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Follow the opportunity to buy financial shares by waiting
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We need to wait a couple more weeks to buy these shares because I think nervousness will continue.However I see a great opportunity here.I do not think firms like Goldman and Merrill has much to lose in sub prime mortgages.The stock market might have a huge correction meanwhile upon low earnings and mortgage stories therefore I suggest to wait and see a couple of weeks.I think the earnings will be better than expected for companies such as Exxon this week however maybe it won't be enough to save the day.
I think investors who lost money buying subprime mortgage-linked securities got what they deserved. I think underwriting standards and interest- rate assessments of Wall Street are very low quality and I endorse Fed's steps to strengthen consumer safeguards. The punishment has been meted out to those who have done misdeeds and made bad judgments.I am getting good evidence that the companies and hedge funds that are being hit are the ones who deserve it.
I think the meltdown isn't spreading to the broader financial services industry. However Treasury notes extending their rally, pushing the yield on the benchmark 10-year note to a six-week low. Investors have also dumped stocks because of spreading defaults on mortgages. Some 89 of 92 financial companies in the Standard & Poor's 500 Index were lower today, helping push the S&P down 1.22 percent to 1,534.08.
A so-called ABX index based on derivatives linked to subprime mortgage securities has fallen by more than 50 percent since January, suggesting a similar decline in the prices of such bonds. Another ABX index suggests declines of percent in the value of AAA rated subprime securities.
Members of Congress have criticized the Fed for lax supervision as borrowers took on $2.8 trillion of home loans between 2004 and 2006, the largest borrowing binge on record. Bank regulators, including the Fed, published unenforceable guidance during that period and disciplined few lenders.
Subprime `Isolated'
Subprime markets ``remain isolated'' and aren't likely to contaminate the U.S. banking system where capital is ``strong'' and involvement in subprime lending is ``limited.''
One day prior to Bernanke's appearance before the House Financial Services Committee, regulators announced a joint initiative with state officials to help police lightly supervised non-bank financial companies.I find it odd that apparently sophisticated investors in non-prime mortgage-backed securities now claim surprise that many non-prime adjustable-rate mortgage borrowers are facing payment shock because of the increase in short-term interest rates.Bernanke told a Senate panel yesterday that the credit losses associated with subprime mortgages are ``fairly significant,'' with estimates of losses reaching from $50 and $100 billion. Subprime-mortgage foreclosures are hurting companies that bet big on the loans.
Home sales and a report on economic growth may help investors decide if they want to keep riding a bull market in stocks, while a torrent of quarterly earnings reports will no doubt cause some anxious moments.A sharp drop in shares of equipment-maker Caterpillar Inc.
CAT.N:on Friday showed just how badly a stock can be hurt when there is an earnings shortfall. The company reported an earnings decline that was greater than expected. The stock fell 4.4 percent and spoiled the Dow's day.
Despite Caterpillar's problems, multinational corporations have been in a position to benefit from stronger economies overseas.One of the reasons big-cap stocks have done so well is that they have a lot of foreign exposure and that is where profit growth has been coming from.
In the coming week, earnings are due from the likes of pharmaceutical companies Merck & Co. Inc. Schering-Plough Corp.Eli Lilly and Co and
Bristol-Myers Squibb.
Others on the list include such high-profile names as Boeing Co, Exxon Mobil Corp and Ford Motor Co.
An important break through
Although investors have been caught off guard by the occasional earnings disappointment from companies such as Caterpillar and Pfizer Inc.,U.S. stock indexes have been reaching new lifetime and closing highs, with the Dow industrials closing above 14,000 for the first time on Thursday.
The Standard & Poor's 500, which earlier in the month finally surpassed its old all-time set in 2000, also ended Thursday at a new closing high.
But worries about earnings shortfalls and subprime mortgages led to Friday's sharp pullback and broke a three-week streak of gains for the three big U.S. stock indexes. The subprime problem is tied to a weak housing sector, where sales have faltered and prices have slumped.
After losing ground on Friday, the Dow Jones industrial average finished the week down 0.4 percent, the Standard & Poor's 500 Index dropped 1.2 percent and the Nasdaq Composite Index declined 0.7 percent.
For the year to date, though, stocks are sharply higher: The Dow is up 11.1 percent, while the S&P 500 is up 8.2 percent and the Nasdaq is up 11.3 percent.
TIME FOR A HOUSING CHECK-UP
The health of the housing sector is due for a check-up in the form of new figures on sales of both new and existing homes.
On Wednesday, the National Association of Realtors will report on sales of existing homes in June. According to the consensus in a Reuters poll of economists, sales fell to a
5.87-million-unit annual rate from 5.99 million in May.
The following day, the Commerce Department issues a report on new home sales. The consensus view is for an annual rate of 895,000 in June, which would be down from 915,000 in May. |
| Tarih
: 21.07.2007 |
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© 2006 Mert TOKER All Rights Reserved. |
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