Wednesday, September 12, 2007

Morning Market Buzz 9/12/07

I didn't have much to say about the market's rally yesterday as it was just another 1% garden variety, range bound move which happened to be up.

It's not any wonder that stock futures are drifting lower as investors remain manic about what a Fed rate cut, if it happens, will do to ease credit market problems and how much of a push lower a cut would give the dollar. The $64 questions ultimately being -- what's been priced in and what surprises lurk. Ad nauseum yesterday, the question on radio and tv... 'Will the Fed cut?' That's really the wrong question. The real forward-spin is to examine what the scenarios are if the Fed does a quarter, half, or nothing. It's going to do something on Tuesday, even if it does nothing --- that's for sure.

And there are worries, inexplicably shoved to the far back burner yesterday, about what a weakening dollar will mean: Dollar Falls to Record Low Against Euro on US Housing Slump. A weaker dollar diminishes the value of U.S. based assets, which would include stocks and bonds. The dollar index bug in the right hand column continues to show an overall bleed against a basket of currencies.

Asset backed commercial paper and other realms of what some call the "dark financial matter" remain a wild card. $140 bln to $300 bln of paper, depending on who's estimating, is due to be "rolled over", or refinanced over the next few weeks.

Even Hank "largely-contained" Paulson has gotten a little religion: Markets still in turmoil, Treasury secretary says.

Paulson, whose legacy will forever be tainted by his "largely contained" mantra until this summer about the impact of subprime mortgages, reminded me to look at subprime loans this morning. The subprime aspect of the credit markets story is portrayed by most as "old news", but the ABX 07-01 triple-B-minus, which gauges the condition of subprime loans issued 2nd half of last year, hit a new low Tuesday. Granted, triple-A has rebounded recently, but the darkest rungs remain in great distress.

-TI Shares are a bit of a drag: Shares Fall After It Cuts Top End of Forecast
-Buffett Sells $140 Million of PetroChina Shares (Update1)

Thanks to Rohit for a little economy humor....

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