In the news over the past several days is the Northern Rock bank having a little run on the bank as well as the GM strike. In England, the depositors of Northern Rock withdrew about £1 billion, or $2 billion, on Friday and over the weekend either at the branches or online, representing about 4% of total deposits. Reports indicated that the online portion of Northern Rock’s business seemed to be “freezing up” all day long presumably due to heavy volume. On Friday morning, Northern Rock solicited the help of the Bank of England as it is feeling some financial stress due to its, yes, you guessed it, mortgage portfolio. We are particularly intrigued by the Name of the company, Northern Rock, as in, solid as a Rock. The news this evening has the bank facing more dramatic withdrawals over the next few days. This is something that we should be paying attention to.
In the housing sector, the CEO of Hovnanian, a home builder, announced that the housing market is very near a bottom. We seem to hear this every week or so but the traders in those homebuilders like the news and bought those stocks. This doesn’t seem like the best of advice.
We just wanted to comment on GM. The company says that it doesn’t need to increase the rebate program because there seems to be strong underlying strength in demand for cars. We question their timing as they are dealing with the unions over the past few days to iron out some contracts. We just find the news to be contradictory and therefore maybe less than correct. No, we don’t really know what’s going on there. If we hear more, we’ll make more comments here.
One of the most off the wall pieces of news this past week was the Greenspan admission that he didn't really see the subprime problem. Is this the type of thing you say when you're trying to sell a lot of books? We don't think so but we saw the genuine look of wonderment on the face of the great Maestro. Would you say his reputation is starting to get a little tarnished?
The stock market seems content to just wait until Tuesday’s Fed news. The pattern is still the same with another stretched top forming. Presumably the traders will wait until Tuesday afternoon to trade one way or the other. So, we will continue to be patient because there is a large distance to travel in the southerly direction and one or two days of waiting isn’t too bad.
This week brings some key broker earnings reports as well as some other company’s reports so there are several potential landmines this week. The market probably does need something to sell for even if it has to be the Fed’s announcement or some earnings news. We think this week holds some possibly very negative price movement. This is also options week.