TFB’s Stumbles: Week Ending March 21, 2008

By Harry Sit

Market volatility continued. The Fed cut interest rate by 0.75%. The market wanted a 1% cut. For the first time, the Fed dared to give the market less than what they demanded. I added some money to my stock funds last Friday. The shares I bought are up 3% already. Not bad for a short week. We will see what happens next week. I still haven’t decided whether I should go beyond my 60/40 allocation. So far I’m just adding to the stocks side to keep up with the market.

These are the interesting articles I came across this week:

Countrywide suspending equity lines of credit (QueerCents) – Proof that a HELOC can be pulled unilaterally by the bank, sometimes right before you need it the most.

Commodities lifeboat being swamped in rush to safety (Financial Times) – A sober reminder for those who believe commodities are the next sure thing. I don’t have any money in commodities. I missed the boat on commodities because I didn’t want to get on it.

A tale of Stock Mergers and Schedule D (The Financial Engineer) – One more reason for keeping it simple and not investing in individual stocks, at least not in a taxable account. Otherwise get ready for some math exercise.

Jeremy Siegel on Bear Stearns, Rate Cuts and the Looming Threat of Inflation (Knowledge@Wharton) – Even the forever bullish Wharton Professor Jeremy Siegel is concerned about the Fed not doing enough on inflation. Interesting quote about Bear Stearns and Long-Term Capital Management (LTCM):

“The truth is, had they had the liquidity to hold on, the Bear Stearns positions might have turned out to be very profitable. [It's] just like Long-Term Capital Management ten years ago — had they been able to hold on, those positions became profitable. But they weren’t in both of these institutions, and as a result, without liquidity, this is a major risk.”

John Meriwether’s Bond Fund Loses 24% on Credit-Market Plunge (Bloomberg) – Speaking of LTCM, its former chief is still at it. He’s probably going to be able to hold on to his positions this time. From the article:

“Relative-value funds try to profit from price changes between related bonds. They rarely make outright bets that a specific bond will rise or fall. Investors in these funds expect to make about 1 percent a month.”

1% a month is pretty decent from bond trading, isn’t it? We only hear about it when he loses money. He must have made a lot of money for his clients in the last 10 years. Or else where did the $1 billion come from?

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Software picked, likely related posts:

Posted on March 21, 2008 under Banking and Credit Cards, Investing.

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