Stock Market - Pre Open Report for February 12th 2008

Posted: February 12, 2008 at 10:20 am by Chuck

Warren Buffet has offered to take on the liabilities of the municipal bond portfolios from Ambac, MBIA, and Financial Guaranty Insurance Company. The offer he made to these companies was to essentially, for a small premium, back up the municipal bond portfolios which has an estimated value of somewhere between $700B to $850 billion. The net effect, should one of these companies take him up on his offer would be a guarantee of maintaining a AAA rating for that portion of the business. However, it would only be the municipal bond assets, not the CDO’s, SIV’s, and other assets that have become tainted. Mr. Buffet said in his interview that one of the three companies has rejected his offer. And that is understandable, for if any of these companies take him up on the offer would to be essentially raising the white flag and saying they failed. It would be an admission of total failure and would essentially be the death of that company. Bond insurers, a soap opera all in itself.

General Motors (GM) posted a 2007 loss of $38 Billion and has offered every factory worker (74,000) a buy out package if they would leave the company. If anyone needed any proof that the consumers are cutting back all they have to do is look to the auto industry and see just how much auto sales have contracted.

Futures are up but I’m seeing trepidation already so we will see how this day plays out. But we are still planning on shorting the market on a technical move. See the recent posts:

http://blog.rebeltraders.net/2008/02/10/dow-jones-industrial-average-technical-analysis/

and

http://blog.rebeltraders.net/2008/02/09/russell-2000-shorting-setup/