And That’s The Year That Was: 2007

January 5, 2008 | Leave a Comment

Attached (linked) please find “And That’s The ‘Year’ That Was”…the Brounes & Associates market/economic commentary for the period just ended December 31, 2007.  A year that started with so much promise could not have ended soon enough for many investors.  Heading into a presidential campaign season, eternal optimists were calling for a continuation of the bullish sentiment.  Oil prices were falling, the housing sector was primed for a rebound, incumbents were touting the strong economy, and opponents began pointing out how they could do better.  Then came Novastar, Accredited, New Century and a number of no-name mortgage lenders whose challenges served as a precursor for far greater problems among the nation’s largest financial institution.  The mortgage fiasco hit just as geopolitical turmoil prompted a rise (rather surge) in energy prices and once again the dreaded “I” word was creeping back into the water cooler conversation.  All the promise of the first half of the year suddenly disappeared by mid-summer and investors were fortunate to squeak out gains despite a woeful fourth quarter (and no Santa Claus rally).  Bernanke and friends remained busy throughout the past few months as the Fed attempted to balance the fears of recession with newfound threats of inflation.  So what are those incumbent/opposition politicos saying (or promising) now?

And That’s The Week That Was: 10.26.07

October 28, 2007 | Leave a Comment

Attached/linked please find And That’s The Week That Was… the Brounes & Associates market/economic commentary for the week ended October 26, 2007.  How can a company report a loss of over $1 billion in a quarter and still see its stock price increase by 30% on the same day?  Countrywide’s Angelo Mozilo must be one heck of salesman as a terrible earning release, the continued array of poor housing news, and even negative reports about something called “option arms” was not enough to keep investors away today.  (Then again, the company has tanked 50% over the past six months.)  The beleaguered CEO believes the worst of the problems are behind them (and, for some reason,  investors were buying his optimistic rhetoric).  All in all, equity investors were in good spirits this week and sought out some buying opportunities despite the ongoing housing/mortgage woes and skyrocketing oil that continue to threaten the economy and markets.  Microsoft led the upward charge as the company reported stronger than expected earnings and the rest of the techs (among others) followed suit.  Bernanke and clan meet next week to set policy so expect the rumors to be flying (along with a heavy dose of market volatility) over the next few days. 

Coming up in the week ahead:  Consumer Confidence (Tuesday), GDP (Wednesday), Fed Meeting Announcement (Wednesday), Personal Income/Spending (Thursday), ISM – Manu (Thursday), Unemployment/Nonfarm Payroll (Friday)
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And That’s The Quarter That Was: Sept. ‘07

October 3, 2007 | Leave a Comment

Attached (linked) please find And That’s The ‘Quarter’ That Was…the Brounes & Associates market/economic commentary for the period just ended September 30, 2007.  Investors can be such a fickle bunch.  After pushing into record territory early in the quarter, equities nosedived (or, is it nosedove?) as the subprime (and related) woes led to cries of “no housing stocks” which became “no mortgage-related stocks” which became “no financial stocks” and, ultimately, “no stocks period.”  And just when it looked like all investors were left running for cover (or the safe haven of treasuries), enter the Fed to save the day with a few sneaky moves of their own.  (Can you say bailout?)  Suddenly the sky was no longer falling and investors were more than willing to dip their toes back into the deep end of the equity pool.  The major indexes (sans small-cap) have their sights set on double-digit annual returns with three months left in the year.

And That’s The Week That Was: Sept. 7, 2007

September 8, 2007 | Leave a Comment

Attached/linked please find And That’s The Week That Was…the Brounes & Associates market/economic commentary for the week ended September 7, 2007.  So, did everyone return from the Labor day holiday only to find that their jobs had been eliminated?  A surprising decline in payroll last month prompted a major late week sell-off in equities and caused investors to scramble (again) back to the safe-haven of treasuries.  Alan Greenspan didn’t help the market mindset when he compared the current turmoil to the Black Monday crash of 1987 AND the Long-Term Capital Management debacle.  The Fed’s policy meeting on September 18 can’t get here soon enough as all eyes remain on Bernanke and friends with most analysts now calling for at least a 25 bps funds rate cut.  Small-caps have suffered more than most as the Russell 2000 Index is now down 1.50% for the year.  It could be worse…At least you have a job.  

Coming up in the week ahead:  Trade Balance (Tuesday), Retail Sales (Friday), Industrial Production (Friday)
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Hedge Funds + Subprime Collapse = Profits

September 4, 2007 | Leave a Comment

An interesting story from Fxtraders.eu (subscription required) … Evidently, while some hedge funds focused on mortgage backed securities have suffered losses (that have been duly noted in the press) related to the decline in the sub-prime mortgages space, many hedge funds have also been able to generate profits as a result of its decline.  Well, I must admit that I don’t mind pointing out that we told you so.  Consider what we blogged on July 19th:

So why is HFL jumping on the bandwagon with commentary on the sub-prime issue?  Well, it’s all about low hanging fruit.  As we have seen in the past with excessively oversold markets (e.g., distressed in 2002 and converts 2004 and 2005), the smart money is ready and waiting to buy at the bottom and reap years of rewards while the mainstream sits on the sidelines and licks their wounds inflicted by painful forced liquidations.  Consider this HFL’s call out to all players with experience in the sub prime sector: now is the time to start thinking about ramping up your own sub-prime vulture funds!  Whether you’re a victim of a downsized prop desk or a shuttered hedge fund, now is your chance to strike gold.

 It certainly seems that some hedgies positioned themselves well and are now benefiting from the subprime collapse …

In what has been the best short sale theme since 2002, many hedge funds have greatly benefited from the collapse in sub-prime mortgages via their short exposure to mortgage lenders and sub-prime mortgage backed securities and indices. While some have focused on shorting mortgage lenders and buying credit default swaps (CDS) on specific mortgage backed bonds, others have elected to purchase CDS on indices of these securities (the ABX series), with most focused on those securities issued in 2006 under more relaxed lending standards.

Even with some hedgies profiting from the subprime mess, you probably won’t see the mainstream press write about it much — at least not for a few more weeks.  Fortunately, investors can be smarter as we reported in July …

There will, however, be no shortage of astute investors that understand the signs of an oversold market and smell the opportunity for huge profits. 

Amen.
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And That’s The Week That Was: August 31, 2007

September 1, 2007 | Leave a Comment

Attached/linked please find And That’s The Week That Was…the Brounes & Associates market/economic commentary for the week ended August 31, 2007.  Is anyone out there?  After a few days of “stalking” Dr. Bernanke and overanalyzing his every move, investors headed out for their last vacation of the summer.  A hectic week on the economic front was overshadowed by some serious Fed-speak (minutes, letters, speeches) and everyone seems to be speculating nonstop on the actions at the next policy meeting.  (Even W joined the fray with some lending ideas of his own…any chance of his becoming a Fed governor after his term expires?)  Volatility, in the form of triple-digits moves on the Dow, remained the norm this week and cautious investors continue to seek the safe-haven of the short (and sweet) end of the treasury curve.   A few new deals were announced, though the torrid pace of the first two quarters has definitely slowed.  Enjoy the day off.  (How soon until Columbus Day?) 

Coming up in the week ahead:  Construction Spending (Tuesday), ISM – Manu (Tuesday), Fed Beige Book (Wednesday), ISM – Services (Thursday), Unemployment/Nonfarm Payroll Additions (Friday)
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