Sub Prime Fatigue Sets In

The US market closed last night up 331 or 2.6% to 13290, a two-day rally of more than 500 points. Wednesday's buying frenzy was sparked by fresh hopes of a Fed rate cut, signs of life in the battered financial sector and plunging oil prices dwon $4 to $90.

The Fed said that the economy looks weak and that housing will not recover until late 2008. One of the Fed governors also said that the Fed must be flexible on interest rates. This is seen as code words that the Fed will cut interest rates aggressively.

All that, and SUB PRIME FATIGUE. It seems that daily one bank or another is setting aside provisions for sub prime based securities. It's gotten to the stage that if you do not announce provisions, the company is immediately suspect. Think about it! If everyone around you are taking US$8 billion provisions, you would be a fool not to take a similar amount even if you don't need it or need a lower number. You can always write it back when the market becomes more sane, and take a big bonus in that year. If you don't take a big enough number now, and come back for more later, your job is on the line.

Asian stocks rallied, tracking an overnight surge on Wall Street amid hopes of another interest-rate cut. Hong Kong and Shanghai both finished more than 4% higher.

Market Indices
Australia All Ordinaries 6507.20 + 1.16%
Bombay Sensex* 19003.26 + 0.34%
Hong Kong Hang Seng 28482.54 + 4.06%
Japan Nikkei 15513.74 + 2.38%
Shanghai Composite 5003.33 + 4.16%
Singapore STI 3478.22 + 3.22%
South Korea Composite 1877.56 + 2.34%
Taiwan Weighted 8447.03 + 2.06%

*Late trading