The Fed cut rates only .25 basis points yesterday, so now today, the rumours start on the financials again. This time it's Citigroup. (C 41.57). In today's NY Times they had an article on the SIV bailout. Just one sentence tells you where things are going:
Even if it succeeds, SIV investors are going to be hurt — especially the European, Mideast and Asian investors who own the riskiest debt. “Their choice is to get really crushed — or slightly less crushed,” the person added.
Think about this. Do these sovereign wealth investors want to buy our debt, when the AAA mortgage paper is selling at .80 cents on the dollar? So they buy the NASDAQ names.
Today CIBC downgrades Citigroup and said they may have to raise cash or sell assets, or even cut their dividend, as they feel they need $30 billion of capital. Compare this NASDAQ name, Cisco (CSCO 33.06).
Over the next five years CSCO will be investing $16 billion into China, including a partnership with Alibaba group. The stock looks poised to breakout to the upside. They report earnings on November 6th, where they'll probably have a "Microsoft type" reaction to their numbers.
And you wonder why they are buying the NASDAQ names?