本文发表在 rolia.net 枫下论坛The last few weeks of the year are often about mopping up and moving on. But this December seems to be more about mopping, because moving beyond the market's turmoil likely won't be in the cards anytime soon.
Traders should see continued volatility in the coming week as big brokers report fourth-quarter earnings and economic data shed light on two key concerns: consumer spending and inflation. Moreover, those reports will converge with a trial run for the Fed's new liquidity-boosting plan.
"It's going to take time flesh out these problems," says Randy Diamond, a trader at Miller Tabak. "The end of this year is really about preventing the dam from overflowing with bad news."
The brokers reporting earnings this week will likely show stark contrasts. Goldman Sachs (GS - Cramer's Take - Stockpickr - Rating), Morgan Stanley (MS - Cramer's Take - Stockpickr - Rating) and Bear Stearns' (BSC - Cramer's Take - Stockpickr - Rating) report on Tuesday, Wednesday and Thursday, respectively.
Goldman, lauded for its strong third quarter on the back of a decision by its proprietary trading desk to take a short position in mortgage-backed securities and related derivatives, is expected to report fiscal-year income of more than $11 billion, according to a report in The Wall Street Journal. The firm was able to offset the fixed-income-related losses in other parts of its business with its savvy bet.
But things might not look as good for Bear Stearns (BSC - Cramer's Take - Stockpickr - Rating) and Morgan Stanley (MS - Cramer's Take - Stockpickr - Rating), which both have warned of writedowns. Some of the same issues that plagued most brokers' earnings in the third quarter will still likely hang over them this time around. The markets for illiquid securities tied to mortgages have remained stuck, and firms have continued to overvalue their most unsavory balance sheet assets.
"The writedowns at Citigroup, UBS (UBS - Cramer's Take - Stockpickr - Rating) and others indicate that bankers have been overvaluing mortgage-backed securities," recently wrote Peter Morici, professor at the University of Maryland School of Business.
Other credit markets are likewise stuck -- something the Federal Reserve is attempting to resolve with four other central banks. The Fed's plan to inject its first $20 billion of liquidity through a newly formed Term Auction Facility is scheduled to take place Monday morning.
After the central bank's 25-basis-point rate cut last Tuesday, and the TAF's announcement Wednesday, traders hoped that key interest rates tied to mortgage rate resets, like Libor, would come down.
Instead, Libor rates have remained elevated, as was revealed by the Treasury Department's net reduction in liquidity via open market operations this past week. Credit markets are still stuck and banks are hesitant to lend to each other.更多精彩文章及讨论，请光临枫下论坛 rolia.net
Traders should see continued volatility in the coming week as big brokers report fourth-quarter earnings and economic data shed light on two key concerns: consumer spending and inflation. Moreover, those reports will converge with a trial run for the Fed's new liquidity-boosting plan.
"It's going to take time flesh out these problems," says Randy Diamond, a trader at Miller Tabak. "The end of this year is really about preventing the dam from overflowing with bad news."
The brokers reporting earnings this week will likely show stark contrasts. Goldman Sachs (GS - Cramer's Take - Stockpickr - Rating), Morgan Stanley (MS - Cramer's Take - Stockpickr - Rating) and Bear Stearns' (BSC - Cramer's Take - Stockpickr - Rating) report on Tuesday, Wednesday and Thursday, respectively.
Goldman, lauded for its strong third quarter on the back of a decision by its proprietary trading desk to take a short position in mortgage-backed securities and related derivatives, is expected to report fiscal-year income of more than $11 billion, according to a report in The Wall Street Journal. The firm was able to offset the fixed-income-related losses in other parts of its business with its savvy bet.
But things might not look as good for Bear Stearns (BSC - Cramer's Take - Stockpickr - Rating) and Morgan Stanley (MS - Cramer's Take - Stockpickr - Rating), which both have warned of writedowns. Some of the same issues that plagued most brokers' earnings in the third quarter will still likely hang over them this time around. The markets for illiquid securities tied to mortgages have remained stuck, and firms have continued to overvalue their most unsavory balance sheet assets.
"The writedowns at Citigroup, UBS (UBS - Cramer's Take - Stockpickr - Rating) and others indicate that bankers have been overvaluing mortgage-backed securities," recently wrote Peter Morici, professor at the University of Maryland School of Business.
Other credit markets are likewise stuck -- something the Federal Reserve is attempting to resolve with four other central banks. The Fed's plan to inject its first $20 billion of liquidity through a newly formed Term Auction Facility is scheduled to take place Monday morning.
After the central bank's 25-basis-point rate cut last Tuesday, and the TAF's announcement Wednesday, traders hoped that key interest rates tied to mortgage rate resets, like Libor, would come down.
Instead, Libor rates have remained elevated, as was revealed by the Treasury Department's net reduction in liquidity via open market operations this past week. Credit markets are still stuck and banks are hesitant to lend to each other.更多精彩文章及讨论，请光临枫下论坛 rolia.net