An interesting article from an analyst from Deutche Bank:
This morning, it looked like times were a changing. It was Monday and equities were rallying, despite pessimistic data, so much for Monday's get me down (see chart at bottom). The Barclay's news on earnings wasencouraging but more imprtant was major credit card player, Capital One , announcing smaller write downs. The equity rally was following the 1982's pattern nicely and yet the drum beats from market pundits keep saying this is a "sucker rally." There were some policy announcements which seemed supportive as well. The usd underperformed over the morning but the question was.. how much of this weakness was stemming from the IMF /equity hopes and how from expectations of aggressive action at the 18 March FOMC meeting. Those Fed hopes seem faint to me, but the usd continues to showsign of vulnerability. Afternoon trading brought a more negative tone, with financials shares giving back their gains and equities falling more than 2 pct off their highs to turn negative, ahh just like old times.
The day
Our credit team noted that Bear Sterns was taken over one year ago, which I am sure seems like ten years ago to Bernanke. We arrived to find the usd sharply lower and the euro hovering 1.3050. We noted that the euro had soared into the Dec FOMC meetings with 3 pct type daily moves , so we were reluctant to fade the euro rally. Yet if the market was worried about the
Fed buying Treasuries for QE, it was not showing it as Treasuries struggled over the day. The euro peaked early at 1.3072 (1.85 pct) and corrected back under 1.3000 as equities wobbled and we saw some profit taking.
In commodities, copper rallied again as inventories eased and have now fallen more than 50,000 tonnes since late February. Our commodity team argue this in not real demand. The Baltic freight dropped sharply today for the 4th straight decline. Yet growth hopes were rising and the early drop in oil prices on continued OPEC production reversed as oil prices snapped back higher. Gold prices eased back in face of the better news , despite lighter IMM positions.
On the economic front, Research noted empire manufacturing survey fell to a new record lows and Industrial production continues to fall at an amazingly fast pace: total February production was down 1.4% and down 11.2% over the last 12 months. However, February weakness was overstated in that utility output was down 7.7% due to warm weather. Over the last year, motor vehicle production has declined 39%. Troubling to us was the continued weakness in business equipment spending (-1.3% February vs. -4.2% January), a large portion of which includes hi-tech production. Moreover, capacity utilization declined from a revised 71.9% in January to 70.9% in February, matching its all-time record low set in December 1982.
The manufacturing sector in Canada also struggled with capacity utilisation falling to 74.7 , the lowest level in 22 years. Yet Canadian net household worth only dropped by a record 4.4 pct in the Q4. In comparison, household net worth in the United States fell by 9.0 pct. yet here was some good news . Canadian existing home sales rose for the first time since September, as buyers took advantage of lower mortgage rates and prices. The average resale price fell 9.2 pct from a year ago.
Equities slipped back in early trading but found some support . Some of the supportive stories include: The FASB proposed allowing companies to exercise more judgment in determining if a market for an asset is active and if a transaction is "distressed." Capital One, one of the largest
issuers of credit cards, reported a better-than-expected credit performance in February. They said the annualized net charge-off rate for U.S. credit cards rose to 8.06 pct in February from 7.82 pct in January. However with a sharp decline in auto loan losses, where the charge-off rate fell to 4.44 pct in February from 6.09 pct in January, and the delinquency rate declined
to 7.52 pct from 9.18 pct. Obama spoke again today on SBA and will appear tonight with comedian Jay Leno . The.Treasury said it will invest up to $15 billion in securities backed by Small Business Administration-guaranteed loans in order to jump-start credit markets for
small firms. They also will allow small business will be allow to carry forward tax losses for 5 years instead of two years .
The improved tone of the market took its toll on risk aversion trades. European CDS fell sharply, usdmxn collapsed to 14.00 and GE stock rallied back over 10 as well. TIPS gained some ground on the better outlook and potential for inflation. The BOE gilt auction was oversubscribed and gilts weakened after the auction. Krugman was again highlighting the lack of political structure to handle the crisis in Europe. Yet Both Trichet and Merkel had positive comments on the euro today which was surprising. UK's Darling suggested it was urgent to boost the resources of the IMF and he expects agreement on this at next month's G20 summit. The positive reaction
to the IMF plans, again shows how the market is underestimate the potential of cb reserves. Russia noted today they have $43.3 billion plans for spending on anti-crisis measures and social programs in the government’s revised 2009 budget.
Afternoon trading started quietly. NAHB data for March are steady to a bit soft, with the housing market index unchanged at 9. ECB's Stark suggested they still has some room to manoeuvre in lowering interest rates, but is getting close to a low point. Stark added it was not time to take such measures, as quantitative easing. Equities slide over the afternoon as the equity market hit some short term targets. Trade tensions also raised their head again, with Mexico saying it will increase tariffs on about 90 U.S. products in retaliation for last week's decision to cancel a pilot program that allowed some Mexican trucks to transport goods within
the United States.
Other news
The slumping global economy is slowing the amount of money sent home by migrant workers in the US. Remittances sent home in Q4 slipped to $17 billion -- 2 pct less than in the same period in 2007.
Db Economics offered some explanation for the apparent stability in retail demand. We note household tax refunds from January through February are running nearly 12% above their
year earlier level. Some of this reflects more households using electronic filing; we doubt this is captured in the retail sales seasonal factors. At the same time, non withheld tax payments—not to be confused with one of our favourite economic series, employee withheld tax receipts—are down almost 15% over the January- February period compared to the same time last year.
Non withheld payments are taxes that households owe above what has been withheld from their paychecks and includes such taxable items as dividend and rental income as well as any capital gains. In order to see how much spending should be lifted, we need to look at the total change in household cash balances and compare it to prior years. We define household cash balances as the difference between cumulative refunds less cumulative non withheld tax payments. Over January and February of 2009, household cash balances are up $52 billion, an all-time record amount, compared $29 billion over the same period last year—which was a record at the time.
Conclusion
The current rally reached about 17 pct from the lows and followed the pace of the 1982 rally in the Dow. Financials ended up failing on their sixth day of the rally. I think it is worth noting that the early rebound from the technology crash in 2002, was lead by this oversold sector, but over
the medium term it underperformed. Some temp agencies are noting a levelling of temp lay-off after a 29 pct drop in demand and ironically mortgage processing demand has been strong. The steepness of the US yield survey has been typically associated with rallies in financials stocks, so
there has been some fundamental support for interest rate margins.
We have seen 7 bear market rallies since 2008 and the average has been around 17 pct, which is just above the high for today. So many technical players have been calling for a failure around 780 on the S&P, and they are now excited as we close around 750. We shall see if this sucker rally can come back and bite the bears. VIX remains very steady about 44. We should keep buying euro dips overnight ahead of the FOMC meeting and we shall see what the Fed announces. It would seem strange for me for them to announce QE, given we have news coming from Treasury on the asset plans and the IMF details in April.
David Geisker 4.20 p.m eur at 1.2967 jpy at 98 25, equities down 0.4 pct.
Citigroup seeks reverse stock split
Measure expected to help offset the massive conversion of government's preferred stock into common shares.
By David Ellis, CNNMoney.com staff writer |
NEW YORK (CNNMoney.com) -- Citigroup unveiled plans Thursday to pursue a reverse stock split, and the company officially gave notice of its previously announced plans to convert the government's massive preferred share stake into common stock.
The New York City-based bank said it would authorize its board of directors to carry out the reverse split, but it requires a shareholder vote before it can take effect.
The move would help reduce the number of shares outstanding for Citi, which are expected to swell after the Treasury Department completes its conversion of part of its $45 billion stake in the company. The bank currently has a total of 5.5 billion shares outstanding.
Shares of Citigroup (C, Fortune 500), initially surged on the news, climbing nearly 23% in Thursday morning trading. But the stock lost ground as the day wore on and wound up finishing Thursday down nearly 16%.
Late last month, the government said it would convert up to $25 billion of preferred shares, matching dollars that Citigroup is able to bring in from other investors. Approximately $52.5 billion in preferred stock will be converted as part of the agreement. This could leave the government with as much as a 36% stake in the bank.
Regulators announced the move to help boost Citi's tangible common equity, a closely watched measure of a bank's ability to absorb losses. The agreement is expected to increase it from the fourth-quarter level of $29.7 billion to as much as $81 billion.
The reverse stock split would also bolster Citi's lagging stock price, which fell below $1 earlier this month and closed on Wednesday at $3.08.
Many large investors, such as mutual funds and pension funds, tend to shun stocks trading below $5 a share. Some are even prohibited from investing in stocks trading below that level.
When a company completes a reverse split, it lowers the number of total shares outstanding and the stock price rises as a result. But the value of the company is unchanged.
For example, if a company has 100 million shares outstanding and a stock price of $5 and decides to split its shares at a 1 for 5 ratio, it would then have 20 million shares that trade at a price of $25.
In a regulatory filing, Citi proposed seven different possible ratios that it could use to split the stock.
Bad bets on the U.S. housing market and a deteriorating global economy has made Citigroup one of the hardest hit companies in the ongoing financial crisis.
The government has had to step in three times to help prop up Citigroup, but has stopped short of seizing complete control of, or nationalizing, the company.
Citi is not the first financial institution that has gotten extensive government aid to consider a reverse stock split. Mortgage buyer Fannie Mae (FNM, Fortune 500), which was seized by the government last fall, announced in late November that it may undertake a reverse stock split in order to lift its ailing stock price.
Citigroup shares, which are off sharply from where they were just a year ago, have gained 63% over the past two weeks as investor fears about the underlying health of the firm have subsided.Link: http://money.cnn.com/2009/03/19/news/companies/citigroup/index.htm
Through this, Citi can actually attract fund managers to invest in the company as there is this rule where large fund managers do not consider stocks that are below $5. One thing I worry on this is, currently it is priced in the $2 - $2.6 range, last closed $2.62 and through a reverse stock split, it will probably re-consolidate its share price to about $20+ I believe. This may also attract shortists to this stock, as there is now more meat to short this counter if more bad news occur as compared to this price range at the moment.
A.I.G. Sues U.S. for Return of $306 Million in Tax Payments
Published: March 19, 2009
While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.
A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.
A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.
The lawsuit, filed on Feb. 27 in Federal District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last fall. Other deals involved A.I.G. offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg, A.I.G.’s former chairman, and the Starr International Company, a privately held enterprise incorporated in Panama, and commonly known as SICO.
The lawsuit contends in part that the federal government owes A.I.G. nearly $62 million in foreign tax credits related to eight foreign entities, with names like Lumagrove, Laperouse and Foppingadreef, that were set up or controlled by financial products, often through a unit known as Pinestead Holdings.
United States tax law allows American companies to claim a credit for any taxes paid to a foreign government. But the I.R.S. denied A.I.G.’s refund claims in 2008, saying that it had improperly calculated the credits. The I.R.S. has identified so-called foreign tax-credit generators as an area of abuse that it is increasingly monitoring.
The remainder of A.I.G.’s claim, for $244 million, concerns net operating loss carry-backs, capital loss carry-backs, a general refund claim and claims for refunds of other tax-related payments that A.I.G. says it made to the I.R.S. but are now owed back. The claim also covers $119 million in penalties and interest that A.I.G. says it is due back from the government.
In part, A.I.G. says it overpaid its federal income taxes after a 2004 accounting scandal that caused it to restate its financial records. A.I.G. says in part that it is entitled to a refund of $33 million that SICO paid in 1997 as compensation to employees, which it now says should be characterized as a deductible expense.
A.I.G.’s lawyers in the case, at Sutherland Asbill & Brennan, referred calls to the company. Asked about the lawsuit, Mark Herr, an A.I.G. spokesman, said Thursday that “A.I.G. is taking this action to ensure that it is not required to pay more than its fair share of taxes.”
----
What an irony of life, while tax payers' money is used to bail AIG out, AIG is giving massive bonus out and biting the hand that saved them. I can understand the agony of the americans on this bonus portion, but if AIG don't do this, I wonder who will work really hard for them to turn the tables back. When it is good times, noone cares, when bad times strikes, everyone wants a piece of everything they do. Human nature at its best.
CIMB: SIN: S-Chips Sector - Credibility issues persist for S-chips
Strategy - Credibility issues persist for S-chips - by Ho Choon Seng CFA
With clouds of doubt enveloping the credibility of S-chips, especially those with net cash' positions, the managements of these companies continue to profess that cash on their balance sheets exists while giving multiple reasons for not returning the cash to investors. Disclosing the banks where the cash is purportedly kept and showing photocopies of bank statements are not enough to assuage investors' concerns.
We believe that the best proof that the cash exists is a return of capital to investors. Also, based on our checks with the managements of S-chips under coverage, only two companies have pledged shares. Despite cheap' valuations, investors are unlikely to jump into S-chips while insiders stay put, given continued credibility issues.
