All in all, it was a rather mixed day. Some big names in the Dow, such as AA, CAT and IBM, saw some big pressure as concerns over global economic weakness continued to grow (which was exacerbated earlier in the day by the very poor ISM reading). However, names like BAC, JPM and C helped to offset those losses as it looks increasingly likely that the Senate’s version of the bailout bill will go through this evening. We guess it was naïve to think that the politicians would have so easily passed it the first time with little political cover and a lack of completely unrelated line items.
Meanwhile, the news about Warren Buffet striking a deal with GE today provided an interesting side story. Still, despite the gushing from the media about the deal and how it must mean that Mr. Buffet feels a bottom is in for the bellwether company, basically, he gave GE a loan. Maybe if he said he bought $3 in common equity, it might be a different story, but he’s getting 10% on the preferred, which, along with his warrants, he can cash in later if the price of the securities rise. The takeaway is that we’re not convinced that this news is market positive, because it makes us wonder how bad things really are in the credit markets if huge companies like GE and GS are having to pay such usurious rates to borrow money.
As we’ve been saying, this whole focus on Capitol Hill is starting to wear on a lot of folks’ nerves, and with the volatility that has resulted from a headline dependant environment, it’s no wonder market participants are finding it difficult to have much confidence – especially given the nasty surprise we got on Monday. The thing that we need to remember, however, is that as frustrating as this market may be right now, we just simply need to stay patient and wait this out. We have little confidence that that the bailout bill will improve conditions all that much, but perhaps if we can get another leg lower after it passes, we can reach a good tradable low.