Friday, September 12, 2008

Heavy Metal... Options are Funny... and other Wall Street Observations

While some companies are interested in dating Lehman Brothers, no one wants to marry it! Could it be that there is too much baggage for a long-term relationship?

Heavy Metal
I moved 95% of my funds from the VGPMX fund, leaving only a a pittance to keep it open. I bought the lion's share of this at approximately 13.00 per share. I enjoyed a wonderful ride up to 40.00. Then I witnessed price deterioration to 24.00, where I took profits. Oil prices appear to be the culprit along with new found interest in the U.S. dollar. Today, I noted that the price went up 1.35 today... but it could have easily dropped another 1.35. And, there is no sense in second guessing that move. When the time is right, I will move funds back into VGPMX. (Please note that the top holding of this fund include nickel, aluminum, and some gold).

Options are Funny
Looking for Buyers could become the slogan of Lehman Brothers. One can only think that Lehman's books must be outright SCARY! Just like girls in high school and college that bad a bad reputation, everybody wanted a date... but no one wanted to marry them. This week the South Koreans walked... and we all know that South Korean Banks are always looking for quality for the cheapest price. Now there are rumors that Bank of America and an unnamed Chinese Bank are mulling over the remains of this once proud institution. Yet, in an uncanny move neither the Fed nor treasury have anted up incentives for BAC to make a move. It is a take it, or leave it scenario. We are reminded that Bank of America has already swallowed Countywide. It has yet to announce loses on the Alt-A portfolio... and at the bare minimum is facing over a billion dollars in write-down from commercial lines! It sounds like a round of hemlock for all!

Stock Market Commentary
Word is that AIG will announce their turn-around plan on September 25th. Down almost 30% alone today, it may be prudent for AIG to move up their announcement. At this rate, there may be no share value of AIG left by the 25th. With share prices dropping so low (Merrill Lynch is now considered a bargain as well) it is fascinating that no buyers are lining up. It makes you think that whatever debt problems that are buried on the books of these companies, it must be UGLY! The latest Market Watch story quote a source in AIG claiming that "It's all on the table." An observer might conlude that it was on the table, now AIG is in the toilet just waiting the flush.

P.S. No word for any of the representatives from Ohio. However, Sherrod Brown has had the best track record of correspondence.

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