Thursday, January 31, 2008

Plaxico Predicts

And it's 23-17 Giants. The Packers wore short sleeves in -15 below weather. Does anyone think this out- psyched their opponets? But sports are different than markets! And yesterday, Ackman and Charlie Gasparino hit a wary market with low blows, and they took it to it's knees.

Somehow I think that the hits from Ackman and Charlie aren't going to stick. The Fed cut rates to 3% which is fine for the "non-financed" based economy. And by being behind the curve, the Fed keeps downward pressure on rates. Just look at the two year at 2.13%. These lower rates will help the ARM market; and the rest of the mortgage market. Now what Ackman wants, is for the stock market value of MBI and Ambac to disappear. Of course he is short these stocks a ton. The best point he brought up was this, aptly summarized by Mish:

Does a company deserve your highest Triple A rating whose stock price has declined 90%, has cut its dividend, is scrambling to raise capital, completed a partial financing at 14% interest (now trading at a 20% yield one week later), has incurred losses massively in excess of its promised zero-loss expectations wiping out more than half of book value, with Berkshire Hathaway as a new competitor, having lost access to its only liquidity facility, and having concealed material information from the marketplace?

Now look at Plaxico's prediction. Tom Brady laughed at it, because he didn't give the Patriots offense any credit. How about 45-42 was his response. If you want to sell a story, make it believable. Just like shortsleeves in below zero weather didn't work; 23-17 just ain't gonna cut it!

Now Ackman's previous letter was here:

As you can see, his letter yesterday was more detailed, from which he used models from UBS and assumptions from CIBC. You can read the full letter here or on my other link yesterday.

The only thing that makes it appear that the bottom is approaching is that policy makers may finally be waking up. The Fed cut .75 basis points, and then .50 basis points because they dragged their feet, and didn't act pre-emptively. It's the same with the bond insurers. You need the rescue plan before the AAA ratings get cut. Otherwise, it's going to cause much more havoc in derivative land, and in the regional banks balance sheet. You can't put the genie back in the bottle!

So pay me a bit now, or pay me a bunch later!

So what happens next? Yesterday you sold the rip; today you buy the dip, and then sell the rip, and you do it until the market says otherwise.

And Wilbur Ross and his interest in the monolines? That's over. He already got his mug on television. Now I think his wallet has gotten as cold as the weather was in Green Bay!

So we need a government bailout of some sort.

So pay me a bit now, or pay me a bunch later!

Otherwise these low blows are gonna stick!

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