The Audacity of Hope Swallows Bad News Whole
I am borrowing an Obama campaign phrase that seemed to infect Wall Street today. Here are the financial headlines for the day;
- UBS writes down 19 Billion in losses; Dilutes itself 30% in a 15 Billion stock issue
- Lehman Brothers raises 4 Billion through a stock offering it does not need
- Deutsche Bank writes down 4 Billion in losses
- US auto sales drop in March; Ford -14%, GM -19%, Chrysler -19%, Toyota -10%, Nissan -4%, and Honda -3%.
- ISM index at 48.6, still showing contraction
- Construction spending down 0.3% in March, 5th straight month of lower spending
Oh yeah, the markets were all up big time on this news with all indices up over 3% today alone.
I knew things were going to be weird after I caught a little bit of CNBC when I woke up this morning. At around 5:15am I put on CNBC and they had a banking sector analyst on discussing the LEH and UBS news. This guy was a riot. The host asked him why the shares of LEH were up big premarket, and why UBS after the huge writedown was soaring premarket. The guy was fighting a smile and actually gasped out a laugh when he answered that this could be the last of the writedowns. He was on the verge of cracking up. I mean, when you cannot even pretend to be serious things are bad!
Today was based on the "Hope" that the first quarter writedowns are the last time, scouts honor. Some might recall a similar rally in the 3rd quarter on "Hope" as well as the "kitchen sink of writedowns" 4th quarter rally. That is a bunch of rallies based on a "Hope" that so far has been elusive.
Hope seems to be the only commodity that Wall Street likes! Is there a futures market for Hope?
It was April Fools day, and I do not know if that had anything to do with things going nuts. Just a absurd day in total.
I found a great quote that perhaps can be the fountain of hope for the banking side of things, check this one out from a CNBC story:
Simon Maughan, analyst at MF Global, told Reuters;
"For a long time we've been worried about moral hazard ... we're now past that point, what we're trying to do now is save the banking system, and the price that banks will pay is tougher regulation going forward."
Wow! I guess they were worried a thing like moral hazard may impede the move to bailout the fools in trouble. They should not have worried, no moral hazard issues with our FED and Treasury.
Short post tonight, but I am confused by today's action on many levels. Maybe tomorrow I can put it all together.
Have a good night.