gm writes:
first?
gm | 03.19.08 - 11:13 am | #

homedad43 writes:
First.

I think that I'm starting to get the hang of reading all of this.

It beats the chicken guts that I used to be using.
homedad43 | 03.19.08 - 11:13 am | #

MSM writes:
On the Fed's Commercial Paper Releases page, the plot "Discount rate history" has color choices for its data lines that give, I presume unintentionally, the aesthetic of flames rising from the curves, beginning with the first wave last summer.

Burning down the (credit) house.
MSM | 03.19.08 - 11:14 am | #

gm writes:
if this isn't nationalization of the banking system then i don't know what nationalization is...fed's balance sheet has no growth limit
gm | 03.19.08 - 11:14 am | #

NoVa writes:
This is Elliot Wave theory?

So this is the final wave of the 3 waves in a downturn? Below is for those who don't have a clue like me.

Based on his research that showed that financial markets bear a striking resemblance to the basic harmony found in nature, Ralph Nelson Elliott postulated that price movements in financial markets follow patterns, but not necessarily in time or amplitude. Elliott developed the Wave Principle on empirically derived rules for interpreting the price action. He hypothesized that financial prices unfold according to a basic rhythm or pattern: five waves in the direction of the trend and three waves counter to the trend (figure 1). Elliott named the five-wave upward movement an impulse wave, and the three-wave counter trend a corrective wave. The most exciting and profitable impulse wave is the third, and this analysis deals with methods of trading this wave.
NoVa | 03.19.08 - 11:15 am | #

energyecon writes:
Here is another oddity - I don't know if anyone else here follows the US Treasury TIO short term money operations - but there were two auctions yesterday and one of them ended up being for $0, a result I have never seen before...no clue what it means but damned peculiar...

US Treasury TIO Auction 464

Cool post CR!
energyecon | 03.19.08 - 11:16 am | #

gab writes:
There's been a huge flight to bills as quarter end approaches, but, for the moment, the flight to safety seems to have abated and a move to riskier securities seems to be in the works.

Mortgage and agency spreads have come in a bunch, and credit is starting to trade more readily. To say nothing of the move out of commodities.
gab | 03.19.08 - 11:17 am | #

Tom Stone writes:
gm,the Fed's Balance sheet does have a growth limit,Economic Collapse.
Tom Stone | 03.19.08 - 11:17 am | #

Martin writes:
If I'm asking a stupid question please accept my apologies.;) Do I understand correctly that this reflects the credit spread of US banks over US treasuries? If so, does this also explain why the cuts in the federal funds rate have not been passed on to the bank's clients?
Martin | 03.19.08 - 11:20 am | #

Marcus Aurelius writes:
It beats the chicken guts that I used to be using.
homedad43 | 03.19.08 - 11:13 am

____


If I remember correctly, the guts came after the headless chicken dance.
Marcus Aurelius | 03.19.08 - 11:26 am | #

sterlingerl writes:
OMG has anyone noticed that gold has dropped $40? Wow!
sterlingerl | 03.19.08 - 11:26 am | #

Bob_in_MA writes:
On the subject of China/decoupling, one thing that's kind of fallen off the radar screen of the MSM is that the main Shanghai index is down about 38%. Just for the hell of it, I coompared that to the fall of the DJIA from Fall of '29. It fell from an October peak of 380 to around 240 and stayed in that range for month or so, about a 38% drop.

I don't mean to add one of those tortured historic parallels, but I just wanted to see the relative severity.

Like 1929 here, every one who could seemed to be putting money into the market last year in China. It would seem really odd if this drop has no effect on consumption. And the decoupling theory rests firmly a continuing healthy rise in Chinese consumption.
Bob_in_MA | 03.19.08 - 11:28 am | #

CalculatedRisk writes:
Martin, the TED spread is the difference between the 3 month LIBOR (the interbank rate) and the 3 month treasuries. This shows the willingness of banks to lend to each other.

The A2P2 spread is the difference between lower rated and higher rated commercial paper.

Both are measures of credit fear in the market.

Best Wishes.
CalculatedRisk | Homepage | 03.19.08 - 11:31 am | #

X writes:
Mortgage rates are all over the place today. Here is an oddity-

Citi is offering 3/1 to 7/1 ARMs starting at 8.50%. Their 1 year ARM is 12+%!

