Today's Key Market News - Market Stabilizing

This morning shows international market stabilization and no major blowups to scare the market into further collapse. In fact, savior funds are finding there way to this weekend's most highlighted risks. Goldman Sachs' (NYSE: GS) Global Equity Opportunities Fund, which was reported to be down near 30% this year, has found a new $3 billion investment. This news, and news of the ECB and Bank of Japan flooding more liquidity into the market, is helping to relieve concerns about Bear Stearns (NYSE: BSC), BNP Paribas (Paris: BNP.PA) and Deutsche Bank (NYSE: DB). That's not to mention the scores of hedge funds that are likely in trouble.

The recent central bank actions are bailing out the investment banks and probably a good deal of hedge funds who are holding mortgage-backed securities. The fact that the SEC began an investigation into such exposure just after BNP expressed concerns and the ECB acted, pretty much exposed that. We believe this liquidity may not necessarily be more than a bandaid though, since we continue to expect a good deal of mortgages to default. Also, we do not expect the secondary market to jump back into the MBS segment too quickly. Without a Fed rate cut, we're not sure the true underlying problem is cured here. In other words, if borrowers can't refinance out of difficult loans, defaults and foreclosures could still move into the red zone. Still, these actions are no doubt a positive for the overall system.

This morning's July retail sales data was a little better than expectations, but remember that those expectations were not very high. We think this will help prevent market collapse here in the near term, however, we are very curious about the underlying issue that spurred the central banks. It's very likely that a bunch of European and U.S. banks and hedge funds were expressing a state of desperate panic to the bankers. It's very possible that a couple banks and scores of funds were headed toward significant losses, possibly threatening to their solvency. We would be curious to see exactly who the bankers purchased securities from, as this would reveal the culprits. I think there is enough evidence for us to guess accurately though.

Please find our "Headline News" sidebar section below:


CNN Money: International Markets Start Well
Forbes: ECB Injects Another $65 Billion
Forbes: Japan Injects $5 Billion
Bloomberg: July Retail Sales Slightly Exceed Low Forecast
Bloomberg: Goldman's Global Equity Opportunities Fund Gets $3 Billion Investment
CNBC: Central Bankers Working Together
CNBC: Japan Posts Weak Q2 Growth
CNBC: China's Central Bank Is Nervous
CNN Money: Hovnanian Q3 Deliveries Down 31%
Yahoo! Earnings Calendar
AP/Yahoo!: Blackstone (NYSE: BX) Profit More Than Triples
AP/Yahoo!: China Auto (NASDAQ: CAAS) Revenues Rise 47%
AP/Yahoo!: Sysco (NYSE: SYY) Profit Rises
AP/Yahoo!: Sears (NASDAQ: SHLD) Narrows Profit Guidance
CNN: Rove Sets Exit
Economist: Geopolitical Week Ahead
Iran Daily: Tales from the Dark Side

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