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Stocks fall off a cliff as Moody's downgrades 15 international banks

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Posted by Rick Moran - American Thinker

on Friday, 22 June 2012 12:12

Moody's Investor Service cut the credit rating of the 6 largest US banks with international arms.

In anticipation of this, and on general economic jitters, stocks tanked 251 points June 21st in the second worst day of trading this year.

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The downgrade of US banks reflects growing concern about the global economy and the exposore of US companies to the european debt crisis.

Wall Street Journal:

The Moody's Corp. unit reduced Morgan Stanley's rating to Baa1, which is three notches above the junk, or noninvestment grade, status that many bond buyers avoid. The move stands to add to the company's borrowing costs and force it to present billions of dollars in cash or high-grade bonds as collateral.

More important, the downgrade could trim Morgan Stanley's earnings power by cutting market share in high-margin businesses such as derivatives as traders seek out higher-rated trading partners. Questions about major banks' earnings power and capacity to withstand market shocks have weighed on financial stocks since early 2011.

Morgan Stanley's shares fell 24 cents, or 1.7%, to $13.96 in 4 p.m. New York Stock Exchange composite trading on Thursday during a broad market selloff. In after-hours trading, the stock was up 3.6%.

In a statement, the company said, "While Moody's revised ratings are better than its initial guidance of up to three notches, we believe the ratings still do not fully reflect the key strategic actions we have taken in recent years."

Over time, a downgrade could mean "the incremental new business could be tougher to win," said Glenn Schorr, an analyst at Nomura Securities. The company's shares have fallen 39% over the past year amid questions about its profit outlook.

But the two-notch rating cut saves Morgan Stanley from a blow to its reputation. The company that has labored since the financial crisis to dispel investor fears that it would be the first major financial firm to be rocked in any large market storm.

With many european leaders poised to initiate "growth" strategies by massively increasing government spending, investors are expressing their concern by driving up the cost of borrowing for nations like Spain and Italy. No one wants to be left holding the bag like Greek investors were, who were given 50 cents on the dollar for their government bonds.

The crisis has also affected American banks who have some exposure to bonds in Spain and Italy. A collapse of the Spanish banking sector would probably freeze credit markets worldwide, causing a meltdown similar to the one that occurred in the US in 2008. We won't know for a few days just how bad is the Spanish situation with its banks as an independent auditor releases results of stress tests performed over the last few months.

Investors want to be optimistic but there is so little good news for the economy that it is becoming harder and harder to see the silver lining. Manufacturing declined last month, as did sales of existing homes. This has affected employment outlook and the possibility of the US sliding back into recession cannot be dismissed.

It's going to be a long ,hot summer.

....read more American Thinker Articles HERE



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MORNING AFTER ROUT HITS MARKETS

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Posted by David Fry via Seeking Alpha

on Friday, 22 June 2012 08:29

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readers know I’ve been on the “down low” waiting for the Greek elections and FOMC statement. This, and staying liquid, proved the right move for now. After all, as someone famously said, “tomorrow’s another day.”

Markets started the trading day inundated by a litany of crummy economic data. Jobless Claims (387K vs 383K expected & prior revised higher as per normal to 389K) made for a mild headline beat but overall the trend is worsening. The “flash” (why do we need one?) PMI estimate came in cold (52.9 vs 53.8 expected & prior 53.9); Bloomberg Consumer Comfort Index fell again (-37.9 vs -36.8 previous); Existing Home Sales were poor dropping 1.4% (4.55M vs 4.62M prior) or housing market not “fixed”; if that weren’t enough, the important Philly Fed Survey imploded (-16.6 vs .5 expected & prior -5.8).

Put these together and Operation Twist seems pathetically inadequate requiring perhaps another Fed meeting adjustment which would be seen by many as more politically motivated. Let’s face it; Bernanke & Co have gotten things wrong. The administration and congress haven’t been helpful either.

Goldman Sachs (GS), and no doubt prepositioned, issued a short S&P 500 call. Late in the trading day rumors Moody’s would issue bank downgrades this evening and into Friday morning. Names mentioned for downgrade include Citigroup (C), Bank of America (BAC), JP Morgan (JPM), Goldman Sachs (GS) and Morgan Stanley (MS). For some banks this could mean margin calls especially for MS.

In the eurozone, the Bundesbank rejected Italy’s Monti call for ECB bond purchases—Europe not “fixed”.

On the earnings front, Micron (MU), Red Hat (RHT) and CarMax (KMX) all reported results that missed analysts’ expectations and those stocks fell sharply as did just about everything else

Commodity markets (DBC), (USO) & (JJC) for example continued their decline. The dollar (UUP) was higher on eurozone confusion and gold (GLD) fell sharply as investors scramble for cash to meet inevitable margin calls.

Volume was higher by recent averages on the large sell-off which is quite common for days like this. Breadth per the WSJ was quite negative and short-term overbought conditions (noted here yesterday) have been wiped-out.

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The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

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The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

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The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Moody's made the announcement of lowering ratings on 15 banks. The funny news is Morgan Stanley was only cut 2 notches causing the stock to rally in late trading because it was better than expected. Really, you can't make this stuff up.

