Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

So much for the “Great American Lager”:

InBev NV agreed to buy Anheuser- Busch Cos. for $49.9 billion to become the world’s biggest brewer, the Wall Street Journal reported, citing unidentified people familiar with the situation.

The $70-a-share takeover of St. Louis-based Anheuser-Busch is the second-biggest of a U.S. consumer-goods company and ends a month of court fights and public disputes over the future of the 156-year-old maker of Budweiser. Leuven, Belgium-based InBev will change its name to Anheuser-Busch Inbev, and Anheuser will have two seats on the board, the Journal said.

From Bloomberg:

Treasury Secretary Henry Paulson sought blanket authority from Congress to buy equity stakes in and lend to Fannie Mae and Freddie Mac, aiming to stem the collapse of confidence in the largest sources of U.S. mortgage financing.

Paulson will propose to Congress a “temporary” increase of the companies’ lines of credit with the Treasury from the current $2.25 billion each, and the right to buy equity “if needed,” according to a statement released by the department in Washington.

Freddie Mac is scheduled to sell $3 billion in short-term notes tomorrow, and Paulson’s comments indicate a growing concern that a crisis of confidence may take hold if demand for the debt is weak. The plan, which requires congressional approval, would give Paulson power to buy an unspecified amount of stock in Fannie Mae and Freddie Mac, a Treasury official told reporters.

A third element of the proposal would give the Federal Reserve a “consultative role” overseeing the companies’ capital requirements. The Fed separately announced it will let the companies borrow directly from the Fed at the same discount rate as commercial banks.

Here’s the full statement from Hammerin’ Hank.

Ooops!! Had to grab this quote from the Yahoo article before they fix it:

A senior Treasury official said any increase in the line of credit — now at $2.25 billion for each company– would be at the Treasury secretary’s discretion. The same would apply to any equity investment made by the government.

The official, who spoke on condition of animosity, also sought to send a calming message about Fannie’s and Freddie’s financial shape, saying: “There’s been no deterioration of the situation since Friday.”

Animosity? Sounds like this official isn’t very thrilled with the idea…

Freddie Mac has a debt offering planned for tomorrow (previously scheduled), so the talk is that efforts are afoot to 1) announce any plans to offer help to Fannie and Freddie prior to the market open tomorrow - maybe even before Asia opens this evening, and 2) make sure that the debt offering gets done.

Thanks to CR for covering this.

From the Times story re #1:

US TREASURY secretary Hank Paulson is working on plans to inject up to $15 billion (£7.5 billion) of capital into Fannie Mae and Freddie Mac to stem the crisis at America’s biggest mortgage firms.

—

Under the terms of the proposed move, the US government would receive a new class of shares in exchange for the capital, which would be hugely dilutive to shareholders.

The Fed and the Treasury are going to have to grow more fingers to keep plugging all the holes in the dam as they spring up. And if you didn’t own any shares of Fannie and Freddie, as a taxpayer, you probably will real soon.

Update:  An interesting comment from this Bloomberg article on the subject:

“There should be a public policy discussion before the Treasury Department turns an explicitly non-government obligation into an explicit government obligation,” said Joshua Rosner, an analyst with Graham Fisher & Co. in New York. “This is not being done with Congress’ involvement and many in Congress would not approve of the decision to burden the taxpayer.”

That’s true - but the man speaks as if Congress would actually take the taxpayers’ opinion into account. They don’t seem to care much about majority public opinion on the housing bailout measure, do they? Which, ironically enough, looks to our insolvent pals Freddie and Fannie to take on ever more and larger mortgages to help support housing prices. Now doesn’t that seem like a great idea?

Notes on the latest moves in the industry groups:

• The commodity and energy groups bounced a bit after slipping below the 50-day (red line). These areas are still the strongest, but appear to have entered a corrective phase.
• Gold and silver stocks perked up as the metals themselves made strong moves - but the stocks, as a group, have been bouncing around quite a bit. There’s still some work to do there to establish a real trend.
• The utilities are trying hard to fulfill their usual ‘defensive’ role.
• Also in the ‘defensive’ vein, some of the health care areas might be trying to gather themselves here. The HMOs are still struggling, but the drug stocks have stopped going down, for now, and some of the biotech names have done well of late, despite the bad market.
• The tech groups are still clearly struggling.
• The other obvious trouble spots haven’t improved, namely the financials, defense, real estate and retail.
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page., or the Industry Group Tracker at WSJ Online.