Sunday, September 14, 2008

If Merrill and Lehman are gone, Who's Left?

This is what stock market bottom's look like.  Yes, tomorrow the market is going to be down, BIG (if Lehman files for bankruptcy protection).  It has been reported that Merrill Lynch has agreed to be acquired by Bank of America.

So who is left?  Washington Mutual, Wachovia, and AIG.

WaMu has no shot of surviving.  Wachovia and AIG could make it.  If they appear they are to survive, it would seem that most of the bad news is prices and discounted into the market.

In addition, we have the Fed Funds rate at a highly stimulative 2%.

So that is what the market has going for itself.

Our Mad Scientist tells me that the only "fly in the ointment" is gasoline prices.  Granted, Oil has fallen and that should help, but the 2 Gulf hurricanes have left our inventories in TERRIBLE shape and have shut several large refineries for at least a week, and perhaps longer, and refiners make GASOLINE and DIESEL - you know, the stuff our economy runs on - and prices could spike for finished products decimating the economy and the market.

I went long the energy equities last week and I felt pretty good about the price action friday, but tomorrow might be painful.  I can't say now that I would add tomorrow or not... but this is what stock market bottom's look like (unless energy comes in for the knock out).

Good Luck!

Mentatt (at) yahoo (d0t) com


Bureaucrat said...

You talked about how "Mish rules" yet you don't seem to be "seeing his point" that he's been making for a year and a half. Our economy is now deflationary. Massively deflationary. The peak oilers (like me) always concentrated on the oil supply, looking less at the demand. If you go to Marketwatch, the one guy Davidowicz who follows the retail industry is nearly screaming and crying at the same time saying that every single retail chain is down in sales except for WMT, MCD and one or two others. There is no money, period. There is no credit and nobody wants to lend. You can't make any real investment judgments under these conditions, can you? Demand is going to drop even more, if Mish is right, and apparently even a category 3 hurricane striking the heart of our refining complex can't move prices up. I don't want to be a screamer, but come on ....

Anonymous said...

Gold up
Dollar down-maybe cliff time
US Stocks down
Big foreign selloff of US paper
US long rates up
RE downturn accelerates
Great Depression 2.0

Then maybe Mr. Putin will activate plan B to bury the dollar and put the US empire in the deepfreeze before our incompetent politicians start WWIII.

If the USD goes off the cliff, the foreign oil producers who sell us 15,000,000 bbls of oil every day may balk at accepting any more USD IOUs for such a valuable commodity. If the USD sells off everywhere, Dick & Condi won't be able to single any country out for threats of military action etc.

Donal Lang said...

I agree that fuels will rise now; but I think not just a spike but a longer term increase as the short term peak runs into fuel demand for rescue/reconstruction and then winter heating.
I'm surprised you're calling a bottom for the stock market. I think it's still defying gravity and will fall for a lot longer. There's a lot of bad news to come, and the financial consequences and interlinks will take a while to unravel. But after that's all over, what's left to make money? Who's going to be buying anything in an economy which is 70% consumer-based? Come to that, which country is going to be buying US bonds or companies, especially now that the Government owns so many 'AAA' investments?

Oh well, there's always NEXT Sunday's announcements to look forward to!

Greg T. Jeffers said...


I see his point, and gave him credit.

See my next couple of posts.