Monday Morning Musings

The market is up nicely this morning, choosing to focus on the positive news rather than some of the negative headlines I have seen. A former colleague of mine used to say, "the news breaks with the cycle". Meaning, when you are in an uptrend, the market usually reacts positively to news.

The news was that mortgage insurer MBIA is getting a $1 billion infusion from Warburg Pincus. This stock had roughly 30 million shares sold short, which is why the stock opened more than +20% higher on this news.

Also, October pending home sales rose +0.6% vs. consensus that called for a drop. These news items are trumping the info. that UBS will take a $10 billion write-down on losses due to subprime lending. But they are also getting a $12 billion investment in the company from two strategic investors.

Fed funds futures are currently pricing in a 76% chance of a 25 basis point rate cut. I would not be surprised to see another 50 basis point cut in the discount rate.

The bond market appears encouraged today, as the yield on the 10-year has bounced all the way back to 4.17%. This reflects an easing of recession fears.

Asian markets were mostly lower overnight after the Chinese govt. took further steps to tighten monetary policy there.