Tuesday, February 19, 2008

Will the market pass its retest? and "On the Other Hand" and "On the Third Hand"

By Mark Hulbert for MarketWatch:

Commentary: Sentiment suggests that the retest of January lows may fail

A dramatic retest of the Jan. 22 lows appears to be in the cards, to take place perhaps as early as this week.
Unfortunately for the bulls, an analysis of sentiment among investment newsletters suggests that the stock market is going to have a tough time passing this test.
o understand why I think so, it's helpful to start with what I wrote in late January when I last reviewed the sentiment among investment newsletters: "The ideal scenario, from a contrarian point of view, would be for advisers to become thoroughly dejected when the market next retests its recent lows -- and to completely throw in the towel." See Jan. 31 column
At least as it is shaping up so far, this is not how the average market timer has reacted....MORE

From 1440 Wall Street:

Bulls and bears both agree that the financial crisis is quite severe. But the optimists are betting that the mess is cleaned up sooner rather than later, and this time they might not be whistling past the graveyard:

The worst of the banking crisis resulting from the subprime meltdown is likely to be over in months rather than quarters, Credit Suisse Chief Executive Brady Dougan was quoted as saying on Saturday....

Finally, from the NYT's DealBook blog:
Wall St. Banks Confront a String of Write-Downs

Wall Street banks are bracing for another wave of multibillion-dollar losses as the crisis that began with subprime mortgages spreads through the credit markets.In recent weeks one part of the debt market after another has buckled. High-risk loans used to finance corporate buyouts have plummeted in value. Securities backed by commercial real estate mortgages and student loans have fallen sharply. Even auction-rate securities, arcane investments usually considered as safe as cash, have stumbled.
...Analysts at UBS go further, predicting the world’s largest banks could ultimately take $123 billion to $203 billion of additional write-downs on subprime-related securities, structured investment vehicles, leveraged loans and commercial mortgage lending. The higher estimate assumes that the troubled bond insurance companies fail, a possibility that, for now, is relatively remote....MORE