Market Soapbox 08/29/07

WEN, mirror bounce, DJIA +247 on low volume with sparkling internals. All UP 2%.

Bonds down 10 yr yield +3bps 4.55, $ down vs 1.3658E & up BIG vs 115.759Y, WTI crude up 2% $73.56, gold up $675.1

SP500 open 1432, up 31 to 1463. 200 DMA 1455 is support. Just two months ago Basis Yield's two main funds, including Yield Alpha, had five star ratings from S&P.

Since, $1 Billion Sydney based Basis Yield Alpha Fund has lost 80% of its value and today filed BK.

Basis said that U.S. home loan defaults had wrecked the value of its CDO debt holdings.

In July, Basis Capital hired Blackstone as an adviser in an effort to avoid a fire sale of assets.

Bear Stearns also hired Blackstone to liquidate its two collapsed funds. In May, China bought a $3 Billion interest in Blackstone.

Since June IPO, Blackstone stock down 28%. Today, Chinese Finance Minister Jin Renqing has resigned for "personal reasons." DOH!

Cheyne Capital Management is pleading with investors for a stay of execution for its $6.6 Billion structured investment vehicle Cheyne Finance (SIV).

The SIV told investors that it was trying to restructure its investment portfolio after heavy losses on MBS triggered an orderly liquidation of the vehicle.

Cheyne said that it had exhausted all available credit facilities but had raised enough cash and other funds through asset disposals to meet its liabilities until November. Merrill Lynch may be exposed to the beleaguered vehicle.

BOJ central bank policy maker Atsushi Mizuno: "Overinvestment was a major cause of the U.S. subprime mortgage crisis and illustrates why the Bank of Japan needs to raise interest rates."

Yesterday: "Extreme D/A volume ratio on paper thin volume, and bargain hunting month opening fund inflows, may yield a boomerang."

The window dressing and short covering came sooner than we thought. Large herks and jerks on paper thin volume, not exactly a market with conviction, very suspect.

We sense another swing Sept 4 or 5. Folks, this solvency soiree is just starting and its going to get very ugly.

Our leading candidates for BK in order: Countrywide, Wachovia, Barclays, Wells Fargo, WaMU.

Word has it that Wachovia Bank has recently cancelled its entire US newspaper advertising budget. Sniff, sniff...

Often wrong, but never in doubt, this is the Nattering Naybob and you're not!

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