Here is the full statement.

There is no economic news Friday unless some ring in from the eurozone.

Disclaimer: The ETF Digest maintains active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current "trading" positions in active portfolios if any are embedded within charts: Lazy & Hedged Lazy Portfolios maintain the follow positions: VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, & EWU.

The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Stocks & Equities

2010′S BEST PERFORMING HEDGE FUND MANAGER’S NEXT BIG INVESTMENT IDEA

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Posted by Bess Levin via DealBreaker

on Thursday, 21 June 2012 08:19

Don Browstein is a former philosophy professor, the founder of Structured Portfolio Management (named the best performing hedge fund in 2010, after returning 49.5 percent and 134.6 percent in 2009), a guy who supposedly once told a trader “The only way you can leave this firm is in a body bag” while brandishing a baseball bat, and the person his new tenants will have to answer to if next month’s rent is one day late.

Don Brownstein’s Structured Portfolio Management LLC plans to start a fund to buy and rent out homes. The firm, based in Stamford, Connecticut, may introduce the fund to investors within weeks, Brownstein said in a letter to clients dated June 12, a copy of which was obtained by Bloomberg News. He didn’t say how much capital has been raised or targeted. “There will be a significant transformation in the way in which single family homes are owned and occupied in the United States,” Brownstein said in the letter. The strategy is to acquire homes through distressed sales and rent them out profitably, perhaps to the former owner, then “sometime in the not distant future, sell the houses and reap a profit from a recovery in prices.”

....read more HERE

donbrownstein

 



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Stocks & Equities

Trader Sentiment Wrong for a Top

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Posted by Todd Market Forecast

on Wednesday, 20 June 2012 06:32

DOW  + 96 on 2000 net advances 

NASDAQ COMP+ 34 on 1300 net advances

 SHORT TERM TREND    Bullish

 INTERMEDIATE TERM TREND      Bullish

  In this country, there is anticipation that on Wednesday the Fed will announce further easing either in the form of QE3 or an extension of operation twist. The latter is more likely and I believe that there could be some selling on the news.   A couple of elements were responsible for the uptrend on Tuesday. Firsts, there were some favorable developments out of Europe, chief among them a better than expected Spanish bond auction.

   If the Fed is inclined to move, they would most likely have to do so tomorrow. The election is looming and they don't like to appear as if they are playing politics.

   If we do get a selloff, it would most likely be an opportunity to buy. Sentiment is wrong for a top. We are seeing a lot of pessimism on the part of traders. For instance, the CBOE put call ratio remains quite high.

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TORONTO EXCHANGE:  Toronto was up a whopping 187. Good show.

GOLD: Gold finally had a down session, down $8 in spite of a weak dollar.

BONDS: Bonds were down again on Tuesday.

THE REST: The dollar was sharply lower, but this didn't help gold and silver which were down. However, copper and crude oil were higher.

BOTTOM LINE:  

   Our intermediate term systems are on a buy signal.

   



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It's Turnaround Tuesday and Two Days Of FOMC Meetings - Expect A Market Retracement!

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Posted by Mark Leibovit - VR Trader

on Tuesday, 19 June 2012 09:32

Less than one month ago, on May 25th Dan Dorfman and I had our final interview. I've known Dan since the early 1980s and those who saw him on Louis Rukeyser's Wall Street Week or other national news channels including CNBC know he was a living legend, a trendsetter, an icon. I was shocked to learn of his passing this weekend. I will truly, truly miss him. He was a great man, a great journalist and a good friend. Please read Neal Cavuto's tribute below which was broadcast on Fox News.

---------------------------------------------

STOCKS - ACTION ALERT - BULL - I BELIEVE CYCLICAL AND SEASONAL PATTERNS TO THE UPSIDE INTO THE FALL ARE NOW THE PREVAILING AND DRIVING FORCE TO THE EQUITY MARKETS HELPED BY THE EXCHANGE STABILIZATION FUND AND THE WORKING GROUP ON FINANCIAL MARKETS (THE PLUNGE PROTECTION TEAM) - WITH BERNANKE PROVIDING WALL STREET AND OBAMA A 'PUT' PROTECTING THEM TO THE DOWNSIDE.

Well, it's 'Turnaround Tuesday' but also the first day the FOMC meets. With markets rallying yesterday, the greater probability is that we begin to pull back. Also, my current thinking is that with so much news behind the markets (the vote in Greece, the FOMC meeting, the G-20 meeting, etc.) this week, we may see the markets back off a bit anyway unless some newer 'market moving' positives unfold such as a dramatic announcement that QE3 is now being implemented. That I do not expect, even though secretly it is very likely being implemented which, unfortunately, is the modus operandi of the Fed for decades. There is too much at stake. For one - Bernanke's job. We know if Obama is not re-elected Bernanke is likely heading back to Princeton University.

Adding to the short-term bearish case today is the fact volume slowed to the upside on Monday and the fact many indexes were up five or six days in a row. 

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