tobias Levkovich today takes a stab at just what sort of sickness swine flu could inspire in stocks, trade and the global economy.
While we do not want to diminish the human cost of such awful developments, the investment community is more likely to focus on the economic price. Health care stocks could benefit, while economically sensitive ones could suffer. In addition, we have worried about protectionist policies coming to the fore and it is plausible that some “America First” types may push for more aggressive action on the Mexican border and on immigration, with a populist flavor behind it. Again, we do not see that kind of legislative effort as being perceived as welcome by markets. US-Mexico trade is significant and the Mexican economy is already being hurt by a drop in tourism, exports to the US and weaker oil prices. Accordingly, the news cannot be seen as good for stocks in that country. We would refer investors to the research put out by Citi’s Latin American strategist, Geoffrey Dennis, who has been cautious on Mexican names and underweight the market since mid-December.
But:
We do not see the swine flu development as the factor that will derail the rally, but we are aware that many investors have not participated in the move and thus want some sort of pullback, so they do not underperform. In that sense, we would expect some in the investment community to seize on swine flu as a reason to argue for selling into the rally. We continue to think that skepticism is the dominant feeling in the marketplace and any pullback should be taken advantage of by investors who have been surprised to the upside by 1Q09 earnings thus far.
The report outlines a few investing themes:
Possible losers: The pork industry. Industries that deal in travel or "confined spaces" (airlines) or highly public places (hotels, restaurants, retailers, etc.).
Possible winners: Drug makers (Gilead, etc.). Less obvious: home entertainment plays including "video distributors, video game producers and even pay-per-view movie distribution (through cable and satellite television providers).
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Bank 'Stress Tests' Expose Cracks
Tweet Share on Facebook April 28, 2009 Comment (3)Banks have until May 4 to appeal the results of the government's "stress tests" designed to determine whether they've hoarded enough capital to continue functioning. Already, the results seem to hint the financial crisis will continue. All of the 19 largest U.S. banks under scrutiny are expected to "pass" but that's not really the point. Some are still expected to be forced to raise new capital no matter their grade.
Which brings us to Bank of America and Citigroup, two banks reportedly being urged by the government to raise capital. That banks are undercapitalized is no big secret. Unfortunately, new concern for two institutions that have already taken a combined $95 billion in bailout money could increase the chances they'll come back for more. The longer their capital structures are questionable, the less chance the pair will be able to convince investors to come creeping back especially as the perception problems plaguing the sector remain firmly entrenched. Officials say they don't want the market to look unfavorably on banks required to up cash reserves, or to consider them insolvent. But that is unlikely.
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Good News From Alex Tabarrok
Tweet Share on Facebook April 27, 2009 CommentMarginal Revolution's Alex Tabarrok takes the long view of our economic history and sees lots of reasons to be encouraged. Ideas and markets save lives.
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Geithner Was The Right Choice, Geithner Should Go
Tweet Share on Facebook April 27, 2009 Comment (8)The NYT has the lengthy rundown of Treasury Secretary Tim Geithner's cozy relationship with Wall Street. You should read the whole thing. It's less about new revelations (other than Sandy Weill offering Geithner the top job at Citi, which Geithner promptly turned down.) The play-by-play is thorough (and thoroughly exhausting) so let's get to the point:
With his deep connections among senior finance execs and (relatively) well-respected stature as an honest regulator, Tim Geithner was the guy to call during the early days of the financial crisis. He knew the players, could get them in a room, and he understood (at least partly) what was at stake. The choice made a sort of sense, despite the unavoidable fact that the New York Fed under Geithner missed an alarming number of chances to regulate before the crisis exploded. The passage below illustrates his role, and his successes and failures:
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Portfolio Magazine Closes
Tweet Share on Facebook April 27, 2009 CommentConde Nast is closing Portfolio, a two-year-old title that cost somewhere between $100 million and $150 million (per BW's Jon Fine) and launched at almost the exact moment the financial sector, the economy, and the advertising market started to implode.
The price tag raised a lot of eyebrows, and speculation over just how committed the company would be to a new biz mag never let up, but as the end comes there's less surprise and more sadness at the loss of a title that did do some great reporting during its short life and (especially) produced some great blogging from Felix Salmon (who recently decamped to Reuters) and media blogger Jeff Bercovici. Portfolio moved the ball forward online and produced solid stories right up to the end. Its voice will be missed.
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Banks Brace For Stress Tests: Who's Vulnerable?
Tweet Share on Facebook April 24, 2009 Comment (19)The 19 largest U.S. banks get the results of the government's "stress tests" starting today. The results will be officially released May 4 and banks still have a few days to appeal, but handicapping the results is already underway.
The AP surveys a few analysts for banks that might fare the worst:
Barclay's Capital analyst Jason Goldberg wrote Thursday that three companies could miss the mark: Cleveland-based KeyCorp, Atlanta-based SunTrust Banks Inc. and Birmingham-based Regions Financial Corp.
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Madoff Madness
Tweet Share on Facebook April 24, 2009 CommentThe newsy bit of Fortune's big Madoff story is that Bernie's close cohort, Frank DiPascali, (who is described as a "ninja" for his shadowy presence) is naming names in a plea deal, and claiming none of Madoff's family members were involved. But the story includes a ton of interesting tidbits about Madoff's own weirdness and how he ran his huge Ponzi scheme:
The technology he used to keep the fraud going should've been in a museum:
The IBM server, for instance, an AS/400 that dated from the 1980s, was so old that some data had to be keyed in by hand, yet Madoff refused to replace it. The machine -- which has been autopsied by the government -- was the nerve center of the fraud. The thousands of pages of statements printed out from it showed trades that were never made.
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Lewis Silenced, Threatened Over Merrill By Bernanke And Paulson
Tweet Share on Facebook April 23, 2009 Comment (96)Bank of America's Ken Lewis' testimony sheds some light on the gory details of last year's crisis management. From the WSJ (sub. req.):
Mr. Lewis, testifying under oath before New York's attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by The Wall Street Journal, Mr. Lewis said the government wanted him to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses.
The cost of refusing to keep shareholders in the dark might have been his job:
The Wall Street Journal previously reported, in a page-one story on Feb. 5, that Mr. Lewis agreed to proceed with the Merrill merger only after Messrs. Paulson and Bernanke said that he and his board would lose their jobs if Bank of America backed out of the deal. Mr. Lewis's testimony with the New York attorney general's office corroborates that account.
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Solar Cos. Bitten Twice By Economic Crisis
Tweet Share on Facebook April 22, 2009 Comment (3)Interesting tidbit from Jefferies & Co.'s '09 cleantech outlook. Solar companies are getting squeezed by both the credit crunch in Europe and the stimulus in the Chinese economy (home to a big chunk of low-cost solar panel makers). From the report (bold is mine):
