STOCK MARKET WATCH, Thursday December 20

[ozymandius]

Source: DU

STOCK MARKET WATCH, Thursday December 20, 2007

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 397 LONG DAYS
DAYS SINCE DEMOCRACY DIED (12/12/00) 2529 DAYS
WHERE'S OSAMA BIN-LADEN? 2251 DAYS
DAYS SINCE ENRON COLLAPSE = 2212
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

---

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES

---

AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.

AT THE CLOSING BELL ON December 19, 2007

Dow... 13,207.27 -25.20 (-0.19%)
Nasdaq... 2,601.01 +4.98 (+0.19%)
S&P 500... 1,453.00 -1.98 (-0.14%)
Gold future... 805.40 -2.00 (-0.25%)
30-Year Bond 4.49% -0.05 (-1.08%)
10-Yr Bond... 4.07% -0.05 (-1.21%)






GOLD, EURO, YEN, Loonie and Silver

---

PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

---

Read more: DU

[ozymandius]

1. Market WrapUp: The Case for Gold

BY CHRIS PUPLAVA

This will likely be the shortest WrapUp I’ll do for the year and by shortest I mean by length of text. A well known maxim is that a picture is worth a thousand words and with that being the case, I will put forth two arguments for why gold should remain strong despite short-term price swings.

Rampant Global Money Printing

....

Rising Inflation

....

Today's Market

Volatility dominated the markets today on continued credit concerns with news of a $9.4 billion writedown at Morgan Stanley and a lowered Standard & Poor’s outlook for bond insurers weighing on the markets. The U.S. Fed announced today the results of its Monday auction of $20 billion in 28-day credit, which met with strong demand.

The markets staged a rally in early afternoon trading only to give up the modest gains in the final hour of trading. The Dow Jones Industrial Average fell 25.20 points to close at 13207.27 (-0.19%), the S&P 500 lost 1.98 points to close at 1453.00 (-0.14%), and the NASDAQ put in a small gain of 4.98 points to close at 2601.01 (+0.19%).

http://www.financialsense.com/Market/wrapup.htm

[ozymandius]

2. Today's Reports

8:30 AM GDP-Final Q3
Briefing Forecast 4.9%
Market Expects 4.9%
Prior 4.9%

8:30 AM Chain Deflator-Final Q3
Briefing Forecast 0.9%
Market Expects 0.9%
Prior 0.9%

8:30 AM Initial Claims 12/15
Briefing Forecast 335K
Market Expects 335K
Prior 333K

10:00 AM Leading Indicators Nov
Briefing Forecast -0.4%
Market Expects -0.3%
Prior -0.5%

12:00 PM Philadelphia Fed Dec
Briefing Forecast 7.0
Market Expects 6.0
Prior 8.2

http://biz.yahoo.com/c/e.html

[Roland99]

12. U.S. WEEKLY INITIAL JOBLESS CLAIMS CREEP UP TO 346,000; GDP UNREVISED AT 4.9%

Guess that translates into BUY! BUY! BUY!

[ozymandius]

14. More People Sign Up for Jobless Benefits (Brit Hume, Fox Ghoul, is happy)

WASHINGTON (AP) -- More people signed up for unemployment benefits last week, suggesting that the job market is softening as the economy loses speed.

....

Economic growth in the October-to-December quarter is expected to slow to a near crawl -- a pace of just 1.5 percent or less, according to economists' projections. The nation's unemployment rate, now at 4.7 percent, is expected to climb to 5 percent by early next year.

http://biz.yahoo.com/ap/071220/jobless.html

[radfringe]

25. it will be spun as

...this is normal as the shopping for the holiday season tapers off. many retailers typically hire new people on a temporary basis during the weeks leading up to Christmas....

[kineneb]

26. To every season, spin, spin, spin,

we give false reason, spin, spin, spin
and a time for every lie
under heaven.


...with sincere apologies to Pete Seeger.

[ozymandius]

3. Oil rises after US crude supplies drop

VIENNA, Austria - Oil prices rose Thursday after a U.S. agency reported that supplies of crude oil and heating oil fell sharply last week, a drop that was expected to be temporary.

