Archive for the ‘Stock Market News’ Category
Chairman Bernanke is set to speak in Florida on long term plan to mitigate mortgage foreclosures. More to follow.
Inflation as measured by the Consumer Price Index (CPI) came in at 0.4% growth, above market expectations for a 0.3% rise in prices.
I’m only reporting the overall CPI number here, as this includes both energy and food prices. The “core” CPI number excludes these items, but I believe this distorts the impact to consumers (hey, we all have to eat and most of us have to drive to get to work).
Housing Starts
Furthermore, housing starts came in slightly under expectations at 1,012 K for January vs. consensus estimates of 1,015 K. A thousand more, a thousand less - it doesn’t matter. The bottom line is that we are continuing to see a weak market for housing due to the collapse of the credit markets. Unfortunately, this will probably continue for some time.
Investors are waiting for key inflation and housing numbers due out at 8:30 EST today. Per Briefing.com, Consumer Price Index (CPI) data is expected to show prices increasing 0.3% in January vs. 0.4% in December. In addition, housing starts are expected to come in at a tepid 1,015K vs. 1,004K in December. Futures are already trading lower in anticipation of the news - we’ll stay glued to the stock market news wire and provide the actuals as soon as they are released.
Tags: stock market news
The stock market news wire is humming this morning on an announcement that Citigroup (NYSE: C) has barred investors in its CSO Partners hedge fund from withdrawing their investments. According to the Wall Street Journal, investors in the fund attempted to withdraw almost 1/3 of fund assets due to fear concerning mortgage backed securities. However, the fund has refused, explaining that they would have to sell valuable securities at huge discounts (which would hurt all investors).
So, is that Really so Bad?
True, the fund did make disproportionately large investments in leveraged securities (even breaking trading policies set within the firm). However, the fund was down only about 11% in 2007, and the previous manager has since been replaced. If you are a diversified institution this fund should only be a small percentage of your portfolio. Therefore, a loss of 11% is not so bad given the amount of risk involved (whether or not all information is truly available about the underlying securities).
Further, according to various sources, CSO is a corporate debt fund, not a fund focused on mortgage backed securities. By keeping investors from redeeming assets, Citigroup is essentially preventing them from making a knee jerk reaction that will guarantee all investors lose money.
Where There’s Smoke, is There Fire?
However, uncertainty drives the market and institutional fund managers are under pressure to “not do worse” than market benchmarks. This will lead many to head for the door as soon as they can. Their argument will undoubtedly be the proverbial: “where there’s smoke there’s fire”. Given the current market situation, I guess I can’t say I blame them.
Tags: citigroup, stock market news
Warren Buffett appeared on CNBC this morning (with another market legend: former Vanguard CEO John Bogle) to discuss his offer to re-insure bonds from troubled bond insurance companies such as MBIA and Ambac. His offer would cover around $800 billion of municipal bonds but would not include any portfolios of exotic instruments such as CDOs, etc.
Buffett on Stocks
Buffett was also asked about his opinion on current stock valuations. While he did mention that he believes stocks are priced in the general range of fair value, another comment he made concerned me. Buffett stated that corporate profits have been strong for some time, and both he and Bogle agreed that this could not last - bottom line: both believe a reversion to the mean in corporate profits is imminent. If the market has not already factored this into stock prices, the stock market could have further to fall moving forward.
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