Market rallies
Today in the equity markets felt so good, so unusual, that it began to dust off a word not seen in recent weeks, "hope".
It came as liquidity in the interbank markets had become, in recent days, more restrained with rates rising again and as spreads on financial company senior debt were hitting highs not seen since the Lehman and Bear Stearns collapses. The rally was led by, believe it or not, financial companies after a comment by Pandit that Citi was looking at a profitable quarter. If this is not an indication of an oversold market, what is.
Looking at recent 13-F data on fourth quarter investments by major institutional investors, which today's action gave me the courage to do, it was fascinating to see that many of the big players continued to add to positions that they already favored. Some were building new positions in "values" at that time. At this point in March all of those investments are under water big time. It is encouraging that the professionals saw value 20% higher than where we are today, or is it. Data on overall equity holdings of companies, including retail and everything not visible in the big firms, indicated that no company of the ones I researched had net positive inflows in the fourth quarter and it was not even close. Retail, high net worth, and small institutional were right, in the aggregate to run then, but longer term they generally aren't the lead steers.
A word of caution --- during the steep decline that began in October there have been eight one day rallies of 5% or more. Is this just another one day wonder, or could the market finally be at some kind of base.
It came as liquidity in the interbank markets had become, in recent days, more restrained with rates rising again and as spreads on financial company senior debt were hitting highs not seen since the Lehman and Bear Stearns collapses. The rally was led by, believe it or not, financial companies after a comment by Pandit that Citi was looking at a profitable quarter. If this is not an indication of an oversold market, what is.
Looking at recent 13-F data on fourth quarter investments by major institutional investors, which today's action gave me the courage to do, it was fascinating to see that many of the big players continued to add to positions that they already favored. Some were building new positions in "values" at that time. At this point in March all of those investments are under water big time. It is encouraging that the professionals saw value 20% higher than where we are today, or is it. Data on overall equity holdings of companies, including retail and everything not visible in the big firms, indicated that no company of the ones I researched had net positive inflows in the fourth quarter and it was not even close. Retail, high net worth, and small institutional were right, in the aggregate to run then, but longer term they generally aren't the lead steers.
A word of caution --- during the steep decline that began in October there have been eight one day rallies of 5% or more. Is this just another one day wonder, or could the market finally be at some kind of base.
posted by John Borden at 9:53 PM
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