Crude stocks fell 7.6 million barrels in the U.S. last week, the Energy Department's Energy Information Administration reported Wednesday in its weekly inventory snapshot. The decline was five times more than the average 1.5 million barrel drop expected by analysts surveyed by Dow Jones Newswires.

Light, sweet crude for February delivery rose 67 cents to $91.91 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. The contract rose $1.16 overnight to settle at $91.24 a barrel after the decline in crude stocks was reported.

In London, February Brent crude futures rose 86 cents to $92.34 a barrel on the ICE Futures exchange.

....

Traders expect supplies will rebound in next week's report, reflecting crude oil deliveries delayed by the fog. Still, Vienna's PVM Oil Associates noted that present total U.S. stocks of crude, at about 297 million barrels, represent "the lowest point since February 2005."

http://news.yahoo.com/s/ap/oil_prices

[ozymandius]

4. Stock futures up ahead of Bear earns

NEW YORK - Wall Street was poised to open modestly higher Thursday, with investors encouraged about technology after strong earnings at Oracle but still nervous about the financial sector ahead of an anticipated loss at Bear Stearns.

Late Wednesday, Oracle Corp. said its profit in the most recent quarter jumped 35 percent, well above analyst estimates, thanks to higher sales of licenses for new products.

Stock futures gained only modestly, though, as investors awaited the last investment bank of the week to report its fourth-quarter results. Bear Stearns Cos. — now facing a lawsuit by Barclays PLC, which lost money over the summer when two of Bear Stearns' hedge funds collapsed — is expected to post its first quarterly loss ever. Bear Stearns, like its Wall Street peers, has made bad investments in subprime mortgages.

Investors were also tentative ahead of economic data including the Commerce Department's final reading on third-quarter gross domestic product, and the Labor Department's weekly data on claims for unemployment benefits — a report that is closely watched, but often volatile from week to week.

http://news.yahoo.com/s/ap/20071220/ap_on_bi_st_ma_re/wall_street

[ozymandius]

5. China raises interest rates for 6th time

BEIJING - China raised interest rates Thursday for a sixth time this year as it tried to cool a price surge that has pushed inflation to its highest level in a decade.

On top of repeated rate hikes, Beijing has imposed investment curbs to slow spending on new factories, office buildings and other assets. It worries that a glut of unneeded projects could lead to defaults on bank loans, causing a debt crisis.

The interest charged on a one-year loan will rise by 0.18 percentage points to 7.47 percent, effective Friday, the central bank said on its Web site. It said rates on bank deposits will rise by 0.27 percentage points to 4.14 percent.

Analysts had expected a rate hike, and pressure built after consumer prices jumped by 6.9 percent in November over the same month last year. It was the highest inflation rate since 1996 and was driven by an 18.2 percent jump in politically sensitive food costs.

Economists blame the latest inflation spike largely on shortages of pork and other food items and said they expected it to ease once a new grain crop was harvested. But inflation has stayed stubbornly high despite official measures to increase food supplies.

http://news.yahoo.com/s/ap/20071220/ap_on_bi_ge/china_interest_rates

[ozymandius]

6. BOJ chief: Japan economy slowing

TOKYO - Japan's economy is slowing due to weakness in housing investment and cautious corporate sentiment, the central bank chief said Thursday, hours after the bank left its benchmark interest rate at 0.5 percent.

"The economic recovery cycle led by production, income, and expenditure remains intact. But a slowdown in the Japanese economy is happening now," Bank of Japan Gov. Toshihiko Fukui told reporters at a news conference.

Fukui's remarks came after the bank's policy board voted 9-0 to leave the unsecured overnight call rate unchanged. It was the first unanimous vote since June.

The governor's comments were slightly more negative than remarks he made earlier this month and suggest the central bank is still a ways from raising interest rates, which are the lowest among the Group of Seven industrialized nations.

http://news.yahoo.com/s/ap/20071220/ap_on_bi_ge/japan_central_bank

[ozymandius]

7. Rite Aid reports wider 3rd-quarter loss

HARRISBURG, Pa. - Rite Aid Corp. reported Thursday that its third-quarter loss widened sharply and lowered its 2008 profit outlook for the second time this year, as leery consumers held their pocketbooks closer.

