Weekly Market Commentary

Posted by Wayne on December 22, 2007 – 3:48 am

Well this last week in the market was just as volatile as the week before – but we did finish on a strong note and the major indexes all ended higher.

Reason being, Oracle (Nasdaq: ORCL) and RIM (Nasdaq: RIMM) – the maker of the ubiquitous BlackBerry device – both issued impressive earnings announcements and sparked the rally before the open yesterday.

The street also reacted favorably to Merrill’s (NYSE: MER) announcement that they’re looking to receive $5 billion in fresh capital from a state owned Singaporean investment firm.

I think that’s great news – in the short term at least – here’s another bank that was hit hard by the downturn in the mortgage and credit markets but was luckily bailed out of a potential catastrophe. However, over the longer term, this trend has me a bit worried.

We have Merrill taking $5 billion from a foreign entity, Citigroup (NYSE: C) receiving almost $7.5 billion for 5% of the firm from Abu Dhabi and Morgan Stanley (NYSE: MS) sold about 10% of the company to a state owned investment firm in China for a $5 billion infusion of capital.

I’m sure this makes investors sleep well at night but I feel like everybody is missing the bigger picture here. We’re basically selling off America’s financial system one piece at a time.

These aren’t simply large companies that employee a lot of people – these firms are the backbone of the American financial system.

You might ask, what are the exact consequences of selling minority equity stakes in these firms? At this level, probably nothing – but fast forward to next year and these mortgage and credit issues just keep piling up. Before you know it these foreign investment firms (who are actually controlled by their respective governments) will have a much stronger position within the weakened Wall Street banks.

From a purely competitive strategy position, that puts US firms at a tremendous disadvantage and being that the banks and brokers tend to be market leading companies, that makes me feel very uncomfortable as we head into the new year.

In any case, we have a slow week ahead of us due to the shortened trading schedule. Some numbers to be on the lookout for (which can also be seen on our trusty economic calendar) are the Durable Goods orders, Initial Claims and Consumer Confidence numbers which are all coming out Thursday.

The market is going to be reacting a bit slow to the news but we could see some volatility on the last few trading days of the year if these numbers come in out of whack.

But not to worry, the market will still be here when we return in 2008, so don’t stress too much. Focus on what’s important in your life right now.

I hope you have a happy holiday and spend it well with friends and family!

Have a great weekend!