Archive for August, 2009
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In the past three weeks alone, China’s formerly sizzling stock market has gone from bull market leader to bear market letdown. On August 30, the Shanghai Composite Index plummeted 6.7%, its largest one-day drop of 2009 so far. And, of the 89 global markets tracked by Bloomberg, the Shanghai index came in last place.
- May 2009: China’s deputy central bank governor seriously questions the “sustainability of the rapid growth in credit and its possible adverse impact,” and a Wall Street Journal piece warns that China’s stimulus spree is “pillaging bank balance sheets” as the quantity of loans vastly outweighs their quality.
- June 2009: “China’s Banks Are Warned About Loans” (WSJ). China Bank Regulatory Commission issues an internal directive to commercial banks to “tighten supervision of loans” and ensure those loans serve the needs of the “real economy” and not “financial speculation.”
- July 2009:“China Aims To Rein In Lending.” (Associated Press) China’s two largest lenders reveal they will “sharply slow credit growth.”
Crude oil closed sharply lower on Monday extending the decline off last week’s high. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.
The low range close sets the stage for a steady to lower opening on Tuesday. Closes below this month’s low crossing at 67.42 would open the door for a larger degree decline into September. If October renews this month’s rally, June’s high crossing at 75.27 is the next upside target. 
First resistance is last Tuesday’s high crossing at 75.00
Second resistance is June’s high crossing at 75.27
First support is today’s low crossing at 69.13
Second support is this month’s low crossing at 67.42
The U.S. Dollar closed lower in quiet trading on Monday as it extends this month’s trading range. The mid range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term.
If September extends the decline off this month’s high, the reaction low crossing at 77.52 is the next downside target. Closes above the reaction high crossing at 79.36 are needed to confirm that a short term low has been posted.
First resistance is last Wednesday’s high crossing at 78.89
Second resistance is the reaction high crossing at 79.69
First support is the reaction low crossing at 77.81
Second resistance is the reaction low crossing at 77.52
“Insider selling is 30x insider buying, while corporate stock buybacks are non-existent. Companies are saying they don’t want to touch their own stocks.”
“I don’t know where the money is coming from to keep the markets from not plunging.”
One can offer some suggestions.
The NASDAQ 100 closed lower due to profit taking on Monday as it consolidated some of the rally off this month’s low. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are diverging and are turning bearish signaling that sideways to lower prices are possible near-term. Closes below this month’s low crossing at 1561.25 are needed to confirm that a top has been posted. If September extends this year’s rally, the 75% retracement level of the 2008-2009 decline crossing at 1761.87 is the next upside target. First resistance is last Friday’s high crossing at 1668.50. Second resistance is the 75% retracement level of the 2008-2009-decline crossing at 1761.87. First support is the 20-day moving average crossing at 1617.51. Second support is this month’s low crossing at 1561.25. 
The S&P 500 index closed lower due to profit taking on Monday as it consolidated some of this month’s rally. The mid-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are diverging and are turning bearish hinting that sideways to lower prices are possible near-term. Closes below this month’s low crossing at 975.80 are needed to confirm that a short-term top has been posted. If September extends this year’s rally, the 38% retracement level of the 2008-2009-decline crossing at 1044.11 is the next upside target. First resistance is last Friday’s high crossing at 1038.50. Second resistance is the 38% retracement level of the 2008-2009-decline crossing at 1044.11. First support is the 20-day moving average crossing at 1008.72. Second support is this month’s low crossing at 975.80.
The Dow closed lower due to profit taking on Monday as it consolidated some of this month’s rally. The mid-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are diverging and are turning neutral to bearish signaling that a short-term top might be in or is near. Closes below this month’s low crossing at 9116 are needed to confirm that a short-term top has been posted. If the Dow extends this month’s rally, weekly resistance crossing at 9653 is the next upside target. First resistance is last Friday’s high crossing at 9630. Second resistance is weekly resistance crossing at 9653. First support is the 10-day moving average crossing at 9453. Second support is the 20-day moving average crossing at 9377.
| IN ONE HOUR OF TRADING YOU CAN MAKE MORE MONEY THAN MOST PEOPLE DO SLAVING AT A DEAD END JOB ALL WEEK LONG… |
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Genius chess player with a certified I.Q. of 157 unveils his ’sneaky’ (and 100% legal) trading system which can…
… secure net profits up to $1250
… not in days or weeks
… but just 59 minutes or less
Who knows what’s going to happen in the next two hours, but, at the moment, it appears as though August will be just the second month in the last 20 or so where the Dow Jones Industrial Average does not post a single day of declines in excess of 200 points.
