Friday, August 24, 2007

Random Thought Friday

The Countrywide/Bank of America deal is a lose-lose situation. Regarding BAC, I know others think this is a sweetheart deal for them and while it may turn out to be I have serious doubts. They are a major player in West Coast real estate and this smells to me like they are averaging down their a losing position and we all now where that leads. (just ask Nick Leeson of Barings, or Metalgescellshaft or better yet, the Nobel laureates over at Long-Term capital). As for Countrywide, well considering the top tick was hit the first minute of trading at $24.45 turned lower and never looked back. What a gift to get out. Hope you CFC longs took it. Gotta have my head examined for not shorting it into that resistance. Just another reminder that the tough trade is the right trade. Congrats to those out there that did get short, my hats off to you ! One last thing, did anyone catch Mozilo's comment when asked if he approached any banks for money he said "they all told me they have their own problems", makes me wonder how big those problems are.

Let me get this straight, Mozilo thinks recession, Goldberg from Thornburg thinks likely a recession. hmmm 2 guys in the field contradicting the ivory tower economists, interesting. But like Gary Shilling has often said predicting a recession is never good for your job security as an economist or analyst, something to think about when listening to these gurus on pompom television.

In many a day prior when the Dow would be up, as it is today, the yen would be down as the hedge fund valets would be playing follow the leader into the carry trade(borrowing and selling yen to buy any other asset). I note the yen is flat to off slightly with the Dow moving as I write this at 2:30 pm EST, we'll see how it closes. I find this a little curious and yes I am long and got longer yesterday. Biased? I hope not. Opposing views are welcome.

Home Depot looks to be having some trouble unloading the supply division deal. By trouble I mean 1.2 billion LESS for the unit. I wonder how this might affect it's stock buyback considering they are doing it with borrowed money. My guess is some bankers are popping Rolaids as we speak.

Someone emailed me regarding my comments on this being a light volume (bear market rally) and not to be trusted. The emailer felt that the summer holidays were to account for the volume drop. To which I say, don't be fooled. Money managers are watching this market very close and while they may indeed be on vacation they are connected via laptop, blackberry, etc. I also suggest that if they are not watching whats going on they may not have something to watch over in short order. Remember, it takes a lot of buying to put a market up, it takes a mere lack o buying to put it down. Good trading to you all.

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