A Melman Minute
By: Leonard Melman
July 22, 2008
The wild optimism that has gripped the financial
markets over the past week has eased overnight as traders begin to pay close
attention to the flood of Second Quarter earnings now pouring into Wall Street -
and the news has not been good. In fact, when it comes to the banking world, it
is clear that there is more bad news to come, and a perfect example is Wachovia
Bank.
As can be seen from the chart, the recent rally appears to be little more than a
temporary interruption, just like several before it, inside a powerful
downtrend. In Wachovia's case, it appears to be reasonable to believe that the
powerfully negative news surrounding the company - particularly since it comes
in the time frame immediately following the closure of IndyMac Bank - could
drive the stock even lower.
Wachovia announced that it had lost an incredible (all figures US$) $8.9 billion
- or $4.20 per share - during the Second Quarter 2008. The company also
announced that it was slashing its dividend and would be cutting 6,350 jobs as
it shut down its wholesale mortgage operations. They suffered losses in
virtually all directions such as operations, write-downs of assets and
encountering restructuring charges.
Unfortunately, this will have to be an abbreviated MM as we have an early
morning flight to catch for northern BC.
In early morning trading, as of 6:00 AM PDT, financial markets in North America
are expected to open sharply lower, following on losses in Europe which amount
to 1.5 to 3 percent in several markets.
Metals, however, are moving in a counter direction with gold trading near $970,
silver up once again to $18.50 and platinum and palladium both higher as well.
Base metals markets are showing good strength with copper up four cents, nickel
also ahead by four cents, zinc up almost one penny and lead showing excellent
relative strength, gaining three cents to 96 cents per pound. During the past
month, lead has moved from 70 cents per pound to 96 based on reduced production
for exportation from China.
Crude oil is trading quietly near $131 per barrel and currency market moves have
been relatively small so far this AM.
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