Thursday, June 19, 2008

Volatile Day Tomorrow

Tomorrow is quadruple witching day which means whatever happens tomorrow in the markets means absolutely nothing unless for some reason you blow through key support levels at 1325 and 12,000. I am sort of expecting a volatile move up but obviously have not bet on it at all. Either way up or down, unless it is massively down, I think whatever happens matters very little for the short term going forward.

The most ridiculous thing I saw today was BBT (regional bank) saying they were fine and were thinking of raising their dividend. Their yield now is already over 8%. That means either the market has it massively wrong or the bank is sticking its head in the sand. Sounds a whole lot like Lehman in January when it raised its dividend and announced an increase in the stock buyback. I do not think it is necessarily these CEOs are malicious are even idiots, it is that they have fooled themselves. I have no position in BBT but am more inclined to short it now than before. They have massive amounts of commercial development exposure though they are in some better geographic areas in the U.S. Either way I do not suspect that over the next 18 months the market has it that wrong that with an 8% dividend yield they should even consider raising their dividend.

MBIA and Ambac got cut by Moody's. It is official. No more AAA's for either one of them. Probably means more writedowns as all models have to go to AA for hard to value assets related to these two.

To me the great conundrum of this whole market is how well transports are doing and have done if you cut out airlines. There is some disconnect. Either the economy is better than you would think or the market is missing something with these guys. Anecdotally I have heard story after story of truckers being forced to return with empty trailers but somehow the stocks of railroads and truckers just keep on trucking.

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