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And the good news keeps coming….

January 15th, 2008 at 06:47 am

Today’s headlines from Bloomberg:

1) Retail Sales in US Unexpectedly Fall 0.4%, Capping Worst Year Since 2002
2) Citigroup Posts Record Loss, Cut Payout
3) Dollar Drops to Lowest Since 2005 versus Yen
4) Merrill, Citigroup Get $21 Billion From Outside Investors to Boost Capital

Yes, an additional $21 billion. Citi raised $14.5 billion and Merrill raised $6.6 billion. That brings the Wall Street bail out to $59 billion, mostly Middle East investors.

Citi said it was to shore up their Tier 1 capital ratio. This is the number that regulators look at to assess if a bank can withstand loan losses. With the injection of capital, the Tier 1 ratio will be 8.2%. Citi likes to see it above 7.5%.

So what does this mean? To me, US stock market should continue to be volatile with pressure to the down size. I expect to see more layoffs on Wall Street. Citi was talking about laying off 45,000 a few months ago.

I already heard that bonuses are way down. Looks like BMW and Mercedes dealership will be disappointed.

But I do expect financial to bottom out in the first half. I wouldn’t buy yet. Subprime mortgages are still out there. Also, some of the bond insurers are having issues, even though Berkshire Hathaway announced they were getting into the business.

Bottom line: Cash is king. And, it an excellent time to build up your cash position and your emergency funds.

These are pretty much my opinions and what I think about the current market.

Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=anjGWhqi0PSE&refer=home

1 Responses to “And the good news keeps coming….”

  1. Broken Arrow Says:

    An excellent entry! It keeps in line with what I've read elsewhere, anticipating a bottom at some time middle of the year....

    Er, not that I'm the kind of guy that would be timing too much anyway, but Cash is indeed King, and now is a great time to build it up for some buys soon.... Maybe before the middle of the year since many other investors will probably be thinking middle of the year as well. Around May maybe.

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