The nation's third-largest drugstore chain also blamed the poor quarter on sluggish start to the cough, cold and flu season.

Shares tumbled 8 percent, or 33 cents, to $3.77 in premarket trading.

Rite Aid said its loss attributable to common shareholders was $93 million, or a 12 cents per share for the three months ending Dec. 1. Analysts surveyed by Thomson Financial expected a loss of 7 cents.

In the same period a year ago, the company reported a loss of $6.82 million, or a penny per share.

http://news.yahoo.com/s/ap/20071220/ap_on_bi_ge/earns_rite_aid

[ozymandius]

8. Barclays sues Bear Stearns over hedge funds

NEW YORK (Reuters) - Barclays Bank Plc (BARC.L) on Wednesday accused Bear Stearns Co Inc (BSC.N) of using two hedge funds that collapsed last summer as places to unload troubled assets.

The London-based bank's allegations appear in a lawsuit filed in U.S. Court for the Southern District of New York in Manhattan.

Bear Stearns was not immediately available for comment.

Barclays described the collapse of two Bear Stearns-run hedge funds as one of the most shocking in the last decade. The bank said it was the sole shareholder to a Bear Stearns enhanced leverage fund with exposure to risky subprime mortgages. That fund and another run by Bear Stearns had more than $20 billion in assets before their collapse.

http://news.yahoo.com/s/nm/20071219/bs_nm/barclays_hedgefund_dc

[Robbien]

35. The investment community will likely push back hard against this suit

Can't have an investor winning a suit on the basis that their investment firm lied about leveraged debt.

But Bear really has a bad case here. The guy in charge of the fund is already under investigation by the feds for withdrawing his own money from the hedge fund while assuring investors not to worry.

This will be interesting.

[ozymandius]

9. More woes for Morgan Stanley

NEW YORK (CNNMoney.com) -- Morgan Stanley stunned Wall Street Wednesday by taking an additional $5.7 billion mortgage-related writedown, while announcing a $5 billion cash injection from a Chinese state-run investment fund.

The firm said it lost $3.59 billion, or $3.61 a share, during the fourth quarter - the first quarterly loss in Morgan Stanley's 72-year history. A year ago, Morgan Stanley posted a profit of $2.27 billion or $1.44 a share.

The loss was steeper than expected, as analysts polled by Thomson Financial were anticipating a loss of 39 cents a share.

John Mack, Morgan's chairman and chief executive, labeled the firm's results "embarrassing."

Adding to those woes was the company's decision to take an additional $5.7 billion writedown on mortgage-related securities during the quarter - which ended Nov. 30 - on top of a previously announced $3.7 billion hit.

.....

Mack, accepting some of the blame for the firm's dismal results, added that he would not receive a bonus for 2007.

http://money.cnn.com/2007/12/19/news/companies/morgan_stanley_earnings/?postversion=2007122007

[ozymandius]

13. confusing reports

I have checked this out - it seems that Morgan Stanley has lost $9.4 billion overall. This translates into a $3.59 billion loss overall for the fourth quarter. This dazzling array of numbers can be very confusing. The firm will still make money this year. Just not as much. This from The Guardian:

For the full year, Morgan Stanley's profits were down by 57% to $3.2bn. Investment banking revenues rose by 31% to $5.5bn and equity sales were up 38% to $8.7bn, although earnings from fixed-income trading were wiped out by mortgage losses.

These numbers bandied about from different sources prompted me to dissect the situation. Sure, I've educated myself in public - not necessarily top form. But then maybe you gained something too if you were as confused as I was.

[ozymandius]

10. Holiday Sales in U.S. Fall for Third Week After Winter Storms

From Bloomberg:

Sales at U.S. retailers declined for the third straight week as storeowners grappled with winter storms and rising gasoline prices that discouraged shoppers during what may be the worst holiday season in five years.

Sales in the seven days through Dec. 15 fell 0.4 percent from a year earlier, following declines of 2.7 percent and 4.4 percent the previous two weeks, Chicago-based ShopperTrak RCT Corp. said yesterday.

