C.M.O. 6.12.2009
Credit Market Overview
June 12, 2009
One of the basic premises of technical analysis is that all of the information that is known about a specific entity is reflected in its price. All of the factors effecting supply and demand are distilled down to a figure which represents how much it costs to buy or sell that thing at the present moment.
There are also other instances where we take things at face value; we presuppose that the cops that write us tickets make sure that they themselves always drive the speed limit and park where they should.
Given these precepts it was enlightening to find out yesterday that some of our lawmakers in Washington had positions in the stocks of the companies whose CEO’s had the unfortunate experience of having to testify in front of Congress and with the advent of media, the world.
The WSJ reported yesterday that “House Speaker Nancy Pelosi and her husband sustained losses of between $100,000 and $1MM on American International Group.” I made sure to put those quotes there as a 10:1 range between the low and high side of that estimate is not something anyone on Wall St. would consider as having any amount of precision and can only be thought to represent one option of a multiple choice question with an intended lack of clarity.
“Representative Nita Lowery (D.N.Y.) and her spouse sold between $15,001 and $50,000 worth of AIG stock in June of 2008 when its price was down to about $35. In November the couple sold their interest in J.P. Morgan Chase & Co. and Wells Fargo & Co., each valued in the same $15,001 and $50,000 range, amid the market collapse.”
Gary Miller (R.CA), himself a millionaire real estate developer reported selling between $250,000 and $500,000 of Countrywide Financial Corp. stock in January of last year shortly after Bank of America agreed to acquire it.
After reading these and other instances where those upon who we depend to craft our legislation were shareholders in the very same entities that they then had the opportunity to grill the management of adds slightly more credibility to the outrage they portrayed but does raise some questions regarding whether they were truly representing the people or just their own P/L’s.
AIG and Countrywide are no longer viable entities but BAC, with all of its attendant problems was upgraded by Keefe Bruyette Woods yesterday. The stock closed at $12.97 off its March 6th low of $3.14. The CDS for BAC peaked after the stock bottomed at 400bps on March 30th.
Enjoy the weekend.
Jim Delaney
