More subprime lending trouble

Timing is everything - yesterday at 6 o'clock in the US markets things looked really bad, then boom!! However, the Nikkei was down 5+ % overnight and the US futures are not looking great either today. My guess is that there will be a re-test of yesterdays US market low before we see any sustained bounce. Financials and tech may be areas of interest, with industrial metals stocks looking to re-coup some of the 25% drop they have seen in the past month.
 
The Fed discount rate cut this morning will benefit financial stocks immensely!!

Timing is everything.


 
Markjbloggs said:
The Fed discount rate cut this morning will benefit financial stocks immensely!!
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Is the fact that the Fed had to unexpectantly cut rates not a really bad sign though? It's a very rash move that could be interpreted as panic coming from the Fed itself. While we could see a short term bounce, I'm not too sure this will cause the markets to settle.
 

I agree that I don't think this cut will lead to a sustained recovery on its own. They only cut the discount rate which is not as important as the Fed rate but the important part was that they said they would do 30 day financing and accept a wide range of collateral including mortgage loans and commercial paper. This should mean that fears about someone like Countrywide entering bankruptcy due to a liquidity crisis become less likely. It should give some life to the credit markets and imprive liquidity. Still think there are going to be few more bad days as it doesn't solve the underlying credit concerns!!!
 

I think a cut in the Fed Funds rate would have been interpreted as panic, but this discount rate cut is being percieved as more appropriate given the market conditions. Before the cut, the US markets were looking over a cliff at yesterdays' lows but the futures are now way up.
 

commodities have been attracting the hot money whereas technology stocks have not, any investors in technology today are probably pretty solid and are not going to get panicked (there are probably alot of commodity investors who are pretty solid too), it is the hot money flowing in and out of commodities that is causing the big ups and downs.
 
you guys are crazy believe me this aint over by a long shot,sell,bank your money and wait,watch september!!!!!!!!!!
 
As a fairly loose rule of thumb I think when the dogs in the street are telling you to sell then it's time to buy.

Current prices reflect a huge amount of future negative news already priced in. I've no doubts that a lot more skeletons are going to appear but at some point you just got to back your own judgement.
 
Markjbloggs said:
Be interested to hear your rationale for this, yob.
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I think he is right. Anyone who thinks that the recent bouce is anything but temporary should be ready for alot of bad days. Cutting the discount rate gave some oxygen to the market but it didn't do anything to cure the underlying problem. We are no better off than we were early last week.
 
thankyou sunny,and the underlying problem......nobody knows how deep it is,look at the banks they wont even trade with each other there drip feeding us the information on the amount of debt their carrying sorry Howitzer but i'll wait till the fog clears,tell me one thing Howitzer do you think theres another 20% drop in the markets with things being so volitile do you think you couldn't see bank of ireland at say 9 or 10 euro because i can,i'm not saying it will but it could,so my opinion is get out and when the market turns buy back in,it will be interesting to Q3 results!!!!!!!!
 
I was just asking what was your rationale for your pessimism - do you have specific info to quantify the underlying problem or are you suggesting that the current uncertainty is likely to continue?

 
my appoligies for mentioning numbers but i was just trying to make a point,sorry,
as i mentioned in my last post,i dont think anybody has specific info',everybody keeping there cards very close,and you have to question central banks proping up commercial banks because theyv'e over stretched there debt ratios and they cant selll them on,then you have CFDs,which only required 10% to cover the purchase,all of a sudden they now want 20%,and if it wasn't covered by noon last friday they where going to sell their holdings and they did!!!!is this going to continue you bet everyone covering their own "This post will be deleted if not edited to remove bad language"and i do believe a lot more to come.
just on a last note i've asked around from different people in the industryfor there feel on whats going on,the only ones who said to buy,guess come on guess.......................yes you got it
the stock broker mmmmmmmmmmm
 
You make some good points, if it was still June/July. There's rarely any benefit in being smart after the fact. I feel certain companies share prices have undershot their fair value. You pays your money, you takes your chance.
 
mmmmmmm....maybe, stockbrokers, sharewatch /sunday times, recommend buying shares in anglo irish bank, whose leading shareholders are banks incidentally...one being Bear Stearns, maybe I'm missing something, I'm not an expert, but I can think of better places to invest in...
 
Howitzer said:
You make some good points, if it was still June/July. There's rarely any benefit in being smart after the fact. I feel certain companies share prices have undershot their fair value. You pays your money, you takes your chance.
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Exactly. Historically the odds favour buying when the market drops 10% or more. Okay, occassionally it will drop even more and it would have been better not to buy but this is far less likely.

The more I hear people tell me I'm mad to buy, the more I wish I'd bought even more. These were the same people who felt just a few weeks ago that stocks were vastly undervalued. Well now they're even more undervalued - why aren't they buying?

Don't let the price action dictate your emotion.
 

I think the problem we have at the moment is that we are not dealing with a rational market so stock valuations and fundamentals are taking second place to fear and market sentiment. I agree that there are some real bargains out there at the moment if you are looking at fundamentals but my own personal opinion is that there is still real downside risk. Rumours are flying around the market and until there is a clearer picture of what is happening, I would be wary of jumping back in. (I have tipped my toe in though to be honest!) Even yesterday when it was revealed that the BOE had lent £300m emergency funding to a bank, everyone started sepeculating that is was Northern Rock or HBOS in trouble and both had to deny it. Turns out it was Barclays covering a scheduled missed payment it was due to recieve.
 
If the market isn't rational now what was it a few months back when all you could hear were the choruses of "The only way is up, badubah." Sounds to me like a lot of people have got caught with their hands in the cookie jar and have got burnt. The market is MORE rational now that it has priced in an element of risk to share prices for the first time in years.
 
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