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IDS World Markets Wed 19th November 08


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t?s=^AORD

 

 

A tad directionless today. All Ords flat, Consumer Discretionary in the dumps, -2.7% followed by Energy -1.3%. There's a few greens: REITS +1.6%, Financials +1.3% and Telecomms, +0.8%.

 

Minor losses in the big 2 miners: BHP -0.5%, RIO -1% with little movement in the golds: Newmont and Lihir flat and Newcrest +0.1%.

 

Oils down but not out: Woodside -2.7%, Santos -0.9% and Caltex -0.9%.

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w?s=^AORD

 

 

Off the lows but still a bearish one...

 

All Ords -0.9%, Materials leading on the downside, -3.8%, Miners next -3.7% and Consumer Discretionary -2.9%. Financials did a bounce, +2.3% as did REITS, +1%.

 

Miners continued to slide throughout the day: BHP -4.1%, RIO -3.1% and in the golds, Newcrest -0.2%, Lihir -3.4% and Newmont +1.4%.

 

Oils mixed: Woodside -3%, Santos +0.6% and Caltex down a hefty -9.7%.

 

Mixed in Asia: China +6.3%, Honkers +0.7%, India +2.2% and Nikkers -0.7%.

 

 

Over to UK/Europe:

 

t?s=^FTSE

 

t?s=^GDAXI

 

t?s=^FCHI

 

 

http://finance.yahoo.com/intlindices?e=europe

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"Record injections of liquidity have driven the overnight lending rate between banks to less than half the 1 percent target set by officials last month. The gap is shifting investors' focus toward the amount of money in the banking system as a better gauge of Fed intentions, something San Francisco Fed President Janet Yellen last month called ``a kind of quantitative easing.''

 

``There has been a policy shift, but the Fed is not transparently announcing what it is doing and why,'' said former St. Louis Fed President William Poole, now a senior fellow at the Cato Institute in Washington. ``Monetary policy works best when the markets understand what the central bank is doing.'' "

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

 

Gloomberg is catching on, some factual incorrections but close.

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Interesting news from Across the Curve:

 

Meltdown

 

 

 

 

CMBS Market Begins to Show Fissures

 

 

 

:unsure:

 

Tally-Ho!

 

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http://www.markit.com/information/products...dices/cmbx.html

 

Even the safest (oldest) bestest rated crap is spreading like a two dolah hoe

 

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Equity wise, is it already baked in or the down draft is just beginning?

 

z?s=IYR&t=6m&q=c&l=on&z=m&a=v&p=s

 

z?s=SRS&t=6m&q=c&l=on&z=m&a=v&p=s

 

btw, this must be the only 2x inverse ETF performing at a real 2x inverse in a long time frame

 

z?s=SRS&t=3m&q=c&l=on&z=m&c=IYR&a=v&p=s

 

I doubled down after the short selling ban (that gap down) butt sold too soon, way too soon.

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"Record injections of liquidity have driven the overnight lending rate between banks to less than half the 1 percent target set by officials last month. The gap is shifting investors' focus toward the amount of money in the banking system as a better gauge of Fed intentions, something San Francisco Fed President Janet Yellen last month called ``a kind of quantitative easing.''

 

``There has been a policy shift, but the Fed is not transparently announcing what it is doing and why,'' said former St. Louis Fed President William Poole, now a senior fellow at the Cato Institute in Washington. ``Monetary policy works best when the markets understand what the central bank is doing.'' "

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

 

Gloomberg is catching on, some factual incorrections but close.

 

I started pointing this out to subscribers of the Wall Street Examiner Professional Edition Fed Report about 3 weeks ago. The mainstream media is just noticing it now?

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There is a consensus among "Smart " money players that corporate/junk debt is a far better way to invest than equities in this environment. You get equity like returns and are a further up the balance sheet in seniority than equity . Typical MBA 30 yr old hedgie type thinking - makes for good client presentations- sounds logical - and is probably very wrong.

 

My take: We are is a sea-change period. THE problem today is that most borrowers - individuals and corporate - CANNOT repay the PRINCIPAL on their borrowings under any reasonable assumptions of future earnings potential. This was never perceived as problematic in the recent past - because everyone could always refinance/rollover their debts. Understanding this really opens one's eyes to the real situation today. Yes - sure, junk bonds may have a high yield - but the default rates at maturity may not look anything like 1990, 1994 or 2001. It may be catastropic. So you get 13% yield for 2 yrs and then a default with close to zero recovery.

 

Therefore - I believe that equities representing a fractional ownership interest in enterprise with real, long lived assets and well managed - with zero debt, bought around book value with a margin of safety - are much safer than junk bonds, leveraged loans etc that are the current rage amongst the "smart" crowd. Sure these are equities are therefore in MBA speak - "junior" to debt - but Iam talking about companies that have no debt- so there is NOTHING senior to the equity!

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speaking of "sea-changes" - another thought on equity "valuations". There is a whole generation or two that has gotten comfortable with really, really idotic concepts - now commonly taught in colleges and blessed by nobel laureates - concepts that will die and take down their adherants with them.

 

Iam talking about the whole "index fund" idea - buying the market concept. Iam talking about valuations based on comaparisons to "historical" ranges in the industry for PE, PE/Growth and other such nonsense. ie. Buy XXX tech stock because historically it traded in a range of 15-20X trailing earnings and is currently cheap at only 12X trailing earnings - laughable nonsense.

 

A lot of ideas and the associated capital is in the process of being decimated - despite the strenuous efforts by various govts to keep the game going.

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