Meanwhile Bank United has the 3/1 ARM at 6.00% no points. Unreal. Maybe Citi just doesn't want to lend money anymore?
X | Homepage | 03.19.08 - 11:36 am | #

Elvis writes:
All of this rapid news is starting to give me a headache. Sometimes I long for the good old days, about 18 months ago, when there were about 3 or 4 stories posted a day.
Elvis | 03.19.08 - 11:36 am | #

scav writes:
And more UberPosts. But what can we do?
scav | 03.19.08 - 11:39 am | #

wawawa writes:
What is THIRD WAVE? Thanks.
wawawa | 03.19.08 - 11:40 am | #

scav writes:
And that is NOT any reflection on Tanta. It's more that when you're in the thick of things it's usually too late to pick up the fundamentals.
scav | 03.19.08 - 11:40 am | #

Bob Dobbs writes:
"sterlingerl writes:
OMG has anyone noticed that gold has dropped $40? Wow!"

Yeah. Some folks are taking their profits. Perhaps big players who need the money elsewhere?

But with this third wave -- thanks very much for the graphics, CR -- gold may be back. Remember, it's taken drops of this magnitude at least twice before in the last year.
Bob Dobbs | Homepage | 03.19.08 - 11:41 am | #

X writes:
Looks like Indy Mac is having problems funding loans.....uhoh....
X | Homepage | 03.19.08 - 11:42 am | #

blackhat writes:
Bob_in_MA,

Chinese market is very speculative. As soon as I heard people talking about how they tripled their money in 6 months, I cringed. China has a large amount of new money that can be thrown at a very nascent stock market (read small) so the effect of the money pumping in is to increase the value of stocks, but not the underlying worthiness of the companies (or read State Owned Enterprises). At the end of the day, infrastructure is still poor, legal standards vary widely, protections for personal property and property rights almost non-existant (some push-back there as middle class grows)...I see decoupling in the sense that US won't drag down the rest of the world, but China will go down some to correct over-valued stocks in a highly speculative market. China can also command-economy itself much faster into a correction than we can if they should decide to formally decouple the dollar...anyway, risk is getting riskier. Charts show that.
blackhat | Homepage | 03.19.08 - 11:44 am | #

david_in_ct writes:
X:
I know someone that closed a chase HELOC today for prime - 1.01. By tomorrow that should work out to about 4.24.
strange stuff indeed
d
david_in_ct | 03.19.08 - 11:47 am | #

Optimistic Joe writes:
Gold & silver indexes point to lower bullion & jewelry prices.

O-Joe
Optimistic Joe | 03.19.08 - 11:47 am | #

traderboy writes:
Not just the US...interbank rates up in the UK as well:

" LONDON (Thomson Financial) - The rates at which banks lend to each other on a three-month basis in the UK continued to edge up as uncertainties plague global financial markets, though overnight rates dropped.

The three-month London Interbank Offered Rate (Libor) -- a key indication of banks' willingness to lend to each other over the medium term -- rose to 5.98 pct from 5.97 pct yesterday, while the one-month rate stayed at 5.75 pct."
traderboy | Homepage | 03.19.08 - 11:49 am | #

Sebastian writes:
Calculated Risk said: "Both are measures of credit fear in the market."

I finally catch a break.:) "Measures of credit fear," but not "measures of whether it's well-founded."


S.
Sebastian | 03.19.08 - 11:52 am | #

X writes:
Here is another oddity-

The conforming cap has been raised to $729,750 in my area for Freddie and Fannie. However, their "Jumbos" aren't competitive at all vs. other lenders' portfolio stuff. Their 5/1 ARMS are at 7.75% with customer paying 1.879 points to get to par. A portfolio 5/1 is 6.00% at par.

What was the point of raising the cap if it was going to work out this way?
X | Homepage | 03.19.08 - 11:53 am | #

Nemo writes:
As Krugman also points out, the 3-month Treasury is yielding 0.73%. That will certainly contribute to your TED spread... Not a good sign, if it persists.

We'll see what happens to the CP spreads over the coming days.
Nemo | Homepage | 03.19.08 - 11:55 am | #

julieng writes:
the -75 bps will do the job, for some times ..
julieng | 03.19.08 - 11:55 am | #

sam writes:
Liquidity trap watch

http://krugman.blogs.nytimes.com...ity-trap-watch/
sam | 03.19.08 - 11:55 am | #

eh writes:
As defined the TED is probably significantly skewed at the moment due to the panic rush into treasuries which has tanked yields.
eh | 03.19.08 - 11:56 am | #

Ceilingfan writes:
Gave me chills. Not in a good way. But love the graphics!
Ceilingfan | 03.19.08 - 11:56 am | #

Optimistic Joe writes:
One could also point out that the indurance premium for bank debt fell by most in history. So, it's not all bad, unless you get your education from the CR blog only.

http://www.bloomberg.com/apps/ ne...id=aN08cfTF0uMo

O-Joe
Optimistic Joe | 03.19.08 - 11:58 am | #

sam writes:
Subprime, the New Contrarian Play?

http://www.housingwire.com/2008/...ontrarian-play/
sam | 03.19.08 - 11:59 am | #

Worried writes:
Sebastian

"Measures of credit fear," but not "measures of whether it's well-founded."

