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| This is just a thought. I wonder how much money has come from the financials to the commodities. They have basically inversed each other for the past 3-4 months. Citigroup (C) will set the stage for one of two things in the morning. They are due to release earnings at 8:30 (Eastern time).
If they try to set the stage for an improved outlook in 2008, this could easily spread to the entire financial sector. To do this, they will more than likely take a "cleansing" write-down, announce lay-offs, and cut their dividend. Others have already done similar things.. Washington Mutual (WM) and National City (NCC) to name a few. This could, and I repeat could, cause some money to flow from commodities to the financial sector. My question, if I were a fund manager, would be: Is it easier to pick up 30% in the grain market (For $5 corn that would mean $6.50 by the end of 2008, or is it easier to pick up 30% in the largest bank in the U.S. that is already at multi-year lows. ($29 now would be $37.70 by the end of 2008) - C has traded as high as $55 this year. Without a major weather scare, I think the 2nd is much more likely.
If they paint a negative image, which I don't think they will do (new CEO wants to look like the savior), I think most financials (unless no exposure to the subprime crisis) are doomed for at least the year to come and commodities are the safer play. I use safer quite loosely these days.
As many have said, these are strange times in the commodity markets. Strange times require one to look at all possibilities. I'll check out the news in the morning and reply. | |
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Financial Sector and Commodities - Related?
