Sunday, September 14, 2008

Buckle Up!

Haven't looked at Globex yet... but hard to miss these headlines:

o Lehman to File Bankruptcy
o BofA & Merrill in Merger Talks
o Banker "Confidence" Plan
o Gasoline Topping $5.00 per Gallon

...Okay, looked it up and wish I hadn't... SPX down like 3% (3.4% low, some recovery occurring)... may want to take a look at these indicators again. There is blood in the streets my friends -- hang tight.

o AIG Restructure

At least we are seeing a flurry of action to shore things up. Enough hand wringing and waiting on Uncle Sam. Of course, it all changes nothing economically speaking for now. But the global financial system's value is entirely hinged on trust and hope, and the former is very much a prerequisite for the later. Here, I can even put that into mathematical terms for you:

Value = Hope/(1+Distrust)^Time

I hope you recognize that formula. It's about as basic as it gets and lies at the heart of modern finance, such that it is. I know, I know; save it for the drama queens on the financial news networks. [edit: Makes more sense with distrust in the denominator, but you get the idea.]

Wow, the boys ain't going to let Monday roll around with giving it a go:

o Bank of America Buys Merrill
o Fed Announcement
o $70B in Support

And I thought Paulson was "taking the weekend off." Guess CNBC got that wrong. I have been wondering who was going to be next. So is this "all better now," or is it "must be worse than we thought."

How many of you are insured through AIG? How much exactly is the LEH counter party risk? And what about WM? Who is next (this is the key back-of-mind question that could really tank us as Federal options fade)? What about the regionals? The list goes on....

So, probably just the start if you ask me, but we'll see what Mr. Market has to say tomorrow morning as we slog through this one day at a time. December e-minis are breaking new lows (1210.75). For me, early to bed, early to rise here on the westest coast.

o Paradise Lost

Note to self: Asia is just waking up; be sure to check the futures and overseas trade first thing. Let the action tell the story and be careful with your stops, this is just the kind of setup that can play hit and run on a nearly 4% down morning. I know it goes without saying, but you just have to trust your own instincts on that one.

o AIG Reaches Out

Yikes. When I wrote "buckle up", I didn't know it was going to be for the whole of an otherwise perfectly nice Sunday. Goodnight.

9/15 - Opening in the overnight lows range -- really not too bad... King Bill Gross - "AIG is in a perverse situation." Cramer - "This feels a little bit like '87 (I know)... This has been a disclosure issue..."

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