You have lost all credibility whatever your purpose here it is now more an indicator of just how bad it is each time you make these stupid comments!

Only a total moron cannot now see that this is a crisis of biblical proportions!

Whatever quaint notions i had about your right to free speach are way gone

You are only talking the market down and encouraging others to bet oppositly to your deranged ramblings

Get real for Gods sake
Worried | Homepage | 03.19.08 - 11:59 am | #

X writes:
The three-month London Interbank Offered Rate (Libor) -- a key indication of banks' willingness to lend to each other over the medium term -- rose to 5.98 pct from 5.97 pct yesterday, while the one-month rate stayed at 5.75 pct."
traderboy | Homepage | 03.19.08 - 11:49 am

Am I missing something? I just went to bloomberg and the 3 month LIBOR is currently at 2.60%..

http://bloomberg.com/markets/rat...ates/ index.html
X | Homepage | 03.19.08 - 11:59 am | #

Worried writes:
X you are mixing Sterling Libor with Dollar Libor or the article is
Worried | Homepage | 03.19.08 - 12:01 pm | #

jus me writes:
Worried - take your meds.
jus me | 03.19.08 - 12:01 pm | #

Noble writes:
sterlingirl: Fed's "hawkish" cut yesterday of "only" .75 points is causing the gold collapse. mp & Conjure had predicted the PM collapse a few days ago if I remember which is when I loaded up on DZZ to protect my GLD investment. I really dont want to have to sell my GLD if I dont have to. so hedging is what I am adopting... But the fall today is troubling - it broke thru a long term trendline at around 955... we shall see. The fear is still there as CR points out... and there are rumors of a European bank in trouble. Gold may still be back.
Noble | 03.19.08 - 12:02 pm | #

Sebastian writes:
Worried asked: "X you are mixing Sterling Libor with Dollar Libor..."

He sure is.:)

http://mortgage-x.com/general/in...tory.asp? y=2008


Sebastian
Sebastian | 03.19.08 - 12:03 pm | #

X writes:
thanks...it's sterling LIBOR!
X | Homepage | 03.19.08 - 12:04 pm | #

Bob_in_MA writes:
Blackhat: China has a large amount of new money that can be thrown at a very nascent stock market (read small)

Blackhat, it looks like the total market cap of the Chinese markets rose really dramatically, partly from share rise, but also because of the huge numbers of new issues. The best estimate I can come up with is that market cap peaked around $3-3.5T, and 2007 GDP was also about $3.5T, so the drop in value is equal to about 30-35% of GDP, similar to the Nasdaq's drop in 2000-3, though not the market as a whole. But then, there's no sign the Shanghai index has hit bottom.

If China slows appreciably, decoupling is completely out the window. Brazil, Australia, Russia, Chile, South Africa, Canada, all the commodity economies, come to a screeching halt.

World production is increasing at a heady pace. Someone has to buy it all, and in increasing amounts.
Bob_in_MA | 03.19.08 - 12:04 pm | #

Sebastian writes:
Worried said: "You are only talking the market down..."

I'm talking the market *up*, but I understood what you meant.:)


S.
Sebastian | 03.19.08 - 12:05 pm | #

Misean writes:
Gosh,

"Credit-default swaps on the CDX North America Investment Grade index, a benchmark gauge of default risk tied to the bonds of 125 companies in the U.S. and Canada, fell 23 basis points to 161 basis points, according to broker Phoenix Partners Group. Contracts on Lehman fell to the lowest in almost two weeks and Goldman contracts dropped to an almost three-week low, signaling improvement in investor confidence."

http://www.bloomberg.com/apps/ ne...id=aN08cfTF0uMo

That's some drop. Lowest in 2-3 weeks.

LOL.

Cheers,
Misean | 03.19.08 - 12:06 pm | #

donna writes:
Looks like fifth wave failure so far....
donna | Homepage | 03.19.08 - 12:08 pm | #

franz writes:
Interesting. All I know is when you are at the beach surfing, you always wait until the third wave as it is typically the biggest and strongest. Always seemed to be that way when you have a set of three waves.
franz | 03.19.08 - 12:10 pm | #

festerpig writes:
It is not just gold that dropped; oil and the EUR are doing the same thing. A short term rebound in the dollar? Since 215 pm EST yesterday, nothing in the market seem to follow any conventional wisdom ... and i can't fully convince myself that all the money is coming out the "once-hot" commodities and back into the stock market. Can it really be that?

thank you.
festerpig | 03.19.08 - 12:10 pm | #

Worried writes:
My feeling is that the Fed rates fly in the face of the reality developing that cash is more valueable.

