One of those days in the financial markets.
So far, it looks (to me) like traders in control of the markets.
Fed cuts rates against backdrop of reasonably solid employment rates and wage growth. You'd think that would be a recipe for financial asset strength (apart from the past two weeks of accepting that, already).
- Foreclosures are up. Enough to cause a meltdown? Probably not, but there appears to be some evidence that price of credit is going up again (certainly the mortgage insurance companies are on the ropes, in ways I didn't anticipate, and that has some reverberations). By the way, mark my words, someone - Buffet? - will come in to help the pure mortgage insurance companies, like MGIC or maybe Ambac, if all they need are re-capitalizations, because those are great businesses, long-term.
- Citibank has more to go. Yeah, but they are not out of business or close to it (I seriously doubt their capital adequacy is at dangerous risk, unless there is some weird, huge problem in the credit derivatives book). Key problem is that it's still not clear how much more, how much longer - that kind of uncertainty is a killer.
- Exxon and the big integrated firms may be trying to drive the independent refiners out of the markets by eating it on refining spreads (that's keep the oil price rise off the pumps, so far). That's bad for earnings and will send energy stocks down (and part of the sector leadership), but not the economy.
- Exxon production is down ... that's bullish for energy prices in a 'tight' environment, so ...
So, all told ...
Play safe and play contrary, I say, so far.
