From Dan Denning at the Old Hat Factory:
--There's nothing like starting your week with a kick to the guts. The Aussie market was doomed before trading began today with Friday's shock result by GE in New York. But it's the collapse of yet another Australian broker, Lift Capital and its 1,600 clients, which threatens to swamp the Aussie market this week.
--But wait, it's not just Lift. "The list of stock brokers that have been engulfed by the tumbling stock market may be expanded to a fourth victim with concerns growing about Melbourne stock lender Chimaera Capital," reports today's Herald Sun. We are finally learning just how many people bought their way into the boom with borrowed money.
--Valuations are out the door for now. If small brokers that offered their clients leverage keep collapsing and liquidating their portfolios, you'd have to be a daredevil or playing with someone else's money to be a buyer.
--It's not that there's no value in the market. It's that there are so many sellers. The trouble is you just don't know how much more forced selling there's going to be. With so much stock being dumped on the market, it pays to be very discrete.
--A quick word about GE before we move on. GE is a world-class jet engine maker. It's also a shameless money-lender.
--GE's commercial finance business in Australia has a much higher profile than its business in the States, which goes under a different name altogether But the company's dirty little secret is getting out: it's really a financial company masquerading as an industrial.
--The company generated huge earnings during the credit boom as a commercial lender, not an industrial manufacturer. GE reported a double digit decline in first quarter earnings, and promptly blamed the whole thing on Bear Stearns. But if GE's CEO Jeffrey Immelt were being candid with investors, he would admit that the problem isn't with Bear Stearns, but in the performance of GE's financial segments.
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