Full-report including
important disclosures: [ PDF ]
The latest report from CIMB on S-Shares in Singapore. S-shares in Singapore has been hit hard by this credibility issue and most of it (including my holdings in celestial) has be eroded till new time lows (lowest 0.08). To get investors' confidence in S-Shares, there's alot of work to do... as I always remember this, it takes 3 years to build up trust and reputation, but it takes 3 seconds to destroy it.
With clouds of doubt enveloping the credibility of S-chips, especially those with net cash' positions, the managements of these companies continue to profess that cash on their balance sheets exists while giving multiple reasons for not returning the cash to investors. Disclosing the banks where the cash is purportedly kept and showing photocopies of bank statements are not enough to assuage investors' concerns.
We believe that the best proof that the cash exists is a return of capital to investors. Also, based on our checks with the managements of S-chips under coverage, only two companies have pledged shares. Despite cheap' valuations, investors are unlikely to jump into S-chips while insiders stay put, given continued credibility issues.
Full-report including
important disclosures: [ PDF ]
The latest report from CIMB on S-Shares in Singapore. S-shares in Singapore has been hit hard by this credibility issue and most of it (including my holdings in celestial) has be eroded till new time lows (lowest 0.08). To get investors' confidence in S-Shares, there's alot of work to do... as I always remember this, it takes 3 years to build up trust and reputation, but it takes 3 seconds to destroy it.
End of reservist
Finally my reservist is over. While I was inside, there was alot of movement in the US market with Citigroup leading the way.
Sidetrack abit, reservist was also cut from 3 weeks to 2 weeks according to some "efficiency" improvement in my unit. I wonder if it was due to the recession instead.
Sidetrack abit, reservist was also cut from 3 weeks to 2 weeks according to some "efficiency" improvement in my unit. I wonder if it was due to the recession instead.
Buffett's metric says it's time to buy
According to investing guru Warren Buffett, U.S. stocks are a logical investment when their total market value equals 70% to 80% of Gross National Product.
By Carol J. Loomis and Doris Burke
February 4, 2009: 9:49 AM ET
According to both this 85-year chart and famed investor Warren Buffett, it just might be. The point of the chart is that there should be a rational relationship between the total market value of U.S. stocks and the output of the U.S. economy - its GNP.
Fortune first ran a version of this chart in late 2001 (see "Warren Buffett on the stock market"). Stocks had by that time retreated sharply from the manic levels of the Internet bubble. But they were still very high, with stock values at 133% of GNP. That level certainly did not suggest to Buffett that it was time to buy stocks.
But he visualized a moment when purchases might make sense, saying, "If the percentage relationship falls to the 70% to 80% area, buying stocks is likely to work very well for you."
Well, that's where stocks were in late January, when the ratio was 75%. Nothing about that reversion to sanity surprises Buffett, who told Fortune that the shift in the ratio reminds him of investor Ben Graham's statement about the stock market: "In the short run it's a voting machine, but in the long run it's a weighing machine."
Not just liking the chart's message in theory, Buffett also put himself on record in an Oct. 17 New York Times op-ed piece, saying that he was personally buying U.S. stocks after a long period of owning nothing (outside of Berkshire Hathaway (BRKB) stock) but U.S. government bonds.
He said that if prices kept falling, he expected to soon have 100% of his net worth in U.S. equities. Prices did keep falling - the Dow Jones industrials have dropped by about 10% since Oct. 17 - so presumably Buffett kept buying. Alas for all curious investors, he isn't saying what he bought.
Link: http://money.cnn.com/2009/02/04/magazines/fortune/buffett_metric.fortune/index.htm?postversion=2009020409
Based on the statistics, it seems that the tech bubble in 2000 was the highest? Apparently ever since late 1990s, the U.S markets have been trading above 100% compared to the U.S GNP. This is something new for me, thus how will this be replicated in our current market? Do we see our s.g stocks compared to our Singapore GNP as well?
By Carol J. Loomis and Doris Burke
February 4, 2009: 9:49 AM ET
According to both this 85-year chart and famed investor Warren Buffett, it just might be. The point of the chart is that there should be a rational relationship between the total market value of U.S. stocks and the output of the U.S. economy - its GNP.
Fortune first ran a version of this chart in late 2001 (see "Warren Buffett on the stock market"). Stocks had by that time retreated sharply from the manic levels of the Internet bubble. But they were still very high, with stock values at 133% of GNP. That level certainly did not suggest to Buffett that it was time to buy stocks.
