>Of all of the problematic sectors, the one that you would least like to
>see not working if you are a bull is the brokerage stocks. These stocks
>trade by and large with the health of the markets, both bond and stock.
>They are simultaneously a coincident and a predictive barometer of
>prices down the road. But let's face it, these guys have been hit by a
>triple whammy: Underwritings are slim, trading is getting very tough and
>who knows what is going on in the dark recesses of the international and
>mortgage debt departments?
>
>These stocks trade as if someone besides the
>buy side has massive exposure to the pieces of paper that must be
>incredibly difficult to value right now. How do you value Indonesian
>junk bonds? How do you value Brazilian debt? Or Venezuelan debt? Do you
>give it a haircut? Do you give it one of those buzz cuts? What about all
>of that mortgage paper that some customer may have plugged them with?
>How do you value that with prepayments skyrocketing? This stuff has to
>be financed and it goes down everyday! That's the worst-case scenario
>for brokerage houses.
Doug