Thursday, March 13, 2008

Fizzle, Part 2

Awww, poor little rally couldn't quite make it yesterday as Dow went from up 120 to down 50 as credit, oil, and a dollar quickly turning rupee brought us back to earth. News keeps rolling in that can only be seen as the beginning, not the end, of this destructive credit mess.

Carlyle Capital is officially bankrupt. They cannot meet their margin calls.

Another hedge fund, Drake Global Opportunities, is shutting down after giving their clients the opportunity to lose 20% last year. Existing clients are having a hard time getting their money out as their investments are locked into leveraged, illiquid CDOs which have little market right now.

Lawrence Yun, former used car salesman and now lead economist for the National Association of Realtors, said yesterday that commercial real estate is in trouble. The market may contract by "as much as 40%" this year. When Mr. Sunshine gives a report like this, you know things are really bad. This is the same guy who's been coming out every 2 weeks and telling us not only is this the best time ever to buy a home, but that the 2nd half of the year looks great for the homebuilders. Sure it does. What else would you expect the NAR to say?

In perhaps the scariest realization of all, Eric Janszen of thinks that the credit mess will spread fully into the $6 trillion muni-bond market. Considering this number is larger than our national deficit, I don't think Bernanke can simply open up another credit window or print more cash to cover the mess.

Another day, another half-dollar. The euro hit $1.55 yesterday, I'm sure it will go higher today. Again, how long will foreign investment prop up our treasuries as they watch their portfolios diminish every day?

Don't be fooled by the false optimism and short-covering on Tuesday. A return to 11,000 is coming.

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