News That Catches the Eye
Bill Gross caught lightning in a bottle with his huge FNM, FRE bet. Whether Mr. Paulson was reacting to Gross' note of last Thursday or not, the bailout enriched Pimco Total Return holders handsomely. According to the Financial Times, on Monday the fund jumped 1.3% or $1.7 billion, it's biggest one-day rise ever against the Lehman Aggregate Bond Index. I guess that's why he's the king. Now the question is: Is he gonna sell the rally?
All eyes have been on Lehman Bros. as of late. But I am sure many noticed where Kerry Killinger was relieved of duty as skipper of Washington Mutual. What may have been under-noticed in the same press release is that Wamu signed a memo of understanding with the Office of Thrift Supervision, requiring them to submit plans and projections regarding the company's future business model and earnings. This sounds like they are on Double Secret Probation, but instead of it being Dean Wermer they are in trouble with it's the Feds, and they won't just be kicked out of their house (like many of their mortgage customers), they could be expelled altogether. With $307 billion of assets per the FDIC, the hangover from this toga party could be ugly. On the bright side, the bank couldn't be on the FDIC's list of problem banks yet, because those banks only have assets of $78 billion.....phew!
We speculated on Urban Digs long ago that there was trouble afoot in commercial real estate, and not just Florida and Nevada condotels. See stories here and here. It is interesting indeed that Lehman's latest mark-to-market losses of $7 billion include $1.7 billion of commercial real estate mark-downs.
The bailout seems to have helped Fannie a bit. The firm raised $7B in a monster debt sale that priced with spreads 70 basis points above comparable treasuries. According to Bloomberg, this is reportedly the lowest premium for it's two year paper since June. How this impacts mortgage rates, and more importantly availability, remains to be seen.
Oil can't seem to catch a bid no how. Neither OPEC nor IKE have been able to cause an uptick. Oil is now well below it's 200-day moving average. But as Urban Digs readers know, when a chart slices through a strongly up-trending 200-day moving average, there is a natural tension for a hard bounce back.....even if the pattern is turning into a major top. Gas up those SUVs. You've been warned.