This year's holiday shopping season may grow at the slowest pace since 2002, according to the National Retail Federation. U.S. shoppers finished just 20 percent of their holiday gift buying last weekend, according to a joint survey conducted by the International Council of Shopping Centers and UBS Securities LLC. Consumers may be holding out for lower prices in coming days, analysts said.

[ozymandius]

11. About The Fed Auctions

From IBD:

The Fed said banks submitted 93 bids totaling $61.553 billion for the $20 billion in loans auctioned off Monday. That put the bid-to-cover ratio at a little more than 3-to-1.

.....

Jay Bryson, global economist with Wachovia, said the strong auction demand was positive.

"It shows that there's not a stigma attached to this as there was at the discount window and that banks are willing to come to the Fed directly," Bryson said.

The interest rate on the 28-day loans — set by the bidding process — was 4.65%. That's higher than the fed funds target rate of 4.25% for overnight bank loans. But it's below the 4.75% discount rate.

.....

Scott Brown, chief economist with Raymond James, said that at this early stage the results of the Fed's first auction are still somewhat hard to interpret.

The heavy demand for the auction loans "suggests either that there's a huge need for (the auction) or that it's working," Brown said. "You need to see the results in the credit markets in the next few days — the Libor (market) in particular is the one to watch."

Mr. Brown has the right take; it's still way too early to tell whether this will work or not.

Let me add a few points.

1.) I've said it before, and I'll say it again; this isn't about liquidity -- it's about confidence. When lenders are concerned that borrowers will take a financial hit over the period of a short-term loan, then lenders are going to be reluctant to lend. In addition, lenders have every reason to be concerned about their own balance sheets right now. Just yesterday, Morgan Stanley announced a writedown of $9.4 billion and S$P downgraded insurer ACA to junk status. In other words -- there are still a ton of problems out there in the financial market.

2.) The Fed is in a serious policy bind. Let's assume this plan works -- then great, the Fed is the champion. But if the plan doesn't work, what can the Fed do then? The latest CPI and PPI reports seriously hem the Fed in from a policy perspective. My opinion is the Fed opted for this plan because of the high inflation levels reported last month.

http://bonddad.blogspot.com/2007/12/about-fed-auctions.html

[ozymandius]

15. Stock Futures Rise After Earnings

NEW YORK (AP) -- Wall Street was poised to open higher Thursday, with investors encouraged about technology shares following strong earnings at Oracle but still uncertain about the financial sector after Bear Stearns posted its first-ever quarterly loss.

Late Wednesday, Oracle Corp. said its profit in the most recent quarter jumped 35 percent, well above analyst estimates, thanks to higher sales of licenses for new products.

But Bear Stearns Cos. said that in the fourth quarter, turmoil in the credit market reduced the investment bank's portfolio by $1.2 billion, leading to a hefty loss. Bear Stearns -- now facing a lawsuit by Barclays PLC, which lost money over the summer when two of Bear Stearns' hedge funds collapsed -- has made bad investments in subprime mortgages like its Wall Street peers.

Investors also digested mixed economic data. The Commerce Department reported that gross domestic product grew at a 4.9 percent pace in the third quarter. The reading on the value of all goods and services produced within the U.S. for the July-to-September quarter was unchanged from an estimate a month ago. Economic growth for the fourth quarter is expected to have slowed to a pace of just 1.5 percent or less, however.

http://biz.yahoo.com/ap/071220/wall_street.html

[ozymandius]

16. FedEx 2Q Profit Falls on Fuel Costs

FedEx 2nd-Quarter Profit Falls 6 Pct, Offers 3rd-Qtr Outlook Below Wall Street Estimates

MEMPHIS, Tenn. (AP) -- Package courier FedEx Corp. reported Thursday its second-quarter profit fell 6 percent from a year ago, largely due to high fuel costs and a sluggish U.S. economy.

The delivery company's growth overseas tempered the effects of the domestic economic slowdown and helped FedEx meet its lowered earnings expectations for the quarter. But it forecast profit for the current quarter that was below Wall Street estimates.

