Wednesday, January 14, 2009

Other than the -25 degree weather it feels like October

Financial unease seems to be spreading again coincidentally just before Congress decides to vote on releasing more TARP money.

Citigroup is moving forward with plans to divest its businesses to raise cash, but they might be running out of time as the stock dipped below $5. Bailout fatigue is very real in Washington and on Main St. The amount of money we've already thrown at Citigroup is staggering and with no real plan for fixing their business, I think many will view saving Citigroup as good money after bad.

Bank of America has already come back to the well looking for more help with their acquisition of Merrill Lynch. I agree with many other commentators that say enough is enough from Bank of America. They bought MBNA, Countrywide and Merrill. Those were bad decisions and I don't think the government should be in the business of bailing out companies that make poor business decisions. However, much like October of 2008, we are hearing the same refrain - if this deal falls apart the entire financial system is in peril. Well, I'm willing to risk it, because the alternative is clearly not working.

There is a bunch of company specific bad news out tonight - Apple's Steve Jobs is taking a leave of absence for health reasons (get well soon!), Motorola is cutting another 4,000 jobs, Google (yes, Google) cut 100 jobs and Nortel filed for bankruptcy.

The markets didn't hold the 850 technical level that I mentioned yesterday. So from a technical standpoint many will point to 750 as the next important threshold. I'd expect a bit of a bump around the inauguration, but if we get back to 750 on the S&P (roughly 7,600 on the Dow) the big question will be - do we bounce or fall through the those levels? Unfortunately, I think the fundamentals would say we're going to eventually break through those levels. We'll see.


No comments: