alpha_zeta

Tuesday Market Preview: Down Further?

The ECB (EU) needs to act more quickly than its regular meetings and make rate cuts of greater magnitude. The Euro should head lower and drop to the teens and we could see par with USD if they drop rates again early 2009.

However, the ECB/EU has difficult making decisions in a market timely manner. Why?
1. bureaucracy (i used to think)

2. disparate/polarization of economies (some economies weak and need rate cuts, others were stronger but some of these have had their currencies hit hard). Instead of a decision-making criteria of "unamimous" they should try "weighted average" ... countries comprising the greatest percentage of GDP of are EU are the weakest

3. arrogance (Irish hedge fund manager interviewed on TV used this word a few weeks ago). Politically, some countries dis-associated themselves from the USA with such things as removal of support with forces in Iraq/Afghanistan. But, Economically, the ECB/EU leaders seem to have become arrogant that their currency is the world's cat's meow ...

well, ECB get with the program, several of the countries in your region are suffering economically (for multiple reasons) and rate cuts are needed independent of other nations/economies (instead of only with co-ordinated efforts).

Ten High Yield, Below Book Stocks

Today with GNW i think you've seen the reason for its low P/BV...and the risk of a catastrophic drop in stock price of low P/BV stocks.

The larger Life/annuity insurers are down bigtime today and before the day started they already had lower P/BV's.

So, what about the smaller/mid-size Life/Annuity insurers , some of which had P/BV's rather higher than the P/BV's of larger co's??

Look out for the smaller/mid-size Life/Annuity insurer stock prices to crater!

Hank Greenberg Is Thinking Of Unloading AIG Stock

Greenberg may sell for a number of reasons:
1) needs the money to put into another business
2) AIG conglomerate is so large that it cannot grow so fast (in large percentages)
3) Hank likes control and not afraid to tie his wealth to something he controls; perhaps he should have sold long ago, but the emotional tie and hope for regaining control was too strong. Best to let it go, rather than spend your life fighting and making no progress.
4) If AIG wants to grow it should split up (spin off) some of its businesses. This will cause pain for some business units and allow other units to shine. This is comparable to the ECB which manages interest rates for the region which has some very strong groth economies and other areas which have low growth.... what to do? Status quo / do nothing.

Stopping there, back to other macro and micro items. Cheers.