OUCH!!!! Danger Will Robinson, Danger! The brakes barely came on as we slid down to those supports, in fact in a couple we are just below them It was a rough and questionable close - did supports hold or break - because a couple are right above and a few dropped below I would say it's a difficult call and even a instant replay would resolve it. I guess we have to wait for today and so far the futures in the pre-market are looking down - however INDU is at fair value.
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Saudi to the Rescue?
Prince Alwaleed had purchased a massive stake in Citigroup in the past when they suffered problems. It was a much needed help back then and now he is back again looking to increase his stake to 5%, but is it too late and too little?
Before when he stood up to the plate Citi was having its own problems, it was easier to assess the problems and decide to make and investment or not. Did the business plan work, could the management execute, what was their debt to revenue ratio, burn-rate, etc. However, this time around the data that needs to be crunched is massive - one reason is that you have to look BEYOND the walls of Citi to determine if there is US and Global risk, currency risk, interest rate / inflation risk, OTC risk, etc.
Prince is already in for a fairly big nut at Citigroup, his largest holding (Riyadh-based Kingdom Holding Co.) - which is taking it on the chin already. Also his holdings company as a whole is getting whacked pretty hard (Down 63% or $13 billion).
At this point I question his motives investing into Citi.
1. Is he pulling the B of A move, when they bought Countrywide because they had previously already dumped 100s of millions into the trouble company - to me that move was all about saving "FACE" - because it was a seriously rated "tossing good money after bad".
2. Is he a "deer in the headlights"? He is down over $13 billion - all his investments are souring and now he is emotionally "married" to Citi (his biggest holdings) and so he is tossing more money at it because he doesn't know what else to do!
Remember just because you have billions doesn't mean you are always going to make the RIGHT or GOOD decision. Buffet has had some whopper failures - the difference with Buffet is he knows WHEN to lick his wounds and walk away. Buffet KNOWS how to take losses without the double-up to catch-up. Just look at his US AIR investment.
However, knuckle's like Kerkorian could NOT stay away from the Big Three - first the massive losses at GM, then the failed buyout of Chrysler, and then another billion dollar loser at Ford. He just didn't learn his lesson.
Is Prince Alwaleed on that same road or do you REALLY think he is an expert at valuing SIV, CDO, OTC paper, understands derivative and liquidity risk, and can really wrap his head around the risk of a massive diverse company like Citi?
Buffet keeps it simple - if he can't understand the 10k or the business plan - he doesn't invest.
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GMAC applies for bank status - yeah right!
OK - I have to pat myself on the back for this one. I called it a week ago when Amex applied for Bank status to get access to the Discount Window and said I am sure that GMAC's eyebrows went up as to a good idea when they see one.
However -this makes me want to PUKE. It's like we are giving these FAILED lending companies a FREE PASS by turning them into the exact thing we DO NOT want them to become - a BANK - for the simple reason that they can get access to the TARP and DISCOUNT window to borrow MORE money from the government and taxpayer.
Who's next, I would say Countrywide but they got in the back-door via Bank of America. Just pick a lender or credit issuers - they'll start to line up - especially if GMAC gets status.
You SERIOUSLY have to be f'n kidding me - I really can't believe Congress has not put a stop to this NONSENSE! Oh wait - I forget - Barney Frank is running that committee.
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Future Pre-market
They are not looking good and we are at or just below supports in the cash. They are looking lower and I would suspect we could see a flush if we aren't careful. I think ARB traders will be more on the sideline instead of getting in front of the futures train - the risk of shorting at the opening on light buy volume may not be worth it. Expect a lower opening as of now.
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Support / Resistance
YIKES - I didn't like the close on the low and AT those supports!
INDU 8000!!!! (Today is about supports failing or holding - we are RIGHT AT THE 8k area - we need to close above it our we could see a hyper move to the downside.)
NDX 1000 - 1100 (We broke below the intra-day support of 1100. 1000 is IN THE CARDS. But there is really no reason for it to stop there.)
SPX 800!!! (Just above it - do we hold and rally?)
RUT 400 !!! (Again - it's about the close)
It looks like we may visit, break down, etc at the opening - the question is do we pause and rally or continue down. There is no news other than a wealthy Saudi Prince tossing more money after bad - to create a "HOPE" euphoric rally. So I don't know what kind of surprise we could get to jolt this market up.
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Conclusion
I really don't see any reason to rally out of this - unless we get Obama or someone to bring back the "HOPE". It's about selling the faith at this point. The fundamentals look like crap and the holiday season is not looking to be a great time for retail. I was at Sears last night - I was the ONLY person in the entire store - sure it was a Wednesday night - but come on !
Goldman lowered their 4Q GDP to -3.0% - that's NEGATIVE - some economist on Bloomberg have pushed the envelope even lower to -5%. Goldman's expectation for Q1 09 is another -1 to -2% off also they predict 8-9% unemployment by the end of 09. If that doesn't forecast recession - I don't know what does.
I sure hope you got your hedge on. It's now about protecting principal, taking minimal losses, and trading this market. Don't be long and wrong or HOPE for the future. If anyone is telling you that they are in it for the long haul - well it's simply because they don't have another answer - which should be HEDGE YOURSELF!!!!
I seriously "HOPE" I am wrong!
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