When private equity was trolling the market looking for stocks, it emboldened buyers. Now the bears have to contend with the sovereign wealth funds cash checkbook. And the bears don't have enough powder for that.
Yesterday, when Citigroup got their $7.5 billion of cash, the naysayers came out in full force. They trotted out Meredith Whitney of CIBC again, who said there was a "100% chance" the Citigroup would cut it's dividend. Oh. And that's analysis? That isn't research. That is an opinion with nothing value-added to it.
We also had "analysts" worried about the 11% rate that Citi paid. C closed at 30.32, and their dividend is 2.16, or 7.12%. According to The Daily Telegraph, 60% of the coupon is tax deductible. Why didn't anyone consider C's real cost of the funding? Because the bears weren't ready for the market to turn, and they weren't prepared for this news.
In today's WSJ, we see that BofA had some overtures with Citigroup about getting hitched. Now the bears have "headline" risk. Late yesterday, when Wells Fargo announced a $1.4 billion write-off in home equity loans, some clown sold the stock down to 28.55. This morning, it's almost a point higher. What happened to the bears "headline" risk?
This morning there was some intervention in the currency markets, as the dollar blasted quickly, activating those who buy stock programs that hit when our dollar strengthens. Then Kohn of the Fed came out and hinted that the Fed was going to cut the discount rate. Where's the bears Plosser now?
The bears, right now, are like "Oz" behind the curtain. And that's why they are huffing and puffing so much, because they haven't covered their shorts. And the markets are losing the depth that allows them to cover without it moving.
So the markets now have the Fed and sovereign wealth funds behind their back. And get prepared for another snap-back V-shaped rally.
Because that is what the least amount of people is prepared for.
Unless you read this blog.
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