But he visualized a moment when purchases might make sense, saying, "If the percentage relationship falls to the 70% to 80% area, buying stocks is likely to work very well for you."
Well, that's where stocks were in late January, when the ratio was 75%. Nothing about that reversion to sanity surprises Buffett, who told Fortune that the shift in the ratio reminds him of investor Ben Graham's statement about the stock market: "In the short run it's a voting machine, but in the long run it's a weighing machine."
Not just liking the chart's message in theory, Buffett also put himself on record in an Oct. 17 New York Times op-ed piece, saying that he was personally buying U.S. stocks after a long period of owning nothing (outside of Berkshire Hathaway (BRKB) stock) but U.S. government bonds.
He said that if prices kept falling, he expected to soon have 100% of his net worth in U.S. equities. Prices did keep falling - the Dow Jones industrials have dropped by about 10% since Oct. 17 - so presumably Buffett kept buying. Alas for all curious investors, he isn't saying what he bought.
Link: http://money.cnn.com/2009/02/04/magazines/fortune/buffett_metric.fortune/index.htm?postversion=2009020409
Based on the statistics, it seems that the tech bubble in 2000 was the highest? Apparently ever since late 1990s, the U.S markets have been trading above 100% compared to the U.S GNP. This is something new for me, thus how will this be replicated in our current market? Do we see our s.g stocks compared to our Singapore GNP as well?
Citi spilts into 2: Citicorp and Citi holdings
The 4th quarter loss came as 1 big news and Citi decides to spilt its assets into 2.
<http://money.cnn.com/2009/01/16/news/companies/loomis_citi.fortune/index.htm?postversion=2009011616>
With this spilt, it's clear on what Citi will be doing. Cutting down on toxic assets in Citi Holdings and concentrating on CitiCorp's core businesses. Share prices plunged to $3.50+ range and luckily, Bank Of America was attracting more attention with Merrill Lynch's massive loss.
A quote from the article:
"The other denizens of Citi Holdings are to include various consumer businesses that Pandit has never shown interest in retaining, such as insurer Primerica. Press reports have said that Primerica will be sold, but it's basically been on the market for a year and hasn't moved. Another loss-ridden company, American International Group (AIG, Fortune 500), is trying to sell a large number of insurance companies and, in today's credit environment, they are stuck right where they are, on AIG's balance sheet.
Citi Holdings is also to inherit the $300 billion of toxic assets on which the U.S. government is sharing losses. That's a package that Pandit will surely be thrilled to shed management responsibility for."
<http://money.cnn.com/2009/01/16/news/companies/loomis_citi.fortune/index.htm?postversion=2009011616>
With this spilt, it's clear on what Citi will be doing. Cutting down on toxic assets in Citi Holdings and concentrating on CitiCorp's core businesses. Share prices plunged to $3.50+ range and luckily, Bank Of America was attracting more attention with Merrill Lynch's massive loss.
A quote from the article:
"The other denizens of Citi Holdings are to include various consumer businesses that Pandit has never shown interest in retaining, such as insurer Primerica. Press reports have said that Primerica will be sold, but it's basically been on the market for a year and hasn't moved. Another loss-ridden company, American International Group (AIG, Fortune 500), is trying to sell a large number of insurance companies and, in today's credit environment, they are stuck right where they are, on AIG's balance sheet.
Citi Holdings is also to inherit the $300 billion of toxic assets on which the U.S. government is sharing losses. That's a package that Pandit will surely be thrilled to shed management responsibility for."
There's good and bad on this spilt in my opinion. Good thing is, Citi will have a very clear company goal on what they want to achieve, reason being the core concentration is in CitiCorp, with core businesses like credit cards, wealth management, the corporate bank and the investment bank.
Bad news is, whoever lands in Citi Holdings, you are more or less prepared to be sold off or laid off. When you separate your non important businesses away, more likely you won't want to keep it as it is more of an expense than a profit making unit. Especially during such bad times, such expenses should be kept as low as possible.
Another article on Citi:
<http://money.cnn.com/2008/04/18/news/companies/anyone_run_citigroup.fortune/index.htm?postversion=2009011616>
Citi and Morgan to merge brokerages
In the first step of an expected overhaul of Citigroup by Vikram Pandit, the bruised bank agreed to sell 51% of Smith Barney to John Mack's Morgan Stanley.
