Midday Action: September 24
September 24, 2008
With cautious ears and eyes still on policymakers, market rescues from some guy named Buffett are far from a bonafide siren song for bulls. As of 10:58 ET the “Cubes” (QQQQ) and “SPYder” (SPY) are up .45% to 1.05% on mixed quantities of bull.
It’s not a smorgasbord for bulls, but some nibbling after two straight sessions of hard percentage losses is attempting to take shape. In large part, investors looking for some stabilization efforts can thank famed value hunter Warren Buffett. Following up on last week’s bid for Constellation Energy (CEG), the Oracle of Omaha announced his Berkshire Hathaway (BRK.A) will take a 10% preferred stake of $5.0B in the apparently still-venerable Goldman Sachs (GS).
Countering some of the enthusiasm are possible concerns over the dilution of shares. Along with the fore-mentioned deal, Buffett & Co. also have added warrants for an additional $5.0B at $115 per share. Further, Goldman announced a $2.5B - $5.0B stock offering in conjunction with the plan, which adds reasons for traders to grow concerned, if they so chose. On the other hand, it’s also more than likely that Warren has done the homework and won’t be so quick to change his tune like other mad money bulls. Intraday, other investors appear to agree, somewhat, as shares tack on 4.25 near 129.30.
Part of traders’ collective trepidation at promoting truly banner headlines of “Bargain Hunting” is due to a second day of deliberations by policymakers. Following Tuesday’s contentious meeting between Bernanke & Co. defending their bailout before the Senate Banking Committee, fresh testimony with the Economic Joint Committee and House Financial Services is currently underway.
Per Briefing.com, as the market was “unimpressed” with yesterday’s “Pow Pow” on ‘da Hill, today has gone a bit smoother. That said, it will be interesting, as always, to find out what the next storyline can usher in by the Closing Bell. Currently, while ‘smoother’, a still-cautious investor has helped push the TED spread up 54 bps to 3.04% and its highest levels since last week’s twenty-plus 1987 crash highs were reached.
In economic reports, existing home sales have promoted a bit of support for a market, prior to the open, had been, umm….a bit feistier. For all intents and purposes, Wednesday’s intraday data registered an in-line 4.94M annualized units. The report is slightly below last month’s 5.0M reading but provides some evidence of a slowdown / stabilization in a popped bubble now long-removed of catch phrases like “Land Shortage!” For its part, the homebuilders ETF (XHB) is up .60 at 19.87 and demonstrating a bit of relative strength on the session.
Elsewhere and somewhat removed from Planet Bear, solar (TAN) stocks, by and large, are sizzling. This morning an energy tax bill passed through the Senate, extending tax credits for solar installations by eight years. Tax credit relief for wind and other renewable energy installations were cleared for shorter durations per Briefing. With analysts bullishly chiming in, the group remains the market’s most consistent leader on the day. Spearheading are names like Sunpower (SPWR), SunTech (STP), LDK Solar (LDK) and First Solar (FSLR).
And finally, maybe instead of buying into “CEG” and “Goldie”, maybe investors need Warren to buy into something like “KEG” during these truly difficult and potentially desperate times. Actions thus far by the multi-billionaire, as well as his stamp of approval for “Paulson’s Plan” appear to still be falling on deaf ears. I guess folks are more inclined to chase the smart money well after the fact and not at levels where it might be possible to actually follow the legendary investor. As they say, “You can lead a horse to water, but you can’t make ‘em drink it.”
Chris Tyler
Staff Writer & Options Strategist
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