Weekly Summary

Every Friday we're going to have a comprehensive weekly summary provided by droblo, with the following points:

• Indices.
• Some views.
• Details of the week
• Summary of the week
• Personal comment.

Indexes .- (Thursday to Thursday) Last Friday, both China and Brazil set the minimum annual and China repeated on Monday, Tuesday and Thursday and Brazil on Tuesday and Wednesday. We can see in the last column how close it is the Ibex its minimum (and it recovered to close, came to be 48 points):

Some views.

• Essential article on the relationship of the global financial system and the USA unit of China: "The United States shows its financial subservience to China"
• The EU said that the recession in Spain is imminent.
• Bill Gross: we are facing a financial tsunami before that the U.S. government should give the powers to be able to buy Treasury debt and other assets as the only solution to the problem. We must remember that it is the president of the largest manager of fixed income funds in the world and declared that the day before the intervention of the agencies mortgage.
• JL Carpathians: Do not forget that if you speculate on the stock market, this is an asymmetric market. Let me explain. It is assumed that there are equal opportunities over the short but that was not the case. It should be borne in mind that any increase will be applauded and encouraged by the entire industry, governments and others, and that any drop will fight every moment with all kinds of obstacles, statements, and other measures. That means if you open shorts must go very fast and speed up their operating parameters-making profits, or may be trapped in the statement of the day, or even things like the actions taken by the SEC greatly complicating sales. The verbiage from many governments vana liberalism was, and the final is a market is very involved, so it is a factor taken into account.

On the news of the week, a couple of very revealing articles:

• Rally or crash: nuclear bomb into the heart of the crisis.
• Crtónica of bankruptcy and nationalization announced.

On Tuesday the collapse of Lehman Brothers that actually changed the stock symbol of the week:

• Lehman or the problem of seeing the beards of the neighboring peel.

Some data.

• The price of credit default swaps or insurance against the bankruptcy of the portfolio on the banks of the U.S., according to data from Bespoke this Monday, after what may have been worsened by Lehman, has risen nearly 135% in the year and almost 25% in August, demonstrating the unreliability of the financial sector's rebound.
• China this year will grow less than 10%, the first time this has happened since 2002.
• Late payment of savings.
• The rate of delinquencies in the U.S. rises to 6.41%, the highest since 1979.
• ECB guarantees liquidity for the Spanish authorities.
• Higher risk premium for the Spanish debt in ten years.
• List of losses and capital increases in the banking world (data from September 5, not including those announced by Lehman on Wednesday):

The macro data of the week. The macro data of the week was the ominous figure of U.S. jobs and here we can see why:

And if what we see in the longer term:

Summary of the week:

After the disastrous meeting last Thursday, Friday Asia with China dropped for the third consecutive day marking annual minimum and Europe following the same path despite a minimum of 11 months of € against $. To make matters worse, the influential Nokia lowered forecasts and suffered heavy losses and the U.S. employment data was carrying a minimum lousy day dropping more than 2% Europe and the USA futures slightly more than 1%. There was a rebound in the first few minutes of meeting USA but before the closure was returned to Europe to see minimal (in the environment of -3%) becoming clear the fear of investors in another day of tough descents. USA, which fell just over 1% at closing time, and had marked the European minimum of around -1.5% - went to maximum levels of the day within minutes thanks to rumors of new buyers from Lehman Brothers and a crude close to $ 105 a barrel, it caused a short closure of USA and finally closed in the environment of +0.50%.

However, the MSCI World Index (Morgan Stanley index of world stock markets) closed its worst week since 2002, something logical because during the big falls in stock markets this year "Western", the emerging behaved better but last week the crash was global. And the weekend brought a big surprise: the nationalization of FNM and FRE and confirmation, despite this, the highest rating from Standard and Poor's sovereign debt USA.