Its shares fell 19 cents to $94.44 in premarket trading Thursday.

FedEx earned $479 million, or $1.54 a share, for the three months ended Nov. 30 compared with $511 million, or $1.64 a share, a year ago.

http://biz.yahoo.com/ap/071220/earns_fedex.html

They'll get that Santa Claus rally if they have to pry it from his cold fingers.

[JNelson6563]

17. This should get 100 recs just for the toon!

Perfect.

As to the futures, last I looked things were down a wee bit. What happened? Someone announced mass layoffs or something? Nothing fuels the markets like the news that many more average Aemricans are now screwed.

Julie

[ozymandius]

18. Maybe the charts have not caught up with the hype.

Like I said above about the futures pointing upward: They'll get that Santa Claus rally if they have to pry it from his cold fingers.

Morgan Stanley profits in the shitter - CHECK.
FedEx profits bruised because of fuel costs - CHECK.
Unemployment initial claims increase - CHECK.
Job market softening - CHECK.
GDP at a crawling growth rate of 1.5% - CHECK.
CPI hits the highest level since the Papa Bush's 1991 recession - CHECK.

What's not to love?

[JNelson6563]

20. Amen Brother Oz!

Succinctly put my friend. :toast:

[AnneD]

23. Morning Marketeers.....

:donut: and lurkers. I think this Santa Rally has run it's course. I think folks are ready to take their profits and run to the Virgin Islands for holiday-since they have no concept of a holy day.

I laughed at the toon today. Hubby and I were laughing about the fire. I maintain that it came from a spark from the paper shredder and he maintains that it came from an overheated circuit-probably a paper shredder. We got a great laugh out of it. You know, it is pretty sad when there is so little trust that an incident like this causes this kind of speculation.

We both count our blessings that we have good health and we have each others good company and the friendship of others. I will be going to visit my Mom in Arizona. My daughter will go with me. I was talking to Mom the other day. She was excitedly fixing thing up. She said she was doing more than usual because with Leila going to college soon, this might be the last time we visit her together. I paused for a minute and carried on our conversation but her thoughts stuck with me. When we get together, we always anticipate seeing each other again, but sadly, this may not be the case for some of us. We lose friends and loved ones from our life, through distance and death. And Life goes on.

So, when you get together with dear ones, and maybe not so dear ones, be kind to each other. Make lots of wonderful memories. It is the memories of the happy times that smooths the rough times. And heaven knows there will be plenty of rough times ahead. Today may be one of my last chances to post for a while as Mom has no internet and school will be out soon. I know most of my internet friends are here today so I wish you all Season's Greetings, Happy Solstice, Feliz Navidad, and Danistayohihv & Aliheli'sdi Itse Udetiyvsadisv ......


Happy hunting and watch out for the bears.

[ozymandius]

19. Bouncing outta the gate (bidness being dealt)

9:35
Dow 13,258.89 Up 51.62 (0.39%)
Nasdaq 2,624.06 Up 23.05 (0.89%)
S&P 500 1,460.34 Up 7.34 (0.51%)
10-Yr Bond 4.03% Down 0.04
NYSE Volume 108,459,170
Nasdaq Volume 74,618,230

[ozymandius]

21. 10:10

Dow 13,228.24 Up 20.97 (0.16%)
Nasdaq 2,619.08 Up 18.07 (0.69%)
S&P 500 1,456.24 Up 3.24 (0.22%)
10-Yr Bond 4.04% Down 0.03
NYSE Volume 472,680,910
Nasdaq Volume 277,584,780

09:45 am : The major indices open higher, with the Nasdaq Composite pacing the advance.

Oracle (ORCL) is providing support to the Composite, after reporting fiscal second quarter earings of $0.31 per share, topping the consensus estimate by four cents.

Meanwhile, Bear Stearn (BSC) reported a huge loss of $6.90 per share, which was a much larger loss than what analysts expected. However, the market is shrugging off the poor results, sending the company's shares higher.DJ30 +50.62 NASDAQ +24.34 SP500 +8.17

[lovuian]

22. Can everyone say America is in a recession

and its on the Republicans watch

[Maeve]

24. Again. As usual.

While there is debate on the technical definitions of recession (depends on what your meaning of "is" is, so to speak!), it ain't pretty on Main Street.