<http://money.cnn.com/2009/01/13/news/companies/citigroup/index.htm?postversion=2009011319>
In a nutshell, we could probably see more of Citi's breakout of its various units if it is still unable to turn itself out within the year. Share prices isn't reflecting well on the bank and in my opinion, the CEO hasn't really done much for the past 1 year plus since he took over and investors is still isn't convinced that the bank can survive its universal business model with high capital ratio and government support.
My take, if the Smith Barney unit isn't good, why will Morgan Stanley buy it? In such bad times, only good things get sold and for a discounted price. This simply doesn't benefit Citi in any way and one must take note of how the media actually wrote that it benefits both parties. It only benefits Citi because Citi needs the capital, and not making a good deal out of this. I wonder if Citi sells of its Card unit and Consumer banking unit, will it still be considered as a bank?
One good thing that I can think of which is coming out of this de-leveraging for Citi is they will have a very clear company goal after all the selling. The old Citi has literally everything, ranging from consumer banking, brokerage, investment, commerical banking, insurance, global wealth management and many more! Your business model can have alot, but what is the core of your business? I guess investors couldn't see this and thus the share price tumbling. Morever, I think there are shortists at work on this counter too, resulting in heavy fall.
Start of the new year
It's been some time since I have posted, as I am into my new job and fighting hard not to get retrenched.
Keep things short for the day as I'm tired, I have started to invest into Celestial again, averaging down. Markets have been slightly volatile since the start of the new year, but I am looking into a few counters and will post their findings soon.
Keep things short for the day as I'm tired, I have started to invest into Celestial again, averaging down. Markets have been slightly volatile since the start of the new year, but I am looking into a few counters and will post their findings soon.
Citi, Wells Fargo fights for wachovia
Sudden news of Wells Fargo taking over Wachovia instead shocked investors quite a fair bit. We all thought that Citi already got the deal to take over with the help of FDIC, but things aren't turning out the way it was expected.
If they lose out on this takeover, this will be the outcome in US:
As far as it goes, Citi was the largest in terms of assets before the crisis and now, they are ranked 4th in terms of deposit. Anyway, their main stream was in capital markets, and not deposits. Comparing itself to the other 4 large commercial banks, it has to do something in order to stay competitive in the market.
Other news include the 700 billion bailout plan. It was finally approved with a few amendents and the main core of it was:
- protecting tax payers
- curbing executive payouts
- new accounting rules
- bank deposit caps are increased
Yen/USD is currently at 105.31-105.38 + 0.30, and nothing much else apart from markets still falling despite the bailout plan. One must consider this fact, it doesn't mean that the government approved the bailout plan and markets will turn better straight away. The credit crunch may still last a while, probably into next year to allow banks to get liquidity again to start lending again.
The logic is simple; just like when you fall and sprain your leg. The doctor can give u painkillers but it doesn't mean you can walk back as per normal immediately. Unfortunately, some traders take such weaknesses in the market and exploit to make capital gains and the market turmoil will not be easily curbed.
High chance is as long as the dust starts to settle down and good news are coming out from banks, it will probably be a good chance to start buying in strong companies.
If they lose out on this takeover, this will be the outcome in US:
As far as it goes, Citi was the largest in terms of assets before the crisis and now, they are ranked 4th in terms of deposit. Anyway, their main stream was in capital markets, and not deposits. Comparing itself to the other 4 large commercial banks, it has to do something in order to stay competitive in the market.
Other news include the 700 billion bailout plan. It was finally approved with a few amendents and the main core of it was:
- protecting tax payers
- curbing executive payouts
- new accounting rules
- bank deposit caps are increased
Yen/USD is currently at 105.31-105.38 + 0.30, and nothing much else apart from markets still falling despite the bailout plan. One must consider this fact, it doesn't mean that the government approved the bailout plan and markets will turn better straight away. The credit crunch may still last a while, probably into next year to allow banks to get liquidity again to start lending again.
The logic is simple; just like when you fall and sprain your leg. The doctor can give u painkillers but it doesn't mean you can walk back as per normal immediately. Unfortunately, some traders take such weaknesses in the market and exploit to make capital gains and the market turmoil will not be easily curbed.
High chance is as long as the dust starts to settle down and good news are coming out from banks, it will probably be a good chance to start buying in strong companies.
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