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Market Update

Capital raising in the financial sector continues in earnest, despite the SEC relaxing the regulation of fair value accounting over the weekend.  The SEC has suggested that certain assets do not have to be marked at their "fair value" (as in the value that they were last traded) if that fair value in unreasonably low because of forced or "panic" sales by those in a bind.  No word on whether the other side will hold true - ie. if you can mark up the value of assets when they are trading at unreasonably HIGH valuations...


Last night Lehman hit the street with a convertible preferred deal worth $3 yards (that's billion for those of you that don't have one in the bank).  It is speculated that they will yield between 7% and 7.5% - much better than the Citi - Abu Dhabi deal at a junky 11% (if we can recall back to last quarter).


UBS will also seek to raise as much as $15 more yards after their massive writedowns, having already scooped CHF$13 billion from private investors in Singapore and the Middle East.  Expect the same to come from Deutsche.



These financial institutions continued ability to raise gobs of capital with relative ease (although we'd argue some of it was given away) has to raise the confidence level somewhat.  As witnessed by treasuries and other safe government securities, there is no shortage of money waiting for a home.  This could make any snapback in the equity markets quite powerful as money rushes from the sidelines.  Some unfairly sold down credit, however, would be a good candidate already.  Ontario came out with a more ten year bonds yesterday yielding 71 basis points over Canadas.  Between the levels on these very safe provincials and other like the Canada Housing Trust and Canada Mortgage Bonds, which are government guaranteed, there is some great value in low risk assets out there.


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