Another day, another bailout: Citigroup

“Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.

In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for [$27 billion of] preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program”

Citigroup pre-market futures indicate a sharp recovery from Friday’s lows. The stock is up 60% to $6. Dow and S&P futures are up as well.

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Reuters: Over 100 U.S. “blue chips” now selling for under $10 a share

This is pretty spooky

Blue chips, including Citigroup (NYSE:C - News; $6.40), Alcoa (NYSE:AA - News; $8.16), Xerox (NYSE:XRX - News; $5.58), Motorola (NYSE:MOT - News; $3.44), Starbucks (NasdaqGS:SBUX - News; $7.97) and Yahoo (NasdaqGS:YHOO - News; $9.14), not to mention beleaguered automakers Ford Motor (NYSE:F - News; $1.26) and General Motors (NYSE:GM - News; $2.79).

According to S&P data, 101 is almost double the 59 companies with share prices below $10 in October 2001 when the dotcom meltdown was in full swing and almost triple the 35 sub-$10 stocks in October 1987

http://biz.yahoo.com/rb/081119/business_us_sp_10bucks.html?.v=1

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Markets retest of Oct lows succeeded

We predicted this last month. We are seeing a W in the Candle charts. If this retest is successful today, we will aim higher. Otherwise lookout below.

Here is an excerpt from BigPicture blog.

Markets have come increasingly close to their October 10th lows. Contrary to what you may have read or heard on TV, this is precisely as it should be. Why? Major lows get retested. That is a basic tenet of market behavior, and crowd psychology. (This has been verified by a variety of studies by different technicians, economists and traders).

There are a variety of different ways to define the terms, yielding some variations, but the basic outline remains the same: All major sell offs hit a point where markets become so deeply oversold, that a rally ensues. Depending upon how deep the prior sell off is, this rally typically lasts anywhere from 3 to 6 weeks. Our work at FusionIQ shows that these snap-backs typically go for about 4 weeks and average ~24%.

http://www.ritholtz.com/blog/2008/11/retest-of-the-october-lows/

The number of newly laid-off individuals seeking unemployment benefits has jumped to a level not seen since just after the Sept. 11, 2001, terrorist attacks, as companies cut more jobs in the face of a slowing economy.

http://biz.yahoo.com/ap/081113/jobless_claims.html

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Are Stocks cheap?

Why Stocks Are Dirt Cheap?

Jeremy Siegel writes this on Yahoo column.

Aggregate earnings over the past year are greatly depressed by huge write-offs not only in the financial sector but in other firms. For example, Ford, GM, and Sprint, whose aggregate market value is less than 0.2% of the S&P 500 Index, lowered the S&P’s reported earnings by about

Note: We made a similar case 2 weeks ago when the market bottomed out at 8000.

VIX drops below 50 for first time since October volatility.

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Currency market says much about Bush’s presidency

Currency market says a lot of about Bush’s Presidency

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Our Nation in debt

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Whew…what a week for Global Markets!

As most of you know this past week was the worst week ever for most global indices.

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Stocks looking attractive as DOW targets for 2002 lows

More on this story soon.

But I think S&P is finally close to 15xp/e. I am not saying you should get out and buy stocks today. But it is definetely looking attractive compared to a month ago. I think as the DOW approaches to 2002 lows of 7500, we can look into nibbling some long term investment plays.

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Dow 1 year anniversary

14,000 to 9,000 in just one year

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Global Banks on the offense with rate cuts

10/08/2008

U.S Fed leads global coordinated rate cut, eases by half point to 1.5%

Bank of England cuts from 5% to 4.5%
ECB cut by a half-point to 3.75%

China cut by 27 basis points

http://biz.yahoo.com/rb/081008/business_us_interestrates.html

10/07/2008

Hong Kong cut base lending rate by 1% point

http://www.marketwatch.com/news/story/hong-kong-cut-base-lending/story.aspx?guid={80A852B4-53BC-4CC9-8567-28D3944B54A1}&tool=1&dist=bigcharts&

10/06/2008

Japan holds rates steady, notes mounting Global crisis

http://www.marketwatch.com/news/story/bank-japan-holds-rates-steady/story.aspx?guid={8FA8F60B-1458-4B51-9DC6-717D244F4E8F}

Australia rate cut stuns, markets thirst for more

http://news.yahoo.com/s/nm/20081007/bs_nm/us_financial_centralbanks

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Another Meltdown day at Wall Street, Short term bottom?

Three reasons this could be a trade-able bottom.

1) VIX spiking above 50 

http://www.marketwatch.com/news/story/vixs-new-all-time-high-not/story.aspx?guid={496AE78A-A548-4380-AFF1-71D34C5269BF}

2) Dow down 800 points at one point during the day

(c) Marketwatch.com

3) Idiot Cramer calling everyone to get out of the market. He’s a good contrarian indicator imo.

http://www.msnbc.msn.com/id/27045699/

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Credit Crisis move to Europe in full force

You thought we are the only one to be affected by this crisis. Thing again!

Germany became the latest, and by far the biggest, European country to explicitly guarantee the deposits in banks held by their citizens, in a move announced Sunday. The German government moved Sunday night to save Hypo Real Estate with a 50 billion euro ($68 billion) rescue package one day after the troubled property lender said an earlier rescue plan had fallen apart, according to media reports.

http://www.marketwatch.com/news/story/german-officials-move-save-hypo/story.aspx?guid={99F9DBD1-3CCB-4FD9-A31D-248BFE852C56}

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LIBOR all time high as Dow reclaims yesterdays losses

“The money markets have completely broken down, with no trading taking place at all. There is no market any more. Central banks are the only providers of cash to the market, no-one else is lending.'’

-Christoph Rieger, a fixed- income strategist, Dresdner Kleinwort.

Courtesy: Bloomberg

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Market crashed - what’s next?

$700 Billion Rejection = 777 points down in DOW
The picture says it all..

Some of the headlines that are rocking the Wall street today

• House Rejects $700B bailout in stunning defeat

• Congress Vows New Effort To Approve Bailout Plan

• Year-end redemption requests loom over Hedge Fund industry

• S&P puts Citigroup rating on review for possible downgrade

• Citigroup to buy Wachovia banking Ops

On the lighter side

• Jon Stewart: Awkward Loan Interview

• Jon Stewart:Clusterf#@k to the Poor House

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Major indices finishes higher on high volatile trading

Sep 18 - Update to our yesterday’s posting.

I guess I nailed this one. I called the short term bottom yesterday. It turned out to be true. Both Longs and Shorts battled out today in this historic trading day, which only made the investors on the sidelines even more nervous. In the final hours of the day, market breadth turned extremely positive pushing all major indices 4-5% greener and higher. Volatility Index, VIX surpassed 42 to end at 34. Usually a spike in VIX followed by a reversal means a short term bottom is in. It will be interesting to see if market actions today will initiate a short term bear market rally.
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Sep 17 - Wall Street plunged again in a crisis of confidence Wednesday as anxieties about the financial system still ran high after the government’s bailout of insurer American International Group Inc. The Dow Jones industrial average dropped about 450 points, and investors seeking the safety of hard assets and government debt sent gold, oil and short-term Treasurys soaring…. » read more

I can’t believe I am saying this, but is this a near bottom? VIX touched Jan, mid March lows again.

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