We still believe that equity and credit markets will re-couple further from here. However it is now more likely that credit spreads tighten rather than equity sells off sharply as recent Fed actions are more positive for credit than equity, in our view. The key points in the attached Strategy Expresso! note are: Credit clouds clearing We still believe that equity and credit markets will re-couple from here, but it is more likely that credit spreads tighten as opposed to equity selling off. Within the banks sector, we would be overweight credit and underweight equities. There is a strong case now to increase exposure to Bank credit. Greater liquidity should help, but equity holders may still suffer from credit losses leading to the need to raise capital. Credit likely to move tighter but above fair value The rally that began in credit markets yesterday (March 18) is the start of a trend that should continue over the next few months, in our view. While we do not expect spreads to approach our fair value estimate of 65-70 bp for iTraxx Main near term, we think they will compress to 100 bp from 130 bp currently. We expect equities to remain in a 'fat and flat' range The downside risks have been reduced by the Fed actions and attractive valuation. However, ongoing losses and de-leveraging in the bank sector coupled with a deterioration in the growth and inflation mix are likely to limit substantial upside, in our view.
the Fed is now Wall Street's garbage truck... in other words, they will take almost anything as collateral and does anyone believe that the banks will buy the stuff back?? yea right.... the Fed is now the largest sub prime holder using printed money complete insanity... JP Morgan gets to keep the assets and the Fed. takes the liabilities, what a deal!
Two questions: Do you think that the FED would be taking such action if the banking system was functioning appropriately and there wasn't any other risk out there to the Economy besides a little "bad" collateral on the books? When was the last time that the FED opened up the discount window not just to banks, but brokers as well? Did you not see that the Port Authority of NY had to pay 20% financing on a mere $100 million dollars worth of short-term debt last month? Do you have any understanding of what "counter-party" risk really means? How about what function the banks have in helping to form capital for investment and economic growth? Naaaaaaaaaa. Everything's fine. Hunky Dory.
well I think everyone (or most everyone) is witness to the socialization and securitzation of corruption.. look, Paulson has to be staring at the ceiling at 2 AM wondering why he took the f'd job that he has. let them pound on gold for awhile but the fix is in as soon as DX rolls over.. fvck'em. I'm buying gold/silver all the way down get it down to 800/15... I could care less... I'll back up the 18 wheeler
He maybe took the job because it allowed him to sell his GS stock tax free. Unfortunately being a brain dead footballer he did not realise that maybe everyone else would rather pay the tax than take the job. I mean really, he was CEO of GS when it was packaging this slime and he took the Secretary job? Oh right, it was altruism, his opportunity to use his talents for what's best for children and bunny rabbits around the world.
wasn't it ex GS's Thain that got the NYSE job and then agreed to take the POS Archipelago platform off GS's hands for a billion. what a hose job.... NYSE got fvcked on that one no wonder why dark pools run the show... NY is fvcking itself with the incest of its own making.... move offshore quick...
Yea but whaddabout the silver lining> Now that the US Govt holds all this paper, or will hold it fairly soon, a lot of labor intensive, high risk jobs necessarily will need to contracted out, as in mortgage servicing evictions foreclosures strong arm collections Dick's Rolodex will be whirring -- as if it's not already the most valuable Rolodex there ever was -- and not all of the above will go to Halliburton and Blackwater. So, get ready and get your bids in early. Don't get shut out at the contracting window.