Jan 13, 2005

Round 'em Up

Quite a few charts look like EBAY or GE and are finding support at recent uptrends. Today's rally may mark the beginning of a bottom but I would guess buys with less risk are in the days ahead.

One thing that stood out to me today was Brian Reynold's article ($$) mentioning the possible beginning of a trend where companies utilize low borrowing rates to buyback convertible bonds. Given the low vol levels this probably makes pretty good sense for some companies. If it gains any traction it may even push vols up which might pull some liquidity out of the marketplace. He also mentions the possible impact on particular issues as convertible traders cover their hedges. This world of excess liquidity we are living in creates some strange cross currents.

Also, we began the morning with some rumors that GM's debt rating would be lowered to junk. The thought that this may happen has already been kicked around pretty good, and honestly I have never heard of a case where the timing of the rating announcement has ever been leaked to or guessed by the market. GM will speak at the autoshow on Thursday and reacting to rumors this morning is more a sign of tension among traders than anything else.

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