TED Watch

TED finished the day below 3, but let's see what it does tomorrow in response to today's shitty DOW performance and earnings reports. More on the TED and why it matters, here.

413 Point Rise in the DOW is now Barely Above the Fold

DOW's up 413 in a day, and the Times barely puts it above the fold. Here it is on the front page, above the fold, one column, no art: THAWING BEGINS IN CREDIT FLOW: DOW RISES BY 413

Market's Up, And?

Yes, DOW's up, but the underlying problems are serious and will remain for some time. And it's not clear yet what this means for equity markets in the short- and near terms. If equity prices are currently 'undervalued' (assuming that they will be 'corrected' to some golden-rule P:E/EBITDA ratio), then one would expect to see more people moving into the market than we see now.

As a general measure, take the terms of Buffet's investments in GE and Goldman Sachs. Yes, he put in some billions, but the more aggressive the terms, the less bullish he is, really. He's not pouring cash into general equities at the moment, instead, GE and Goldman drew up these insanely privileged contracts for a new class of shares, all his own, with a generous dividend and almost infinite options.

The questions now are:

1. Now that the banks have FED capital, when, and how far will LIBOR rates drop? (Meaning, When will the banks start trusting, and loaning to, each other, regardless of the spin that's being given to the general public at the moment?)
2. How honest will the banks be in stating their losses in the next earnings report?
3. How aggressively will the Financial Accounting Standards Board enforce the rules on valuing the toxic assets in the next round of earnings reports? (Meaning, When will the charade end, and when will finally know what debt's good and what debt's bad?)
4. As the FED racks up more debt (DOWWTF?! earlier predicted that the final tab will come in at $1.5 trillion, though that's now looking kinda low), who will keep buying the T-Bills?

The DOW vs FDIC-Insured Deposits

If the DOW scaled with FDIC-insured deposits from 1990 to the present, it would now be at 6,000. Since the present crisis is (at least, more than anything else) driven by the absence of credit, the question of asset value and the availability of cash is of heightened importance.

As CDOs, CDSs and other financial instruments get stripped from the market, the 'distance' between the asset, the credit that it backs, and the borrower becomes shortened.


Permalink: http://dowwtf.blogspot.com/2008/10/dow-vs-fdic-insured-deposits.html

I Can Has Happy DOW!?!

The Journal is all excited about the DOW up 400. Forgive them--it's incumbent upon them to report this with breathy excitement...


...but keep in mind that these daily shifts are not the point. This is. After all, let's look at the DOW over the last couple weeks...

Permalink: http://dowwtf.blogspot.com/2008/09/dow-is-up-yawwwwwn-lolz.html

The Dow Belongs at ~8,000

The Times is treating today's falling DOW as though it were 9/11. Ignore this. The DOW (and attendant commodity- and oil futures) will be up and down a lot over the coming months.

The real question is not how much the DOW is up or down in a day, but where does the DOW really belong?

It belongs at 8,000.

Once credit leverage has been removed from the market, the market can then assess asset prices (securities, home prices, commodities) for their real (non-leveraged, supply-demand) market value.