What Would Big Oil Invest In? Written By: Miranda Marquit 2008-10-02 13:17:39 Does Big Oil see which way the wind is blowing (and where the sun is shining)?
Why is Bear Stearns Trading Above Deal Price? Written By: David Neubert 2008-03-18 11:05:52 I've been getting the inside scoop from some hedgefund traders (who always request to remain anonymous). One told me that the reason Bear Stearns (BSC - $7.90) is trading so far above the deal price with JP Morgan (JPM - $41.00) is that bond holders who NEED the deal to go through are buying millions in equity to save their billions in debt. The will eat the difference between where they buy the equity and $2.00 in order to protect much higher numbers in debt. Also, the equity acts as a nice hedge. If the deal does not go through, Bear Stearns equity will go up a lot and the bonds will go down.
Lesson in hedge fund thinking: Equity up? The bank is being sold cheap at the expense of equity holders to protect bondholders. No deal means the equity can trade up speculation that another buyer with more time to analyze the company will pay up. Bonds Down? If JP Morgan walks away from its government subsidized guarantee, bonds fall.
When Adam Smith wrote about the "invisible hand" in 1776, he referred to the natural forces that allow the market to correct for seemingly disastrous situations with no intervention on the part of government. Unfortunately, the natural forces of the market are no longer relevant. Wall Street's ecosystem has been polluted by a flawed broker-dealer model, leveraged complexity and a lack of proper oversight.
Why Wall Street Should Keep an Eye on the Indian Wedding Season Written By: Eben Esterhuizen 2008-08-13 02:46:02
There is a growing consensus that it's going to be the rest of the world that will drag the U.S. into a recession at the start of 2009. Tuesday's U.S. exports data surprised to the upside, but you have to wonder how sustainable this kind of export growth is. Adam Carr at ICAP Australia pointed out that shipments to Italy, the UK and Germany - whose own outlooks aren't great - were what drove U.S. exports higher during June. The resilience of U.S. exports has been providing some support to the stock market, but we have to wonder if demand for U.S. exports will remain strong.
