So its no longer a secret that the world's entire credit and financial system has problems. What it now comes down to is the degree of severity. Is this a minor issue concerning just "subprime" paper that is only being exacerbated by opportunist short-sellers as game show host, Ben Stein proclaimed to be the case in his apologist's op-ed in the New York Times yesterday? Or are we witnessing the crumbling of an ill-conceived financial system built upon paper that only had collateral value so long as the bubble enablers at Standard & Poor's and Moody's Investor Services said so? Indeed, it may not be as dire as the latter, but it is most certainly not as polyanish as the former Nixon speechwriter opines. Unfortunately, at this juncture I'm being reduced to recounting the day's gory details. And today was again a win for the bears. And for those with cognitive abilities, the day's news places serious doubts on any thesis' that suggests the credit problems are "contained" and that the current problems will not translate into a weakening consumer and a weaker "non-financial" segment of the world economy. Again, the ECB found it necessary to pump another $10.48-billion into money markets overnight. The Euro has given back nearly 2-percent against the woeful dollar since early last week thanks to the massive Euro print job. Euro broker powerhouse UBS hit its 52 week low calling the current environment “turbulent” and said that market conditions may reduce profit for the rest of the year. Also, Sanford Bernstein analysts issued a report today spelling out losses at Citigroup (C) that may accrue to as much as $3-billion this quarter due to current credit conditions and the marking down of some loans on its books by as much as 20-percent. The two largest retailers in the U.S., Home Depot (HD) and Wal-Mart (WMT) also both issued weaker than expected quarterly revenues. Home Depot "beat" its earnings estimates. Wal-Mart did not. Still, both companies were forced to admit that the crashing housing and mortgage bubbles would impact operations through the end of the year and lowered guidance accordingly. Also, probably the most disturbing news on the day was word that Sentinel Management Group Inc., an Illinois-based firm that manages $1.6 billion of mostly short-term money/equivalents for commodity traders and hedge funds reportedly asked regulators for permission to freeze client withdrawals due to being unable to liquidate some of its commercial paper without taking a substantial haircut. Also, in addition to my mentioning of the problems encountered by Canadian diversified financial concern, Coventree Inc., in being unable to float fresh commercial paper yesterday, reportedly, as many as seventeen Canadian issuers of asset-backed paper have reported liquidity concerns to Canada's version of Standard & Poor's, DBRS yesterday and today. All seventeen reportedly are having severe difficulty in tapping the CP market for liquidity needs. The CP market in Canada is roughly 15-percent the size of the $1-trillion size of the U.S. CP market. Also, Japan's Norinchukin, a major credit provider that "acts as a de facto central bank for nearly 5,000 agricultural, forestry and fishery cooperative systems nationwide" reportedly tapped the BOJ (Bank of Japan) for some Yen last night. Still, as a proxy for how seriously folks are taking all of this, it didn’t stop the best performing IPO of 2007 from taking flight. Shares of software maker VMware Inc. (VMW), a spin-off from data storage, EMC Corp. (EMC) soared 84 percent on its first day of trading making it the biggest IPO winner of 2007. At $51/share, its closing price today, VMware already trades with a $20-billion market-cap, backed by just $1-billion in trailing annual revenues (albeit growing). As many clues are being unturned, there remains a plethora of cluelessness.
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