Tuesday, December 30, 2008

Well, that little rally will make your 12/31 statements look better

The markets had nice little rally when no one was watching today. There was practically no trading volume again today because but as I've said before light volume leads to wild swings with little cause.

From briefing.com:
"Stocks staged a solid advance without the help of any major news items or encouraging economic data. Each of the major indices rallied in the final minutes of trading, finishing at session highs.”

Well, maybe the advance was not without cause. Around 4:30pm the government announced another plan to formally purchase mortgage-backed securities from Fannie, Freddie and Ginnie Mae. Now, I'm sure no one leaked that news out to the market early (hint, hint, wink, wink) but it might have been a reason to drive the markets up 100 points in the last 40 minutes. The timing of this announcement (right before year-end) seems designed to goose prices into the end of the year. Given tomorrow's light volume (few sellers are around) the markets could keep going for at least a day.

Was this a GMAC rally? I don't know, I suppose it's possible, but GMAC is a busted business (the company lost $6 billion in 9 months, so our $6 billion investment should buy them 9 mths).

Speaking of the pain associated with your year-end statements consider the following losses...

1. Anil Ambani
March net worth: $42 billion
Current net worth: $12 billion

Ambani lost $30 billion in the past nine months, more than anyone in the world.

2. Oleg Deripaska
March net worth: $28 billion
Current net worth: less than $10 billion

Former metals trader survived Russia’s gangster wars but may not withstand collapsing markets and heavy debts of at least $14 billion. Russia’s one-time richest man recently received a $4.5 billion loan from a state-controlled bank in order to keep his 25% stake in Norilsk Nickel, which faced a margin call by Western banks from which he had borrowed.

3. Luis Portillo
March net worth: $1.2 billion
Current net worth: $15 million

Spain’s short-lived real estate gold rush left one of its most visible speculators holding a nearly empty bag. Portillo–who acquired real estate firm Inmocaral three years ago, then led the takeover of the larger Inmobiliaria Colonial in 2006–personally borrowed a reported $1.4 billion from more than a dozen banks during boom times, using his stock as collateral.

Now, it's hard to feel bad for anyone with a net worth still measured in millions or billions, but those are some pretty impressive moves. The 25 largest US billionaire losers lost a combined $167 billion in 2008. This is one of the big reasons that state governments are panicking - that's a lot of potential tax revenue that has gone poof in the night....


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