Back on track

As I was expecting, we got a technical reaction: +485.
The question now, what is next?

Most probably, US Congress will pass some sort of bailout and we are going to have a relief rally or just a break. Afterwards, we will start to get the macro data for Q3 and later on the company reports. They will be terrible, they cannot be otherwise. Dont forget that USD got stronger in this quarter and this will affect also the oversee income. And anyway, the impact of so many bank failures is hard to estimate, therefore better avoid DJIA.

DAX? It will mostly follow DJIAs move. What is bothering me, is the auto leasing business. Are Daimler, VW, BMW, MAN or Porsche itself going to do writeoffs due to customer financing? However, I would see 5500 as a bottom for this year.

Romanian stock? There, it is a matter of capital flows. When capital goes in, it jumps like a bouncing cat. When capital goes out, it is like a dead body. Sadly, the romanian stock has no connection with the real economy or with the stimulus given by the finance ministery. I would say it will bottom up sometime in Q4 or Q1 2009 when the investors will start to compute the dividend yields. 10% yields or even bigger will change the view on things. I will post some numbers.

No posts from thursday till sunday - I am in vacation.

djia -777

Did they actually mean -666? :)) The House decision was evil, just like the mess done by the bankers.

We will most probably (and hopefully) see a technical reaction during the next days (supported also by the discussions about a new rescue plan). I expect DAX to close the gap between 5500 and 5800.

Oktoberfest

What a weekend for Bayern! Oktoberfest goes on, but ...

The famous Bayern local party, CSU, has lost after 46 years its absolute majority in the local elections! CSU went down to 43%!

The München located Hypo Real Estate was saved by a 35 billion credit! The shares dropped 60%!

It is definitely not good for Europe when bad news are coming from the richest German land, the land of Allianz, Munich Re, HVB, MAN, Audi, BMW, Siemens and Infineon!

"Spiegel - Aktie der Hypo Real Estate stürzt ab!

Eine Gruppe deutscher Banken hat Hypo Real Estate vor dem Aus gerettet. Die Bundesregierung sichert den Milliardenkredit mit einer Staatsgarantie - doch die Anleger bleiben skeptisch: Die Aktie des Immobilienfinanzierers brach zum Börsenbeginn um mehr als 60 Prozent ein. "

2 New Kids on The Block

The news from the night between Sunday and Monday: Wachovia and Hypo Real Estate (Germany) need urgent action to avoid collaps.

I start to wonder: how and when will it stop? how many banks are going to survive?

Domino rolls over Europe

This weekend was no bank crash in US! :) It was in Europe this time: U.K. mortgage firm Bradford & Bingley to be nationalized. According to the rumours also belgian Fortis is not in good shape.

I am already convinced that we are seeing now something that has never happend before in the banking industry. So many world-wide known names stopped their business this month. The outcome of this will last for sure. The boss of IMF warns also about a long lasting Europe slowdown.

"Das wird für Europa schwierig": Der Chef des Weltwährungsfonds, Dominique Strauss-Kahn, erwartet langwierige Probleme der Weltwirtschaft - vor allem arme Staaten würden leiden.

Der IWF-Chef weiter: "Aber die Realwirtschaft wird nicht absinken. Die Währungen werden nicht zusammenbrechen. Den Zentralbanken gelingt es, die Finanzkrise zu managen."

A must see

It is not necessarily telling the ultimate truth, but it is for sure a must see movie: Zeitgeist. You can find it on youtube divided in several parts.

It definitely helps you not to get too much in love with the shares you own :)

America on painkillers

America got so many shocks in the last month and took so many painkillers, that they do not feel anymore the pain.

Let's sum up: the whole investment banking branch is dissapeared! Their whole history was erased during september 2008! The world biggest insurer AIG is out! The largest US saving and loans bank, Washington Mutual gave up the last night! The federal mortgage associations are also down!

The consequences are not fully foreseeable and will take years to recover. Do not be misleaded by the apparent status-quo that we see now in the US markets. It is just painkillers effect and a lot of hope.

I dont buy it

While Bush warns about a "long and painful recession" and the German finance minister Steinbrück predicts a slowed growth and raising unemployment, Romania is bullish about the future: this year we grow by more than 9% and the next 5 years we grow at a 6% pace. 100% romanian fairy tale :) By the way, even China is worrying about going from +10% GDP growth directly into recession.

Well, I am not a fan of hard landing theory either, but this bullshit with 5 years of continuos romanian prosperity does not really match with the financial Armaghedon mentioned by Bush.

"Romania va inregistra anul acesta o crestere economica de 9,1%, potrivit Comisiei Nationale de Prognoza (CNP) care a modificat estimarea din primavara care indica o majorare a PIB de 6,5%. Varianta preliminara a prognozei de toamna a CNP modifica toate cifrele legate de evolutia economiei pana in 2013 publicate in primavara. Astfel, cresterea economica se va mentine peste 6% pana in 2013, in conditiile in care previziunile anterioare indicau un salt al PIB de peste 6% numai pentru anul viitor.

Die Finanzkrise wird auch die deutsche Wirtschaft treffen, warnt Finanzminister Peer Steinbrück - und sagt gebremstes Wachstum und steigende Arbeitslosigkeit voraus.

More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession."

Governments in action

The romanian Finance minister announced the suspension of taxes on stock exchange related profits made in 2009. Also, the loss of 2008 may be used for offseting the profit of 2009.
I have 3 comments on that:
- first of all, as a private investor, thanks!
- if the loss of 2008 is considered for offseting the 2009 profit, this decision is retroactive! Thus illegal! Sorry, I like the proposal, but I want to remain objective - it is illegal.
- I estimate the short term impact on the market is rather small. Because of 2 reasons: we need also a foreign capital inflow and the 12% yield offered by some banks is puting huge pressure on the expected return. The stock investment must bring at least 20% to make the risk acceptable comparing to the 12% offered by banks.