The profound and rapid falls in the previous week that kept the indices technically oversold provoked this news was valued at some exaggeration: the markets opened with strong rises on Monday, underscoring the rise of more than 3% in Japan (and on the contrary the fourth consecutive annual minimum Chinese) around similar levels and at the opening of Europe and almost double the financial sector. These gains were extended during the morning, the Ibex almost came to almost +5% - would be strengthened as the dollar touched annual peak-picking with his foot changed to analysts who expected a weakening of fact as had happened in the Asian-sitting ignoring the deteriorating finances and making USA prevail at the least cost of risk premiums. However, USA marked its highest in the opening (+2.5% on SP500) and was losing bellows, highlighting the weakness of the technology sector. Europe endured quite well and, while far from peak was closed, the increases were very significant (from the Dax +2.22% +3.92% of the FTSE). USA marked its minimum after closing in Europe but a rally in the last minute ended up going up the Dow and the SP above 2% in the day. Finally highlight of the "bullish Monday" the ruin of the shareholders of FNM and FRE downs that closed with close to 90% on the day.

On Tuesday, the $ still climbing positions and the raw morning in the vicinity of the 105 $ / barrel and yet Japan fell almost 2% and China again during the session marking the fifth consecutive day-by-minimum of 21 months. This led Europe to circumvent the proper closure USA and apathetic dawn and took quite minutes to be decided one way was that, with the rise of future USA, and the slight positive, with the USA after disembarking from the spot, the slight negative. In any case USA seemed to demonstrate strength and rebounded despite another real estate data (the "pending home index") and a disastrous $ weakest when suddenly the realization by the market of the need to increase capital by Lehman Brothers after the rejection of South Korean bank to be rumoreaba could come with a strong package shareholding in the state, with strength weighed on the market and will spoil the closures in Europe although only the Ibex took a drop (-1.77%) important. As for USA imported a little crude to $ 102 that day when the shares of LEH came down to 45%, and half meeting was quoted below the Friday close of canceling all the bullish effect of the nationalization of FNM and FRE. Another new section to the bottom of the commodities led to annual minimum to Brazil and prevented USA functioned in the typical "safe securities" with what the SP500 fell nearly 3.5% (the worst day since February 2007).

On Wednesday morning with two pieces of news, good and bad: bad was that OPEC reduced production in 520 thousand barrels per day although we must qualify that this is the extra amount in full ascent decided to put into circulation and Saudi Arabia not be lifted until November, that's why I did not influence too much on the price of crude. And the good news is that Lehman had finally made an official statement reassuring the markets by announcing that before the opening performance and presented an American plan for viability. This served to a rebound of future U.S. and a rising minimum-but-rising of the Chinese stock market, did not prevent the negative moderate in Japan but favored a flat opening in Europe seemed unthinkable that the night before. And in fact, seemed so unlikely to be entered into losses in a few minutes to be moderate on the Ibex-except where the bad day of two "heavyweights" such as Iberdrola and SAN is much-noticed because all morning had hopes of a quick solution to the crisis of Lehman. And Lehman announced it expected: a huge loss and a plan to sell assets and cut costs that includes layoffs and reduced dividend. I do not know if the market was expecting a miracle (before the announcement Lehman rose nearly 30% in Europe) but the fact is that it took quite bad ... but only for a few minutes, gradually returned to Europe and USA moderate losses opened in positive. Lehman opened up the 17% and before the first 10 minutes of the meeting was going negative, returning to positive after the minimum passing mark again +10% at 40 minutes of sitting and cutting a quarter that number 5 minutes later ... All of this volatility resulted in increases in the indices USA but not in excess of 1% and which are volatilized when Lehman opted by the clearly negative. Europe closed with falls of less than 1% on average (the "ugly duckling" was the Ibex with a -1.49%) and the U.S., and Lehman, after closing positive and returned to Europe with the help of a bullish rally of $ ( it certainly led to a minimum annual gold) managed to set new maximum levels above 1% but could not overcome the closing level last Friday and returned sales, again very aggressive in Lehman. The indexes closed with modest positive, but the descent of some financial securities (-7% Lehman, Washington Mutual -30%) do not bode well.

