| Financial Blogs Bear Witness to Misery
While most U.S. investors enjoyed a day off for Martin Luther King Day on Jan. 21, financial bloggers watched the markets tank in Asia and Europe, and braced for big damage when the U.S. stock market reopened for business the next day. Bespoke Investment Group's Think B.I.G. listed the drops in each of the 30 Dow stocks in pre-market trading on Jan. 22—and it wasn't pretty. To illustrate how bad it is for traders, Trader Mike posted a video of a young distraught fellow losing gobs of money. (Warning: The video contains abundant profanity.) Long or Short Capital's tips for "how to end it" might cheer him up—or maybe not. Over at 24/7 Wall St., Jon Ogg asserted that the Federal Reserve is "far behind the curve," and asked if the Fed would attempt to limit the damage by cutting rates before its scheduled meeting on Jan.
High anxiety: Wall Street waits for Fed to make move on rate cut
In the 20 years Mike Marcotullio has worked on Wall Street, he's seen historic market reversals that pushed weaker men to the brink of despair. Like Jan. 23, when the Dow whipsawed 625 points in one day, fueling drama on the trading floor that ranked up there with the fallout from the crisis in the Long Term Capital Management hedge fund in 1998 and the technology bust of 2000 and 2001. "There has been a lot of fear, panic and insecurity in the markets and the U.S. economy based on the housing decline," said Marcotullio, senior principal in American Capital Partners, an investment bank in New York City. This week, the stock market has been buoyed by hopes Federal Reserve Board Chairman Ben Bernanke will announce a one-half percentage point decrease in the Fed's key rate today, and until he does, stocks will still be subject to wild swings, fueled by concern the unfolding housing crisis could lead to more write-downs in the financial sector and tip the country into recession.
Friends Provident to hold on to F&C
Today is crunch time for embattled insurer Friends Provident. It is due to unveil a review of its business following the collapse of a nil-premium merger with Resolution Life last year. The company is expected to say its 52pc stake in fund manager F&C, worth about £700m, is up for sale. About 17pc of F&C stock is held by another asset manager -Dawnay Day - and the remainder is freely floated. In the past year, the share price has oscillated wildly as bid rumours came and went. But it is now trading flat compared to six months ago when Questor tipped it as a Sell. More recently, the price has been inflated by expectations that a bidder could emerge and one or two are tipped to be interested. Simultaneously, however, about 27m of the 45m F&C shares available on the stock market are being "shorted" by those expecting bad news.
Bank of China denies subprime worries as trading suspended
Trading in Bank of China was suspended here Tuesday pending a major announcement, but the bank denied reports that it would post massive losses over assets linked to US subprime mortgages. The suspension came after Hong Kong media reported China's third-largest bank could announce a significant writedown in 2007 on its 7.95 billion US dollars of investments in subprime-related securities. "It is the largest subprime exposure in Asia. I don't know of any bigger exposure," said Tang Yayun, a Shanghai-based analyst with Northeast Securities. Senior banking regulators have warned Bank of China as well as Industrial and Commercial Bank of China and China Construction Bank would have to make provisions for all their subprime-linked assets, the Hong Kong media said. "It's only the tip of the iceberg," said Tang.
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