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Reuters – U.S. Treasury debt prices jumped on Tuesday, pushing the benchmark note’s yield down to fresh five-decade lows, after the Federal Reserve slashed interest rates near zero and vowed to extend its quantitative easing measures.
In an unprecedented move, the Fed cut its target for overnight interest rates to a target of zero to 0.25 percent, the lowest on record.
"The decision is setting the Treasury market rallying because of a more dramatic move than the market expected," said Haag Sherman, co-founder and managing director of Salient Partners in Houston, Texas. "The Fed has been sending a message it will throw everything it has at deflation," and Tuesday’s aggressive rate cut and policy statement reinforced that message, he said.
The benchmark 10-year Treasury note’s price, which moves inversely to its yield, jumped 1-16/32, pushing its yield down to a five-decade low of 2.35 percent <US10YT=RR>, versus 2.52 percent late Tuesday.
"The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level," said the policy-setting Federal Open Market Committee in its accompanying statement.
Seattle Times – Bill Fleckenstein, a well-known Seattle investor who bets exclusively on falling stocks, is shutting his 12-year-old fund and starting a new one that will buy equities, too.
Fleckenstein said he doesn’t think the worse is over in the U.S. stock market. Yet he no longer wants to limit himself to so-called short bets.
"I’m not wildly bullish right now," he said. "The market hasn’t reached its ultimate lows, but we might be in a trading range for a long time."
Short sellers have been the best-performing hedge funds this year, up 32 percent through November, according to Chicago-based Hedge Fund Research, whose data show an industry average decline of 18 percent during that period. Fleckenstein, founder and president of Fleckenstein Capital, declined to comment on the fund’s size or its returns.
The Olympian – Asian stock markets turned in a mixed performance Friday, but most recoiled from their lows despite a grim profit forecast from Toyota and sluggish U.S. economic data. European markets opened higher.
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Many of Asia’s bourses showed surprising resilience – notably in Hong Kong, South Korea and Singapore – given the overnight drop on Wall Street, as lower-priced shares attracted buyers and lending markets showed more signs of mending.
Reuters – General Motors Corp (GM.N) and Ford Motor Co (F.N) posted more than $27 billion of net losses in the first half of 2008 — and that was before a deepening economic slowdown pushed industry sales beyond 15-year lows.
What either automaker will report for an encore in the third quarter could be overwhelmed by the potential merger of Chrysler LLC into GM or various other scenarios of some or all of the Auburn Hills, Michigan automaker being sold.
Both are expected to post dismal third-quarter results on Friday, capping off a disastrous week that started with reports that U.S. auto sales plunged to the lowest annualized rate in a quarter century in the first month of the fourth quarter.
Analysts on average expect GM and Ford to post losses of roughly $2 billion each for the third quarter excluding one time items, according to Reuters Estimates.
ABC News – European stock markets opened higher Tuesday after Japan’s Nikkei index recovered from 26-year lows, with Germany’s DAX further boosted by another steep rise in the value of Volkswagen AG shares.
The FTSE 100 index of leading British shares was 92.62 points, or 2.4 percent, higher at 3,945.21, helped along by a near 6 percent rise in BP PLC’s share price after the oil giant revealed an 83 percent increase in net profit in the three months from July to September to $8.05 billion.
Nashville Tennessean- A filing made with the Securities and Exchange Commission Thursday revealed another institutional investor who placed large bets on shares of Nashville-based Gaylord Entertainment as its stock price drifted to new lows almost two weeks ago.
New York-based hedge fund Eminence Capital LLC, headed by Ricky C. Sandler, disclosed that it acquired 2.8 million shares, or 6.9 percent, of Gaylord stock on July 14, the same day a Goldman Sachs downgrade sent the stock to its 52-week low of $19.30 per share.
The stock closed at $29.20 Thursday, up nearly 35 percent in the past 10 days, but still only trading at about half of its yearly high, reached last August.
West Palm Beach (HedgeCo.net)- Hedge fund Three Arch Investors has begun buying tracts of abandoned development land in California.
“Property and land values in California have dropped to very low lows and at some stage they will recover." John Godden, managing partner of London-based IGS Group said, “This is the ultimate way to play what everyone knows to be the situation.”
"The price of homes have fallen by a little under 20% over the past year, and land prices have slumped by almost 80%." David Michelson, manager of the California Distressed Land Fund said. “The banks do not want this stuff, they want to get rid of it,” he said.
The fund, which has a target size of $150m to $250m, provides an alternative to commercial property funds or residential property index derivatives for those seeking to benefit from any upswing in the property sector.
