Today's market take from D&D Securities

I get this type of patter every morning from Dominick & Dominick Securities Canadian division. Given that so many of you care about what’s going on in the stock market, I thought I’d share a sample with you. The insights are interesting and highly relevant, given the cliff that we might be looking at….

“The saga of Freddie and Fannie continues and in some quarters there is a level of disbelief. But if we look at the Fed action in the rescue of Bear Stearns, they have shown their hand. The equity holders were devastated, eventually getting $10 per share down from a high of $160. The FED Concern is with the Bond holders and we have believed that the equity holders are going the way of Air Canada. We couldn’t understand why anyone would own them, let alone buy them. It’s like buying a call that has no optionality. But the effect of the prospect of rescue for housing was viewed positively for US Banks and they rallied. But today is another day and you guessed, they are all down a lot. LEH walked away from a deal with Asian investors because they wouldn’t pay book and a half.

It’s probably worth looking at “second order effects” because they can do more damage than the original problems. Sub prime problems would have been manageable but it led to a buyers strike of Bank Paper and we went right into a credit crunch that has done vastly more damage to investors that sub prime has.

Because we don’t know what we don’t know, the market jumps in one direction and it seems immediately jumps the other way. But there is no proportion to it. Gold price dropped from $1000 to $800 and the shares in ABX plunged from $53 to $35 in six months. In 3 months it was $46 to $36. The Box Score has the TED Spread up to 1.13 and the VIX won’t go below 20. Oil bounced off the 200 day and broke the down trend. The first target would be the 100 day at $125 and we are watching the US$ (DXY, Bloomberg) roll over. Its way above the uptrend which is currently $75.50 and the 200 day at $74.

The XLF is making lower highs and has started a small downtrend, which is being confirmed by the SKF which is pushing toward a break above its 200 which is less than 10 points away at 137.50

The DOW failed to break above its 50 day and it is also in a small down trend making lower highs. The US signed an agreement to locate missiles in Poland, they are already in Turkey and have troops “training” in the ‘Stans’. No wonder there is tension and it just adds another twist to the volatility especially for Oil.

It is rumored that UBS is going to offer phantom stock to its Bankers and Wealth Management. Being in a class by itself, they must be desperate to offer a solution that has such a bad track record. Bullets are for shooting and biting and if UBS don’t do both, events will do it for them. Once again…….………………..……Take the money!

QID US EQUITY (Bloomberg): UltraShort QQQ ProShares is an exchange-traded fund incorporated in the USA. The fund seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of the NASDAQ-100 Index.”

MRM