The biggest financial crisis has been resolved in the shortest time period. The markets would like us to belive there is no recession (or a short one).
Still, the rally, which was also driven by investors looking to put money to work on the first day of the quarter, only brought the market back to where it was a month ago. And credit markets remained frozen despite the efforts of central bankers to get banks to start lending again. The coming first-quarter earnings season is expected to bring yet another wave of billion-dollar write-downs by financial firms.The dividend rate is almost 8%. In this environment that is not a bad return.
Investors, however, also are expecting sour news at some U.S. regional banks, which will report first-quarter earnings this month. The expected bad news has put pressure on some to scramble for capital. One regional bank, National City Corp. of Ohio, is now considering a potential sale to hometown rival KeyCorp as a result, according to people familiar with the matter.
In one sign of growing investor confidence, strong demand for an issue of preferred convertible shares by Lehman Brothers allowed the investment bank to boost the issue to four million shares from three million, and raise $4 billion in new capital.
Global investors have been fooled by more than one false dawn since the financial crisis began last year. On Oct. 1, shares of Citigroup Inc. gained 2.2% after it announced a $5.9 billion write-down on its subprime-mortgage exposure. On Oct. 5, Merrill Lynch & Co. admitted to a $5.5 billion write-down, sparking a 2.5% rally in its stock. On Nov. 8, shares of Morgan Stanley gained 4.9% after it announced a $3.7 billion loss on subprime exposure. All of those rallies proved premature, as the falling value of mortgage investments forced the banks to take billions of dollars in additional write-downs.That is the point. How many times have we seen the market bottom? Is this the real bottom or is this just a bear market rally? We will find out answers in a few months.
http://online.wsj.com/article/SB120702674576879869.html?mod=The-Morning-Brief
1 comment:
Since reckless deregulation was at the heart of much of the troubles we've experienced, the measures put forth will do nothing to correct it. The balm applied is nothing more than a palliative, and a short lived one at that.
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