Tuesday's Big Bounce Back

Yesterday's big +316 point bounce back for the DOW just goes to show that there is no way to guess the direction of the stock market in the short term. However, the issues that are causing concern in boardrooms across the country still remain. E-Trade, the discount brokerage, lost a whopping -60% on Monday after Citigroup analyst Prashant Bhatia raised the possibility of bankruptcy due to write-downs of E-Trade's sub-prime related investments. That sent shock waves through the financial sector as firms such as; Merrill, Citigroup, Bank of America, Bear Sterns, HSBC, Wachovia,Washington Mutual, etc. try to grasp the limit of exposure they have to these illiquid, hard-to-value, convoluted securities. Merrill and Citigroup have both let go of their CEO's due to billion of dollars of losses and the realization of last year's overstated profits under their watch. Interest rates are expected to be lowered another -.25 bpts at the Fed's 12/11/07 meeting, however, if we do not see at least another -.25 bpt cut materialize the market may react very negatively.

A tough week in the market (the first of many)

Wow!  What a tough week in the market.  The -360 point drop in the DOW on Wednesday shows that the market is finally waking up to what the bond market has been telling us for the past few months.  Looks out for big companies like Citigroup and WaMu to start slashing dividends to try to keep things afloat as they deal with billions of dollars of write-downs from their Structured Investment Vehicles (SIV's) which are holding toxic sub-prime mortgage debt.  The recent drop in the 10 year treasury yield down to 4.30% indicates a tremendous flight to safety.  Investors that seemed to have an insatiable appetite for risk are suddenly running for cover.  Luckily those retirees kicking back with their fixed annuity payments need not worry ; )

Thanks,

MM