Monday Outlook

I’m a seller on Monday. A bounce looks hopeless to me (but, hey, people say Sarah Palin won the debate). Here’s what I think people digest over the weekend: a) The bailout doesn’t really do anything for awhile It’s not like there is anybody who really knows how this will work and there is no way that $500B flows into banks anytime really soon. b) The bailout may not be enough Who knows how many of these are required? c) European banks (as pointed out above) are in lousy shape d) Hedge fund blow-ups We haven’t had any yet but all my buds are telling me that they are out there. It took a month or so after the Russian debt default for the LTCM problem. e) Hedge fund redemptions There were tons of these - a guy I respect in the business for 25 years thinks half the hedge funds in Fairfield Cty will be gone in 6 months. That’s lots of selling. f) Trickle down Everyone has now noticed the problem. School teachers are checking their 401-K statements this weekend (403-b?) On the other side are: a) Some people like daj who believe in bounces. I hope he is right. b) The Fed may yet cut interest rates c) There’s a lot of cash on the sidelines waiting for a bottom.

Joey…agree with everything you said there… but if the cash waiting on the sidelines is staying in treasuries and not even taking risk on lending to banks, do you think it will be so quick to jump into something a lot more risky (i.e. equities)?

No

Nike Wrote: ------------------------------------------------------- > The market has further down to go. The bailout was > priced in and nobody believes in it. I agree wholeheartedly. Some guys at the office were baffled after the indices tanked in the afternoon, I told them this almost word for word. As for Monday, Lord only knows, it’s too early to tell how effective the bailout will be or how it will be implemented. It depends on how central banks indicate their actions with Libor at its current level. Should be another wild week.

BosyBillups Wrote: ------------------------------------------------------- > Global central bank rate cuts on Sunday evening. > Paint it. i buy that, THIS is the moment to act. this puppy is literally on the precipice and someone needs to show they are in charge.

I agree that this is about the right time, but I don’t see it making a difference that lasts more than a few hours…

a few hours is enough for me to sell out…chuckle

“c) There’s a lot of cash on the sidelines waiting for a bottom.” I hear this mainly from people that are hopeful (on the optimistic side of things) that the worst may be behind us. My counterargument to this statement is that the majority of this cash on the sidelines was in the form of credit not real hard cash. I will stand by this argument until I’m proven wrong, but there is no way in hell that hard cash on the sidelines comes anywhere close to the cash credit generated off repo lines that are now being decreased or cut.

This just made things worse: http://news.yahoo.com/s/afp/20081004/ts_afp/usfinancebankinggermanyhypo Ouch. Edit: In fact, I think this is really psychologically bad. HRE got 35B Euro and now they think it might need 135B Euro. So everyone can do the calculation 35:135 as 700: oh no…

I had stated that the EU banks were in rough shape but WTF that does not sound good at all. Let’s hope there is a REAL big cushion embedded in that “revised” estimate. If you haven’t seen this piece by Kedrosky you should read it. Maybe someone here can transcribe the leverage ratios for us for each of the banks listed. Unbelievable really. http://paul.kedrosky.com/archives/2008/09/30/how_the_us_save.html

JoeyDVivre Wrote: ------------------------------------------------------- > This just made things worse: > http://news.yahoo.com/s/afp/20081004/ts_afp/usfina > ncebankinggermanyhypo > > Ouch. > > Edit: In fact, I think this is really > psychologically bad. HRE got 35B Euro and now > they think it might need 135B Euro. So everyone > can do the calculation 35:135 as 700: oh no… The article says 20b now…50b by the end of the year and 70b-100b by the end of 2009… I think they may have outlined their refinancing profile? i.e. The numbers mentioned for most American institutions so far have just been their immediate needs (i.e. AIG 85b of which 61b has already been drawn)… that probably means there’ll be a lot more cash needed by the american isntos as well!

Yep, the cash injections only bring you back to the surface for a little air. It will take a lot more capital to get you back in the boat.

equity_analyst Wrote: ------------------------------------------------------- > I had stated that the EU banks were in rough shape > but WTF that does not sound good at all. Let’s > hope there is a REAL big cushion embedded in that > “revised” estimate. > > If you haven’t seen this piece by Kedrosky you > should read it. Maybe someone here can transcribe > the leverage ratios for us for each of the banks > listed. Unbelievable really. > > http://paul.kedrosky.com/archives/2008/09/30/how_t > he_us_save.html Fair enough…but you also have to consider the cash flow of this banks…take for example HSBC or Barclays…they are massive retail banks as well

The mix of toxic assets these companies hold is obviously critical too. I think though, that many people are not fully aware that these European banks are in trouble.

DJIA futures down 160

This is looking pretty dire. I hope everyone ends up okay. Hang on to your hats!

This blows. European Central Bankers thought they were immune to this garbage, and it appears they were mistaken. Here comes the death of the HF industy, sucks b/c that means I’m S.O.L.

Not what I hear. The hedge fund industry clears out the small players.

The Death Spiral continues to gain momentum. I’m an optimist but I am struggling to find anything positive to hold on to.

It’s not safe to hold anything over the weekend anymore. Monday has not been good to us in a while.