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Latest | Highest ratedEU antitrust authorities formally object to Oracle's (ORCL) proposed $7.4B takeover of Sun Microsystems (JAVA) on concerns Oracle ownership of Sun's MySQL database software would reduce competition. The move doesn't necessarily mean the EU will reject the deal, but should delay the process. [View news story]
In a Q-and-A, Jim Rogers elaborates on which homework Nouriel Roubini didn't do ("all of it ... I have a problem talking about a bubble when assets are this depressed from their all-time highs") and says it's one of the few times he hasn't been short anywhere in the world - there's "a gigantic amount of money being printed and it has to go somewhere." [View news story]
This over production problem, especially in China, should bring commodity prices down to earth. The US will meanwhile keep its consumption low with 10.2% unemployment figures as a testament to that likelihood. Hence Dr. Roubini's bubble has some merit.
Longer term Jim Rodgers is correct. If the stumulus works as intended, the world economies will ramp up. Demand will increase. Prices will rise. So far we have just been staving off deflation. Mr. Rodgers seems to skip over this item. Eventually what he says will be true though (or at least I hope the world economies will recover). The growth so far is uncertain, and it may even be an illusion to a large degree. We will need another 6 months at least to be relatively certain that we actually have a recovery. Until then commodity prices should not take off. If people bid them up too much too quickly, they will only derail the recovery. If excessive speculation pushes them up, we will see another crash. No one wants to see this. I hope not even GS, although they may think they can profit from it.
Cisco Systems (CSCO +0.6%) is offering a three-part $5B debt deal to price later today. The company had $10.3B in long-term debt outstanding as of July. [View news story]
Treasury sells $40B in three-year notes at 1.404% (.pdf). Bid-to-cover ratio of 3.33 vs. a recent 2.82; indirect bidders take 68.5% vs. a recent 55%. Big jump in direct bids to 7.5% vs. recent 5.9%. Ten-year Treasurys moved slightly higher; the 30-year yield is -0.01 to 4.39%; 10-year -0.02 to 3.48%; 5-year -0.01 to 2.29%; 2-year +0.01 to 0.85%. [View news story]
USD Index has been edging upward. it is now down only -1.00%. As damage to the oil facilities in the gulf does not occur, it should recover significantly.
Futures suggest a strong start to a week with sparse economic data, and at the tail-end of Q3 earnings. The uptrend in global equities appears to be intact, analyst Ian Williams says, noting central banks' willingness to extend stimulus measures should perpetuate a favorable backdrop for risky assets. S&P +1% to 1076. [View news story]
On a daily basis the VIX recently set a higher high. If it sets a higher low that may be at approx. 22.90. If the VIX reverses upward at that point, equities will likely go downward. VIX is currently at about 24.19.
Meanwhile, IMF director Dominique Strauss-Kahn says progress is being made on a possible financial sector tax, also known as the IMF tax, which would be an incentive to take less risks, but also create an insurance fund to be used in case of a future crisis. [View news story]
While Goldman CEO Lloyd Blankfein understands that "people are pissed off" with bankers, he says everybody should be happy: "Companies are looking to grow again and raise money. That's where we come in. The financial system may have led us into the crisis but it will lead us out." [View news story]
I don't think even Mr. Blanfein believes his rhetoric.
Is the Hated U.S. Dollar About to Rally? [View article]
Treasury's Stress Tests Weren't Stressful Enough [View article]
In this case the small deception by the Fed/Treasury is palatable. It was done with the best of intentions. Yes, the banks may still experience further problems, but they are in a better position to deal with them. A second stress test may eventually be done. It may again have the same intention. It is still possible it won't be necessary.
Positioning for a Bond Rally [View article]
The people buying the long bonds are probably not planning on holding the bonds too long. If we get a rise in the USD, which many are predicting short term (especially Prechter). It would push commodities and equities downward. People would want to get out of the USD carry trade on a USD rally. They would have to sell other assets in order to repay the USD's. This would push commodities and equities (many of which are commodity based) downward. When equities and commodities fall there is usually a flight to quality (bonds). This drives the price of the bonds upward. If the investor then sells those bonds at the near term bottom of the market, the investor earns extra money from the appreciation of the bonds. This is a plan that could work. Of course, the timing would have to be good. Plus you have to sell near the bottom. You also want to sell before the Fed starts pressuring the market with interest raises. Bonds would go down with a rate increase by the Fed (or perhaps even with the expectation of one in the near term).
The USD going up is not definitely necessary for this scenario. One could just figure the markets are tiring. Plus oil was at about $80. Both looked like they were poised to make a move downward. With the higher than expected unemployment it would seem likely that oil prices would move down on the expectation of a cooler economy. With higher unemployment people will spend less on gasoline, etc. Decreased demand should lead to a decrease in the price. Ditto for many other commodities. Equities would follow. Equities markets are already showing signs of being tired. They are ripe for a retracement.
Gold Juniors Poised for Historic Bull Run [View article]
Public Storage (PSA): Q3 FFO of $1.44 beats by $0.19. Revenue of $352M (-5%) vs. $405M. (PR) [View news story]
A slightly tongue-in-cheek contrary indicator - based on the percentage of Harvard MBAs taking market-sensitive positions - says that the lower numbers of grads flocking to the Street may be a positive market signal. [View news story]
Going by the theory the market is now rated a "hold", just a hair above a "sell". The article does not try to say the market is a "buy". It's merely positive that the market is no longer a definite "sell".
There is likely some substance ot this theory as a sell indicator. Who knows what the number for 2010 will be though??? It wouldn't take much to push this indicator back to "sell". If we get a USD carry trade unwind (likely if the Fed starts raising rates next spring) at the same time as a renewal of interest in "market-sensitive jobs" by Harvard MBA's that would really be a "SELL" signal!!!
U.K. fines UBS (UBS) £8M after staff used customer accounts to make thousands of unauthorized trades. The bank has also paid more than $42M to compensate clients for their losses. The employees "were able to take advantage of UBS' inadequate systems and controls, giving them free rein to make unauthorized trades with customer money that they were then able to conceal," FSA says. Another blow to UBS's reputation. [View news story]
Fitch joins S&P in considering a downgrade to Berkshire Hathaway (BRK.A), sharing concerns that tilting the company from insurance to rail makes it more sensitive to general conditions. [View news story]