Archive - Feb 2009 - Story

I have previously discussed the topic of negative basis trades, specifically as manifested in cash-CDS pair trades.

I have previously discussed the topic of negative basis trades, specifically as manifested in cash-CDS pair trades.

Busy day for bankruptcies. Aleris, which was in preparation to file bankruptcy, finally pulled the plug today.

* Says refinancing and new capital to total $3 billion
* Says company has $800 million in cash and cash equivalents
* Says operations expected to continue as usual
* Says intends to implement its financial restructuring through a chapter 11 filing
* Says agreement-in-principle with an ad hoc committee of certain debt holders on terms to reduce debt by about $8 billion
* Says chapter 11 filing to be initiated on or before April 1, 2009

Fitch Ratings-London-12 February 2009: Fitch Ratings has today downgraded Ukraine's Long-term foreign and local currency Issuer Default Ratings to 'B' from 'B+'. This reflects increased risk of a banking and currency crisis in Ukraine, due to intensified stress on the financial system and greater risks to successful implementation of Ukraine's IMF-supported programme. The Outlooks on both IDRs are Negative. The agency has also downgraded the Country Ceiling to 'B' from 'B+'. The Short-term foreign currency IDR is affirmed at 'B'.

The credit market is on fire, as is proof that greater fool theory is alive and well. Yesterday saw the placement of 3 high yield issues at a much more reasonable original issue discount, and yet accounts were swarming like flies on excrement with lipstick. All three issues have immediately generated about 1-2 points return post break, leading many original allocators to flip their holdings to naive secondary market bidders.

In the corporate realm it is good to see investors heeded our advice about the increasing default risk at Continental.

In the corporate realm it is good to see investors heeded our advice about the increasing default risk at Continental.

Terex, the maker of heavy duty off-road and mining trucks, announced earnings last night of $0.62 which actually bear street consensus of $0.54, however this morning the stock is down about 30% premarket on this ominous disclosure in the 8K filed:

Terex, the maker of heavy duty off-road and mining trucks, announced earnings last night of $0.62 which actually bear street consensus of $0.54, however this morning the stock is down about 30% premarket on this ominous disclosure in the 8K filed:

Probably the best perspective on yesterday's congressional theater, from Mike O'Rourke at BTIG. Recommended reading

• China on the brink (Asia Times)
• Stanford Group being investigated by regulators (Bloomberg)
• Wilbur Ross says private investors waiting for banks to write down assets (Bloomberg)
• Congress manages to make Wall Street vil
  

• Ron Paul introduces legislation to end Federal Reserve (Lew Rockwell)
• US and Russian satellites collide in space. Who on earth is monitoring these things (WSJ)
• Chinalco buying $20 billion of Rio Tinto debt and mines.
  

A common query among most equity market participants is when is it time to buy. Timing a market bottom is usually a very dangerous play and it traditionally makes sense in the context of cost averaging down (assuming one doesn't make a 20% return overnight), and of a significant liquidity backstop. In other words neither we, nor any responsible financial advisor, will ever recommend betting even half the farm on a hunch, based on technicals, fundamentals, tea leaves, kaballah or other sound investing methods.

A common query among most equity market participants is when is it time to buy. Timing a market bottom is usually a very dangerous play and it traditionally makes sense in the context of cost averaging down (assuming one doesn't make a 20% return overnight), and of a significant liquidity backstop. In other words neither we, nor any responsible financial advisor, will ever recommend betting even half the farm on a hunch, based on technicals, fundamentals, tea leaves, kaballah or other sound investing methods.