BTW, hi, guys! :hi: Little bit of family news--#2 Son just joined the Air National Guard (Go Air Force!) today and will be heading to basic sometime in the new year. he's going to be in medical service, able to qualify as an EMT when he gets his training.

[ozymandius]

27. Greetings Maeve!

So good to see you. Congratulations to your son. The Air Reserve, like the Air Force, seeks highly intelligent recruits. (So say my Air Force veteran friends.)

Blessings to you and yours.

:hi:

[AnneD]

36. Congrats.....

Maeve. If I had to recommend a branch, I would recommend the USAF (or USN nuclear sub-but that's me).Hope we are out of Iraq by the time he finishes. Will he be going to San Antonio Texas for training? If he is-there are some folks that can look out for him. Again Congrats.

[Maeve]

37. Nope, Sheppard AFB, Wichita Falls TX

My uncle was a full-bird colonel in the AF when he retired, so I'm partial to that branch myself. He's not in much danger of being deployed in the near future, but there's always that, isn't there?
Thanks for the asking, tho...we are very proud of him! :patriot:

[ozymandius]

28. late lunch update

12:44
Dow 13,162.16 Down 45.11 (0.34%)
Nasdaq 2,609.55 Up 8.54 (0.33%)
S&P 500 1,448.45 Down 4.55 (0.31%)
10-Yr Bond 4.00% Down 0.07
NYSE Volume 1,649,500,880
Nasdaq Volume 921,992,810

12:00 pm : Stocks opened sharply higher, buoyed by a number of better than expected earnings reports from non-financial companies, but quickly fell as the financial sector took some steam out of the stock market. The S&P and Dow are currently in the red, although losses are slight. The Nasdaq is posting a modest gain, but is well off its opening high.

With regard to financials, Bear Stearns (BSC 89.53, -1.07) reported a huge loss of $6.90 per share due to mortgage-related losses, much higher than the $1.79 per share loss most analysts expected. It was Bear's first quarterly loss ever, according to reports. The stock was actually trading higher in the early-going, but eventually reversed as investors soured on some news regarding bond insurer MBIA (MBI 20.61, -6.41).

Shares of MBIA are down 24% after the company said it has $30.6 billion in collateralized debt obligations, much larger than analysts previously thought. Yesterday, Standard & Poor's affirmed MBIA's AAA credit rating, and today said the company's CDO exposure was factored into its decision. S&P's announcement, though, has done little to help the stock, as some investors feel blindsided that this was not previously disclosed.

Oracle (ORCL 22.22, +1.46) is keeping the Nasdaq in positive territory, and limiting the S&P 500's losses, after the company pleased investors with a stronger than expected earnings report. Oracle reported earnings of $0.31 per share, topping the estimate by $0.04 per share.

Meanwhile, Nike (NKE 67.02, +3.22 ), Herman Miller (MLHR 30.66, +2.24), and Accenture (ACN 37.14, +2.18) all came in ahead of estimates.

FedEx (FDX 93.25, -1.38) beat its fiscal second quarter earnings expectation, but its stock is lower after the company issued third quarter earnings guidance that was below the consensus estimate.

Seven of the ten economic sectors are trading lower, led by a 1.8% decline in financials. The tech sector (+0.8%) is providing leadership, thanks to strength in Oracle.

There were several economic reports, although none had much of an effect on the stock market.

Third quarter real GDP was unchanged a 4.9% annual growth rate. The report was just the final revision, so it did not have much of an impact on the market.

The weekly initial jobless claims for the week ended Dec. 15 rose to 346,000 from 335,000 the week before. The reading is not high enough to signal significant weakness in the labor market, just a modest worsening.

Lastly, Leading Indicators dropped by 0.4%, slightly more than the expectation of a 0.3% drop. This report typically garners little market interest, as many of the indicators that make up the report have been previously released. DJ30 -25.52 NASDAQ +9.04 SP500 -3.22 NASDAQ Dec/Adv/Vol 1617/1191/727 mln NYSE Dec/Adv/Vol 1879/1161/443 mln

[Roland99]

29. Was just about to post the numbers to the downside.

:)

[antigop]

30. Bond giant's $8.1 billion surprise

http://money.cnn.com/2007/12/20/news/companies/benner_mbia.fortune/index.htm

Just hours after dodging a potentially devastating downgrade from ratings agency S&P, bond insurance giant MBIA disclosed late Wednesday a massive $8.1 billion exposure to the same risky investments that have been wreaking havoc on Wall Street in recent months.

It's unlikely now that MBIA can escape a ratings downgrade. The news could also jeopardize an offer by buyout firm Warburg Pincus to invest $1 billion in the beleaguered company.

MBIA's surprise writedown could rattle Wall Street at a critical time. If MBIA is downgraded or fails to secure financing from Warburg Pincus, then the bonds it guarantees will be downgraded, likely resulting in more losses for investment banks and prolonged turmoil in the credit markets.

Analysts said they were dismayed by MBIA's disclosure. "We are shocked that management withheld this information for as long as it did," wrote Morgan Stanley's Ken Zerbe and Yoana Koleva in a research note issued after Wednesday's writedown was announced. "This new disclosure completely changes our view of MBIA being a 'more conservative underwriter' relative to Ambac."

MBIA (MBI), the country's largest bond insurer, revealed late Wednesday that the $8.1 billion is backed collateral debt obligations (CDOs) and residential mortgage-backed securities, whose value has fallen steeply since credit markets seized up this summer. Of the total writedown, $5.1 billion was written in 2006 and 2007, when Wall Street firms were inking some of the riskiest loans.

[Robbien]

33. Analysts say they were shocked

They must be the only ones on the planet to have that reaction.

This $8.lB MBIA is talking about is not just risky CDOs, it is CDOs squared, or CDOs backed by other CDOs. Junk backed by junk.

MBIA guarantees over $30.6B in mortgage securities. Ouch. This is gonna hurt. Coal in xmas stockings for Wall Streeters.

[ozymandius]

40. These analysts must be drooling, spoon-fed, Haldol-junkie idiots.

Atrios and other economic bloggers have been talking about Big Shitpile for more than a month.

Still - it would not surprise me if Secretary Paulsen, his Goldman buddies and Bernanke pull a mutant rabbit out of a hat. Gotta protect those year-end bonuses, you know. :eyes:

[ozymandius]

38. Big Shitpile just got bigger.

http://atrios.blogspot.com/2007_12_16_archive.html#780384800167723447

Shitpile Squared

[antigop]

31. Bond insurer defaults threaten big banks

http://money.cnn.com/2007/12/20/news/companies/benner_ACA.fortune/index.htm

Wall Street banks may inject cash into ACA Financial Guaranty Corporation, which was dramatically downgraded to junk while nearly the entire bond insurance industry was put on negative credit watch by S&P yesterday.

But don't believe for a second that the bailout team of CIBC, Merrill Lynch, and Bear Stearns believe in the company or its business model. They're just trying to avoid another round of extremely damaging write downs on top of the $76 billion in losses that securities firms and banks have posted this year. "The reality, which is clear to Wall Street though obviously not to Washington, is that any such infusion would be a clear attempt to avoid having to recognize losses tied to monoline counterparty exposures," Josh Rosner, managing director at the research firm Graham Fisher, said in a research report issued today.

He adds that the move is the latest in a growing list of strategies banks have used avoid growing economic losses throughout the current economic crisis. The possible ACA bailout is a perfect example of this hypothesis. When ACA's debt went from A to CCC, the move also hit Canadian bank CIBC (which Fortune predicted in November). CIBC said it may immediately write down $1.7 billion of the $3.5 billion in mortgage holdings guaranteed by ACA, which were part of CIBC's roughly $10 billion in hedged collateralized debt obligations.

These CDOs were not included in previous write downs because, though sullied by bad mortgage debt, they were supposedly insured or hedged by entities like ACA. Now that ACA can't backstop the losses, the credit ratings on those bonds will fall, and result in losses.

