Today's rally is mostly fueled by the the write-downs UBS and Lehman just took.
Investors were pleased to hear that Swiss bank UBS AG said it will issue up to $15 billion in new stock and that its chairman, Marcel Ospel, had quit. Investors chose to look past the bank's announcement that it will take a fresh $19 billion write-down due to additional declines in the value of its mortgage assets and other credit instruments, following an $18 billion write-down last year.
Raising capital through stock issuance, a $19 billion write-down and this stock is up 10%??? I think this is a sign that many investors believe that with these writedowns the worse from the credit crunch is behind us. Finally.
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2 comments:
all that matters is that the market had priced in more problems than there really will be. it doesnt even need to be behind us for the market to be strong
ill take the flip side argument to this and say that commodities have had a hell of a run for weeks now. this is a big retracement, naturally when commodities are retracing...markets are going to go up.
i still dont think the worst is over. maybe we will actually hit bottom over the summer.
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