Of course, a decline of this magnitude today would be about a 2.1 percent drop, whereas, a year ago, that same 200 points would work out to be a drubbing of 1.7 percent. Come to think of it, that difference is a whole lot less than it seemed it would be before doing the math.
| IN ONE HOUR OF TRADING YOU CAN MAKE MORE MONEY THAN MOST PEOPLE DO SLAVING AT A DEAD END JOB ALL WEEK LONG… |
| I didn’t believe it either until I saw the proof with my own eyes…
Click here for the full report Genius chess player with a certified I.Q. of 157 unveils his ’sneaky’ (and 100% legal) trading system which can… … secure net profits up to $1250 |
Lehman Claims Could Reach $100 Billion (Reuters)
The majority coming from Joe Gregory. Kidding (kind of) but seriously: PWC says it’s gonna be huge.
Cerberus to Raise New Distressed Funds (Bloomberg)
According to chief operating officer Mark Neporent, the requests to pull $4.77 billion came from other managers who needed to provide liquidity to their investors, meaning it had nothing to do with Cerberus and wasn’t one of those “lack of confidence” situations. Therefore: you should not hesitate to fork over cash for the new funds.
Barney Frank Said To Back Broader Fed Audits (WSJ)
According to Ron Paul. “Barney told me, ‘It’s going to come. You’re going to get what you want,’ ” Mr. Paul said.
Swiss Banks Expect To Avoid Witch-Hunt (FT)
They haven’t been promised anything but are hopeful, the alternative involving latex gloves. Boris Collardi, chief executive of Julius Baer, said: “I don’t want to say we’re relaxed but we’re prepared. There may be some requests for information [from tax authorities] but I don’t think we face the risk of another John Doe summons. It’s like we’ve been driving in a 60kph zone and after you’ve passed it, someone tells you it was 30. The interpretation of the rules has changed. It’s a very unpleasant position to be in, but the most important thing is that we won’t compromise on fishing expeditions or banking secrecy.”
Preaching The Gospel Of Momentum (Barron’s)
Barron’s: You employ about 200 people. But none of them do fundamental research and follow companies like General Electric or Nestlé, right?
Asness: It’s actually just me and David [Kabilllar] and one really big computer.
As Disposals Slow at AIG, ILFC Chief Makes Pitch (WSJ)
Steven Udvar-Hazy to possibly step up to the plate and buy about $2 billion of the company’s aircraft portfolio (and start a rival business).
Scavengers scan beaches seeking valuable trinkets (NYDN)
Your new revenue stream?
Woman Hires Hitman For Just $200 (CBS12 via BI)
$100 up front, $100 after the job got done.
The Flash-Trading Thorn In NYSE’s Side (WSJ)
Goes by the name William O’Brien.
Early last week, worries on credit tightening by the Chinese Government triggered selloffs in risky assets. In the commodity universe, the base metal complex got the biggest hit as the government’s massive stimulus plan has encouraged expansion in various industries. Should the government tighten lending, many projects may have to be postponed or cancelled.However, later in the week, strong macro economic data boosted sentiment again and improved market sentiment helped commodities pared some of the losses made earlier. However, the Jefferies/Reuters CRB Index still lost -0.6% over the week. Crude oil price rose for the second consecutive day last Friday as encouraging economic data…..Read Complete Article
Every Friday, in just about every bank failure press release, the FDIC mentions a loss share agreement with the acquiring bank. As an example, in the press release regarding Mutual Bank of Harvey, Illinois on July 31st:
As of July 16, 2009, Mutual Bank had total assets of $1.6 billion and total deposits of approximately $1.6 billion. In addition to assuming all of the deposits of the failed bank, United Central Bank agreed to purchase essentially all of the assets.
The FDIC and United Central Bank entered into a loss-share transaction on approximately $1.3 billion of Mutual Bank’s assets.
emphasis added
For those interested in every detail, here are the Single Family Loss Share Agreement (page 54) and Commercial Loss Share Agreement {page 89) between the FDIC and United Central Bank (the acquirer).From the WSJ: FDIC Shoulders Big Losses on Loans
[T]he Federal Deposit Insurance Corp. has agreed to assume most of the risk on $80 billion in loans and other assets. The agency expects it will eventually have to cover $14 billion in future losses on deals cut so far. …
So far, the FDIC has paid out $300 million to a handful of banks under the loss-share agreements. … The agency estimates the loss-share deals cut will cost it $11 billion less than if the agency seized the assets and sold them at fair-market value.
…
In most cases, the FDIC agrees to cover 80% of future losses on a big portion of the assets, and 95% on the rest. The FDIC says it doesn’t anticipate facing the 95% loss-coverage scenario on any deal. … Many of the loss-share deals will be in place for up to 10 years.
These agreements definitely make the deals more attractive to potential buyers because the limit the downside.The article notes that the FDIC “had just $10.4 billion in its deposit-insurance fund at the end of June”, but that includes reserves for future losses. And since the FDIC expects losses of $14 billion from these loss share agreements, they should have already reserved for those losses. Still many of these agreements will be in place for 10 years, and there is the potential for much higher losses.
