Investment Banks, Real Estate and updates.

The recent technical higher high zig zag in the market shows the importance of why trading and using 3 day positions makes for profiting in this type of market.

The recent news of Merrill and its 23 dollar / share secondary and capital raise and the sale of bonds at 22 cents the dollar is showing signs of what a new CEO is all about. Citi is still holding back hoping for either higher pricing or movement higher in prices in the market. Those results can only come from stable home prices in the traunches most affected by this drilldown. Previous Mer secondary price offerings had to be repriced in order for the sov funds to write another check. This is actually the worst deal we will see this year for this type of transaction. We have just priced the risk for the year on these pools of investments. Even if real estate falls another 15 percent nationally, it appears this deal benefitted the buyers more then the seller in terms of forthcoming profits.

The new bond deal announced by the Treasury is more a press event then anything that can significantly stem the issue of lack of buyers. RE Agents are telling me sell-side is taking cash deals at lower offers then multiple offers at higher pricing that need financing. I think this will continue for the next 6 months as the FHA, Fed and the banks try to rekindle a new type of financing arrangement. Will we ever see 100 sq. foot deals in southern California? Not sure - but there is still alot of pain in the markets

Citi is next

Citigroup Inc. may follow Merrill Lynch & Co. by taking billions of dollars in losses on mortgage- related bonds, according to some analysts. Preferred-stock investors are making a similar connection between the companies.

The chart of the day shows the preferred issues sold by Citigroup, the biggest U.S. bank by assets, in January is tracking shares that Merrill issued three months ago. Lehman Brothers Holdings Inc. and JPMorgan Chase & Co. preferred shares are also included for reference.

All four firms sold these shares to raise capital after losses sparked by the subprime-mortgage market's collapse last year. Merrill will have a $5.7 billion hit from selling collateralized debt obligations to the Lone Star Funds investment firm at about 22 cents on the dollar.

Citigroup ``has been far less aggressive'' than Merrill in marking down CDOs, William Tanona, an analyst at Goldman Sachs Group Inc., wrote in a report today. ``They would struggle to obtain their prices in the marketplace.''

The securities are valued at about 55 cents on Citigroup's books, according to Tanona. Bringing the valuation into line with Merrill's would imply a $16.2 billion writedown and about a $2-a- share reduction in earnings, the report said.

Oil is coming near support levels at the 115 / 120 level. There is no momentum on the upside yet so we might see another week of selling until we spike bottom to create our new trading range.

The new law supporting the Fannie/Freddie bailout seems to be helping investors squeeze out the spread between the 10 year fed note and the private debt.
S&P said on July 26 that it may downgrade the
subordinated bonds of Fannie and Freddie. A cut would affect $19.2 billion of
AA- rated debt, according to data compiled by Bloomberg. S&P affirmed the
AAA ratings of the companies' senior debt.

We Continued to add to long positions on yesterdays sell-off in finacials and will be looking to unload positions in the next few weeks.

Type rest of the post here

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