Market participants lose confidence in stocks and are begining to trim down portfolio holding in anticipation of buying back at lower price in the future. Market makers, day traders, hedge funds, institutional and individual investors appear to align in interest in a seller market.
The amount of shares in circulation on the hands of traders is increasing. On the other hands, the amount of sideline cash is also immense. Asset price is suppressed by market makers and traders. Market paricipants know that the price is attractive but do not have confidence due to manipulation. Long term investors are holding large cap stocks for decent dividend and relative stability.
S.E.C. Weighs Action Against Standard & Poor’s
The staff of the Securities and Exchange Commission is considering recommending civil legal action against Standard & Poor’s over its rating of a 2007 collateralized debt offering.
The S.E.C. staff said it may recommend that the commission seek civil money penalties, disgorgement of fees or other actions.
S.& P. has been under fire for its recent downgrade of United States long-term debt, as well as several bad calls it made leading to the financial crisis and economic meltdown that began in 2008.
The "Risk On" trade is back today sending stocks and commodities sharply higher, and the US 10-year Treasury yield back up towards 2%. Meanwhile, as of Monday's close the S&P 500 dividend yield remained higher than the 10-year T-note, a move seen only 20 times in the past 58 years on a quarterly basis according to S&P research. The phenomenon rewrites the rulebook for yield-seeking investors, as the broader stock market offers more than a traditional bond investment.
"We're looking at that (the S&P 500 dividend yield) saying 'where do you want to put your money? Where is a safe place to put your money?' Right now it doesn't seem like there's any safe place, but it's where are you going to get the most bang for your buck?'" says Andre Julian, chief financial officer at OpVest.
Specifically, Julian believes the safe haven of the stock market is in large cap multi-national stocks that offer a good dividend. "Think about it, corporations have $2 Trillion in cash on the side… remember there's a lot of growth right now in these companies, their earnings are really strong," he says.
Fund Goes Down Blind Alley
Real-estate developer Stephen Ross and his partners spent more than a year digging into U.S. banks, including more than 100 with loans to local bakeries, gas stations and amusement parks.
But the deeper they went, the worse things looked. As a result, Related Cos., the New York firm in which Mr. Ross is chief executive, gave back the money it raised from roughly 150 investors, including hedge-fund manager David Einhorn. The firm did find several investments it was interested in but was outbid.
With the clock ticking on its 18-month deadline, Messrs. Ross, Blau and Beal sent a letter to investors Aug. 18 informing them that the fund would be liquidated. Investors received roughly 97 cents on the dollar after expenses. Mr. Einhorn, one of the investors, declined to comment through a spokesman.
"While we are disappointed that we were not able to acquire a banking franchise and execute the SJB business plan, we refused to compromise on transactions that did not offer both an appropriate margin of safety and attractive returns," the letter said.
Mr. Ross said there is "a lot of money to be made in the future of banks," especially in online banking. "We want to be back in it. The question is when."
Solyndra bankruptcy may be a total loss for taxpayers
During the weeks of nasty congressional hearings and even nastier columns in the press since solar panel maker Solyndra declared bankruptcy, it's been widely assumed that the debacle cost the government over half a billion dollars.
But it's not as though Solyndra is completely worthless. The company has some assets it could sell. It has that state-of-the-art factory, all the equipment inside, and a sizable inventory of solar panels.
Solyndra bankruptcy may be a total loss for taxpayers
tweet3EmailPrint..Steve Hargreaves, On Friday September 30, 2011, 6:29 am EDT
During the weeks of nasty congressional hearings and even nastier columns in the press since solar panel maker Solyndra declared bankruptcy, it's been widely assumed that the debacle cost the government over half a billion dollars.
That huge loss may not come to pass.
As the guarantor of the loan the company received to build a state-of-the-art factory in Fremont, Calif., the government is on the hook for the $527 billion Solyndra ultimately borrowed.
But it's not as though Solyndra is completely worthless. The company has some assets it could sell. It has that state-of-the-art factory, all the equipment inside, and a sizable inventory of solar panels.
During bankruptcy hearings earlier this week, Solyndra chief financial officer W.G. Stover said the company had $859 million in assets and $749 million in liabilities at the start of 2011.
How much those assets are worth now that the company has folded, and where the federal government stands as creditors line up to get their money back, are questions that will be hashed out in bankruptcy court over the next few weeks or months.
