November 25, 2008 --- When Soup Getting Cold!
US stocks continued their rebound with Europe +10% as the Citi bailout cheer lasted for the day. I still view this as a dead cat bounce and not really a tradable one. Stock wise, I do not think Citi can go sleep now ---with $2trn on-BS assets and $1.23trn in off-BS assets & 667bn in Mtg-related securities, the $306bn is clearly not the end of the problem. What about those credit card and auto-related loans?
Another thing I feel confused to US SEC is why won’t they ban the shorts on Banks? The govt authorities have created a great trade for the HFs/speculators by guaranteeing dilution bailouts --- buying CDS protection on Banks, buying out-of-money puts, and then nail the stock with shorts only to be guaranteed Government induced dilution. It seems US tax payer is writing hedge funds big check?
Market wise, technical strategists still suggest that the S&P has yet to complete the wave down and Asia still looks set to test Oct lows. I think this make sense to me as bond spreads are still at historical highs with HY spreads still in the stratosphere. Banks are will not be allowed to fail but what happens when industrials that hires tens of thousands of Workers go under? Overnight, WTE US Oct Existing Home Sales (-3.1%), EU Sep New Orders (-3.9% MoM) and Germany November IFO (85.8) remind me that the recession is still in the beginning stage. In addition, I also saw the Soup getting cold as Campbell Soup -7.6% after sales that missed est. and warning that FY09 REV and NP may be 5% down due to the strength of banana currency.
Asia likely to have a strong open and the focus today is MSCI rebalance…Strategy wise, I would use the bounce to trim my positions in preparation for the next leg down
Oversea Markets Review
After falling nearly 10% last week, global equity prices climbed 5.9% yesterday thanks to robust gains across Europe (8%) and the Americas (6.5%). Meanwhile, equities in Asia fell on balance. Elsewhere, 1MWTI oil climbed m+$4 to $54.50/bbl, the highest price in a week. UST yields rose with 2yr increased 11bp to 1.20% and 10yr ascended 12bp to 3.32%. Two- and ten-year yields have corrected 23bp and 31bp, respectively, since they hit record lows last week. USD dropped 1.8% on TW basis, -3% vs EUR to $1.295 and -1.8% vs EM currencies, while it rose 1.4% against YEN to 97.3.