<<"Din perspectiva Ministerul Economiei şi Finanţelor am făcut o evaluare privind impactul bugetar şi am decis ca într-o modificare în Codul Fiscal, pe care o vom face probabil săptămâna viitoare, vom suspenda plata impozitelor pe câştigurile de pe piaţa de capital pe întreg anul 2009, atât în ceea ceea ce priveşte investiţiile pe termen lung, cât şi cele pe termen scurt. Atât impozitul de 1% pentru portofoliile mai mari de un an, cât şi cel de 16% pentru investiţiile sub un an se suspendă", a explicat Vosganian. Ministrul Finanţelor a precizat că această măsură nu se va aplica mai devreme pentru că în Codul Fiscal modificările trebuie să fie regularizate pe tot anul."Ceea ce este cel mai important este că vrem să încurajăm investiţiile pe piaţa de capital", a spus Vosganian.Pe de altă parte, o altă măsură pe care promite să o aplice Ministerul Economiei şi Finanţelor investitorilor se referă la aplicarea unei impozitări similare celei a companiilor: pierderile dintr-un an să se raporteze la următorul an fiscal. "Această măsură se va aplica inclusiv pentru anul 2008, anume pierderile din 2008 se vor reporta pe 2009, iar apoi măsura se va aplica din 2009", a spus ministrul. <<

How can you call it free market?

Oil jumped today 25usd. From about 100 usd. That's about 25%. Well, this is just insane. Oil is not a luxury, it is not an investment. It is a basic resource, quite similar with bread and water (in G8). How would you call it if the price of food would jump in one day 25%? Disaster? 1929? Global collapse? most probably everybody will blame the hedge funds that are building long positions on oil because the "short the financials" game is suspended for the moment.

the german Warren Buffets

Buy when everybody sells and sell only if the fundamentals changed. This seems to match what 2 money- and traditionrich austrian/german families are doing now.

While the auto shares plunged 20%-30% in the last 2 months or even more (see MAN for example), 2 auto giants, Volkswagen and Continental, jumped almost 50% because:
- Schaeffler family decided to takeover Continental
- two clans of the Porsche family are having a power fight regarding the cooperation between Porsche and Audi

It looks like they didnt hear that we are heading to recession :)

Historical moments again

The investment banking branch is past! The last 2 surviving mohicans (GS and MS) decide to become regular banks. There is no more independent investment bank in US. This is the acknowledgement that a business model has died.

Warning! Bumpy road ahead! More than 1 year of troubles in the financial markets will hit hard the GDP of G8.

"WASHINGTON (MarketWatch) -- In yet another extraordinary development for Wall Street, the Federal Reserve said late Sunday night that venerable investment banks Goldman Sachs and Morgan Stanley will become bank holding companies, subjecting themselves to stricter federal oversight.
The Wall Street titans will be allowed to transition into holding companies following a mandatory five-day waiting period, and will be able to take advantage of credit from the Federal Reserve Bank of New York in order to complete the transition. "

Comic times

Good, it's clear: the yankies take over risky assets from the financial companies, the short selling of financial shares is suspended for certain periods in us, uk or germany! Nice, this might help.

But I wonder what the romanian finance minister plans! He said friday that he wants to stimulate the investors and make the BVB listed shares more attractive. Which investors? :) There are less than 10k active small investors and most of them are probably quite depressed now. No comissions? Nobody cares about it when the shares plunge 50%! No profit taxes? Who cares when most of the guys have net loss in 2008! New IPOs? They did so "much" in 10 years and they will fix till Tuesday :))

Na ja, comic times!

"Moneyline - Autorităţile române pregătesc o serie de măsuri menite să stimuleze interesul investitorilor la bursă, a declarat ministrul Economiei şi Finanţelor, Varujan Vorganian.Ministrul Economiei şi Finanţelor, Varujan Vosganian, a declarat astăzi că nu va rămâne indiferent faţă de criza financiară internaţională, care s-a reflectat în ultimele zile prin deprecieri puternice pe piaţa de la Bucureşti, şi a anunţat că a avut deja o întâlnire cu premirul şi cu membri din conducerea BVB pe această temă , urmând ca luni şi marţi să fie decise măsurile ce vor fi anunţate în zilele următoare. "Nu vreau să anticipez, însă măsurile noastre vor fi menite să stimuleze interesul investitorilor astfel încât chiar în aceste condiţii potrivnice să-şi focalizeze sumele disponibile către Bursa de Valori. Am încredere în Bursa de Valori şi cred că în zilele următoare vom face încă o frumoasă festivitate la Bursă când vom aloca acţiuni la Transgaz unor persoane care sunt îndreptăţite, care au suferit abuzuri pe timpul comunismului", a spus Vosganian."

Historical times

We live historical times! The US administration jumps in and pump money to take the garbage out of the financial markets. I assume that financial history will have sometime a chapter called "Paulson doctrine". The question is: are 700$ billion enough?

On the long term, I assume they may even resell with profit (!) this garbage.

"Marketwatch - The plan allows the government to buy the bad debt of U.S. financial institutions for the next two years, according to a draft of the proposed legislation. It gives the Treasury secretary the authority to buy $700 billion in mortgage-related assets, in a bid to address the root cause of the turmoil that swept through markets this past week and resulted in the filing for bankruptcy by and government takeovers of some of the biggest U.S. financial companies. "