But some are optimistic Washington can recoup a big chunk of its cash.
"The federal government owns the assets of borrowers that default and can manage or sell them," Mark Muro, policy director at the Brookings Institution's Metropolitan Policy Program, wrote in an article earlier this week. "It's conceivable that taxpayers will not lose any money."
The Solyndra curse
The path forward: While many analysts don't paint such a rosy picture, they do seem to think the best outcome for Solyndra and its creditors would be for another company to come in and buy it whole.
It's generally thought that Solyndra's bankruptcy was caused by its technologically advanced panels becoming uncompetitive with cheaper traditional solar panels as the price for those traditional panels fell. Yet it's possible another firm could tweak the design, infuse it with cash, and attempt to make a go of it.
Split up: The other option is that Solyndra will be split up and sold off in parts. This is bad news for anyone the company owes money to.
The firm's most valuable asset, the equipment it uses to make the panels, is custom made and highly specialized. It's not useful for anything else besides making the specific type of panel Solyndra made.
The other assets are the panels themselves. Solyndra has a whole warehouse full of unsold solar panels. Kann noted that they work just fine, and third parties would be able to service them. But finding a buyer for panels that come with no warrantee will be a challenge.
Most of the company's buildings were leased, so there's not much property to sell. The new factory Solyndra built with the government's money is 300,000 square feet. Solyndra does own that factory, but it's unclear how much it's worth.
Another manufacturing facility the company owned nearby that was almost twice as large sold for $42.5 million late last year, according to The Register, a San Francisco area real estate journal.
In the end, it seems like the government will get some of its money back, but it may not be close to the $527 million.
A summer many investors would rather forget
The United States lost its top-of-the-line credit rating for the first time. The financial system of Europe seemed ready to collapse. Money managers sifted through data for signs that the economy was about to slide into a new recession.
Even if the next corporate earnings season, in October, shows that companies are still making money, it may not be enough to calm the markets until the bigger questions about Europe are answered.
Europe's debt problems are "going to continue to overshadow everything else in the market until we have a resolution," said Stephen Auth, chief investment officer at Federated Investors.
The European Union is wrestling with crippling debt in a handful of nations. If those nations can't make payments, banks that hold their national bonds will suffer deep losses, and lending could tighten worldwide around the world -- possibly leading to a widespread recession.
Investors overlooked fundamentals of individual companies and made bets on the whole market. On more than half the trading days since Aug. 1, more than 400 of the stocks in the S&P 500 rose or fell as a group, according to Bespoke Investment Group.
Perhaps the best investment over the quarter was the very thing everyone fretted about -- U.S. government debt.
Treasury prices soared even after the S&P ratings service knocked American debt down one notch from the highest level on Aug. 5. On Sept. 22, the yield on the benchmark 10-year Treasury note hit a record low, 1.71 percent. Bond yields fall when prices rise.
"Investors are no better than hyperactive first-graders playing musical chairs and trying to out-anticipate the other," he said. "This is no different. They start to think the market is oversold, and they should buy it when it's cheap."
Some experts say investors should hold their noses and buy stocks anyway. "We remain positive regarding stocks relative to bonds and cash and view the current pullback as an opportunity," Bill Stone, chief investment strategist at PNC, wrote in a note to clients. "Stock valuations are attractive at the moment."
Assuming, he added, that corporate earnings don't collapse -- another sign that uncertainty rules right now on Wall Street.
With Firestorm Nearing, Traders Stand Their Ground
We’ll proffer the usual, technical explanation: Yesterday’s ups and downs were caused entirely by algorithm-driven machines with nothing more on their tiny digital brains than a bunch of zeroes and ones. And if they had a smattering of human help, the humans undoubtedly applied the same tried-and-true tactic that has carried the day for the hedgies time and again in recent months – i.e., letting the index futures fall on thin volume, exhausting sellers overnight; then inducing a short-covering panic ahead of the opening bell.
Has this outcome been factored into “the markets”? Yes and no. While it would appear that expectations of Greece going belly up are nearly universal, we cannot predict whether the event will cause a tsunami that takes Italy and Spain (and France?) with it. For their part, traders seem to be taking the Zen attitude that we shouldn’t worry too much about those things that we cannot change. There is no question that the markets have been extremely volatile, reflecting the nervousness of traders and speculators still in the game.
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