In fact, Thursday awoke very red in Asia (with the new minimum of 21 months in China which already reaches 60% of profitability in the year and the MSCI index of emerging stock markets in minimum of 23 months) while the losses were in Europe mild in opening due to new low against the annual € $ (in theory a cheaper euro helps European exporters are the ones that have more weight in the indexes), even at midday positive but the losses were already higher than 1% under the pretext of some negative statements from the Bank of England on the evolution of the economy. The bad data and weekly unemployment of the U.S. trade deficit were overshadowed by rumors of bankruptcy of Lehman rose for falls in the indices that, perhaps because of the proximity of the annual minimum and has not been decided by decreases strongest since just -1.5% exceeded even when the spot opened down 1.5% USA rates and 40% Lehman. In addition, a crude whose future arrived to play helped bounce from 100.20 minimum and Europe was able to close down half of "only" 0.50%. Following the closure, went to the USA positive amid rumors about a possible buyer of Lehman, fell again, it was doubtful all afternoon and there was a last minute rally thanks to rumors that placed the BOA buying Lehman (who nonetheless fell -- 42%), the banking sector ended up going up and the Dow Jones and the SP did over 1%. The veracity of this and any conditions of the transaction will determine the future movements in the very short term.

Personal comment.

When I wondered on Monday regarding the effect would last bullish for the nationalization of FRE and FNM (http://www.serenitymarkets.com/ficha_comentario.asp?sec=9&id=21403) did not think it would last just 1 single meeting in USA. And that he had a great reason for optimism in the financial system: half the world-including not only private banks, including central bank-backed debt held by these two mortgage agencies as a result of their semi were considered virtually invulnerable. The decision by the U.S. government to secure its own rating (Triple A, the maximum) such debts gave them the reason and automatically became a very doubtful debt in an insurance payment. Why so little lasting effect of this benign news? Besides all the problems that we know already for months, this news means, in my opinion, which has been burned the last cartridge.

U.S. rates fell, not rose despite a dramatic upturn in inflation, has opened windows and extended to provide emergency liquidity to the financial sector, has coordinated auctions of liquidity with other central banks ... even put obstacles to the SEC to sell bank shares ... Financed the purchase of Bear Stearns by JP Morgan and have absorbed the debts of several regional banks that have gone bankrupt. Now just spend money that they do not take this nationalization, and remember that the U.S. deficit is impressive. It should be borne in mind that credo default swaps notes treasure to 10 years in the U.S. (that is, what it costs to secure a bond portfolio to 10 years issued by the U.S. Treasury) this week touched its record high of more expensive premium This implies a doubt about the safety of the issuer. So, as they began to assess the possibility of bankruptcy for a "big" as Lehman Brothers and the silence of the authorities think the market realized that they could no longer expect further interventions to save more banks. True or not that scenario, of course afraid that the world's largest economy is backed by assets doubtful that a free economy would have a value close to negative. Like I say this, as I happened to FRE and FNM, it is also true that any news favorable to the financial sector could provoke another important rebound ...

To illustrate the economic problems Americans here we see an independent projection (Bud Conrad, a famous American investor and analyst) of the U.S. government deficit if things continue as they are:

And that can be corroborated in the present figure of current account deficit, the largest in history and the world:

In conclusion, very difficult market short with a bearish trend does not seem that overwhelming this time may change the maturity of futures and options are next week: I remain confident that the more extreme pessimism that reflect surveys of market sentiment may result in a movement that might otherwise be of great violence or that the drop in gold and commodity transfer some liquidity to the bag. But it also frightens me how close we are to annual minimum, a possible return to the low $ and, above all, the credit crisis: this week has been Lehman but do not forget to Washington Mutual, Ambac, Mbia, Wachovia ... until Merry lynched is dangerous ground and then only in the USA: the losses are still emerging and with a banking business to the bottom will be very difficult to fill in a short time.

(Unrated)

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Written by Droblo the Sept. 12, 2008 with 218 points.