[Demeter]

32. That Cartoon Is Just Plain Creepy!

Just like Unca Dick.

Peter Lorre would have been the man to portray the Vice--too bad the wrong one is dead!

[fascisthunter]

34. That Cartoonist is One of My Favs

too funny and the style is great!

[ozymandius]

39. at the close: PPT/Goldman rally plied from Santa's cold fingers

Dow 13,245.64 Up 38.37 (0.29%)
Nasdaq 2,640.86 Up 39.85 (1.53%)
S&P 500 1,460.12 Up 7.12 (0.49%)
10-Yr Bond 4.03% Down 0.04
NYSE Volume 3,548,630,250
Nasdaq Volume 2,027,222,880

4:20 pm : It was another roller coaster day of trading on Thursday. The S&P and Dow closed with modest gains after spending much of the day in the red, while the Nasdaq finished the day significantly higher, buoyed by a strong earnings report from Oracle (ORC 22.10, +1.34). The financial sector prevented the market from making further gains,though, as bond insurers once again came under scrutiny.

Shares of bond insurer MBIA (MBI 20.00, -7.02) plummeted 26% after the company said it has $30.6 billion in collateralized debt obligation exposure, much larger than many analysts previously thought. Yesterday, Standard & Poor's affirmed MBIA's AAA credit rating, and today said the company's CDO exposure was factored into that decision.

S&P's announcement, though, did little to help the stock, as some investors felt blindsided that the exposure was not previously disclosed. Adding to the company's woes, Fitch Ratings put MBIA on Rating Watch Negative because of the CDO exposure.

A number of companies reported earnings on Thursday, most of them better than expected.

Oracle played a pivotal role in the Nasdaq's outperformance after reporting stronger than expected earnings. Oracle earnings came in at $0.31 per share, topping estimates by $0.04.

Meanwhile, Nike (NKE 66.01, +2.21), Herman Miller (MLHR 32.05, +3.63), and Accenture (ACN 37.24, +2.28) all came in ahead of estimates.

It was just about a month ago that FedEx (FDX 93.63, -1.00) warned of an earnings shortfall for its second quarter and fiscal year. So, although FedEx beat the second quarter consensus estimate of $1.50 by four cents, the qualifier should be added that it beat the lowered consensus estimate. Also, the company issued futures earnings guidance below expectations, which helped send its shares lower.

Bear Stearns (BSC 91.42, +0.82) reported a huge loss of $6.90 per share due to mortgage-related losses, much higher than the $1.79 per share loss most analysts expected. It was Bear's first quarterly loss ever, according to reports. After some choppy trading, the market shrugged off the negative report, sending shares of the company higher.

Of the nine sectors that traded high, tech (+1.6%) provided leadership, thanks to strength in Oracle and Apple (AAPL 187.21, +4.09). Only the financial sector (-0.7%) finished lower.

There were several economic reports, although none had much of an impact on the stock market.

Third quarter real GDP was unchanged at a 4.9% annual growth rate. Core PCE rose 2.0% (consensuses +1.8%) quarter over quarter and the GDP Price Index rose 1.0% (consensus +0.9%). The report was just the final revision, so it did not have much of an impact on the market.

The weekly initial jobless claims for the week ended Dec. 15 rose to 346,000 from 335,000 the week before. The reading is not high enough to signal significant weakness in the labor market, just a modest worsening.

Leading Indicators dropped by 0.4%, slightly more than the expectation of a 0.3% drop. This report typically garners little market interest, as many of the indicators that make up the report have been previously released.

Lastly, the regional Fed survey for December manufacturing was a very disappointing -5.7. A reading below zero suggests a contraction in manufacturing. The New York survey released earlier this week had a more optimistic reading of 10.3. These are just regional surveys, and not too much emphasis should be placed on them, but a poor reading here raises red flags. DJ30 +38.37 NASDAQ +39.85 NQ100 +1.9% R2K +1.5% SP400 +1.2% SP500 +7.12 NASDAQ Dec/Adv/Vol 1124/1899/1.89 bln NYSE Dec/Adv/Vol 1434/1766/1.37 bln