Tuesday, March 29, 2005

Who will be left holding the bag?

Last week I gave a little analysis on the markets and some of the systemic problems that I thought the US capital markets would go through. The crisis of the past two weeks has been with GM and now AIG. It is interesting to note that AIG is the 3ed largest owner of GM debt. That combined with the reinsurance issues with AIG subsidiaries means that this company is very venerable. When the one of the biggest insurance companies is hurting bad, so to will the economy. Contagion is a tricky thing and it is hard to find out if this is not occurring with other insurance companies also…GenRe comes to mind. The market is now at 10412 and 1974 with 1% losses on the day. US$/Euro is at 1.2917? This part of the equation I don’t understand….There is one possibility that the Chinese are actually supporting the US$, but how long will they continue to buy our paper? The US 10ytb is now at 4.59 which marks a big increase in the past week.

Oil is still very high and the risk is increasing. I still think that my prediction is correct about the general risk to the market and the direction that we are going in. Look for the event that creates bad news that starts the movement to the exits. Can the captains and the kings keep things together?


Post a Comment

<< Home