If inflation begins exploding those rates are going up no matter how ugly it gets and anybody wishes otherwise.
Worried | Homepage | 03.19.08 - 12:10 pm | #

Ed writes:
"This is Elliot Wave theory?

So this is the final wave of the 3 waves in a downturn? Below is for those who don't have a clue like me.

Based on his research that showed that financial markets bear a striking resemblance to the basic harmony found in nature, Ralph Nelson Elliott postulated that price movements in financial markets follow patterns, but not necessarily in time or amplitude. Elliott developed the Wave Principle on empirically derived rules for interpreting the price action. He hypothesized that financial prices unfold according to a basic rhythm or pattern: five waves in the direction of the trend and three waves counter to the trend (figure 1). Elliott named the five-wave upward movement an impulse wave, and the three-wave counter trend a corrective wave. The most exciting and profitable impulse wave is the third, and this analysis deals with methods of trading this wave"

Perhaps we need to start teaching some trig in business school
Ed | 03.19.08 - 12:11 pm | #

REBear writes:
Hi,
Do you buy options on S&P? If so which etf would you recomend? thanks
REBear | 03.19.08 - 12:12 pm | #

Crispy&Cole writes:
Central Ca bank delays f/s and posts a big loss:

http://www.centralvalleybusiness...es/001/? ID=8163
Crispy&Cole | Homepage | 03.19.08 - 12:14 pm | #

Worried writes:
"the reality developing that cash is more valueable."

By that i mean the funny money is dissapearing but the loans remains and as leverage dissapears cash sitting idle becomes more valueable or sought after. Surely rates have to go up?
Worried | Homepage | 03.19.08 - 12:14 pm | #

blackhat writes:
Bob_in_MA,

Excellent points. Not suggesting there won't be effects like China and US will function in sterile economic bubbles...And you're right, a lot of commodity hunger is coming from China to produce more complex and finished products. On the other hand, it's still a command economy from the central government. They will still build factories, dams, bridges, highways, refineries, ports, etc...and continue to gobble up all those commodities...granted we could see drop off, but they have 5 and 10 year plans that don't care about short term market conditions IMO. Europe is now China's largest trading partner. Don't be suprised to see China switch the dollar to the Euro to support those new eastern block on-the-way up consumers...again, just my opinion.
blackhat | Homepage | 03.19.08 - 12:14 pm | #

sam writes:
new article on CDS

http://www.time.com/time/ busines...ref=patrick.net
sam | 03.19.08 - 12:16 pm | #

Sebastian writes:
Worried said: "If inflation begins exploding those rates are going up no matter how ugly it gets and anybody wishes otherwise."

Calm down, and follow that line of reasoning.

If inflation is going to go up and interest rates must rise, what does that say about the state of mind of people who are buying T-bills yielding less than 1%? For people buying 5-year Treasuries yielding only 2.47%?

http://finance.yahoo.com/q?d=t&s=^IRX

http://finance.yahoo.com/q?d=t&s=^FVX

This is part of the game, too, keeping your head while others are losing theirs.


S.
Sebastian | 03.19.08 - 12:19 pm | #

Crispy&Cole writes:
“This remediation process has included independent evaluations of more than 70 percent of the dollar amount of the $1.3 billion of commercial loans outstanding at Dec. 31, 2007,” it says.

This bank is in deep trouble! CRE and Residential problems.
Crispy&Cole | Homepage | 03.19.08 - 12:19 pm | #

sam writes:
“The Fed cannot unilaterally suspend mark-to-market. That would truly be "banana-republic" policy.”
No, but the FASB can, and there is already talk that it makes no sense to mark assets to market when most people agree the current market values are wrong and the real value of the assets will inevitably be higher. So if insolvency depends upon mark to market, and mark to market is suspended in this situation, then the whole problem disappears, right?
The emperor has no clothes, but if everyone pretends otherwise, then life goes on as normal.
sam | 03.19.08 - 12:19 pm | #

Elvis writes:
CR: General question: How much do you think the rate cuts help the value of income producing properties like office buildings? Have these rate cuts decreased the risk of office buildings and increased the pricing by keeping cap rates down? Is it keeping air in a bubble or are the cuts too late as there is too much momentum against CRE? Trying to figure out how CRE will respond to more Fed panic.
Elvis | 03.19.08 - 12:20 pm | #

Magnolia writes:
Bottom Line.....The Fed has engaged in Sophisticated MONEY LAUNDERING.
Magnolia | 03.19.08 - 12:21 pm | #

psychodave writes:
@Sebastian | 03.19.08 - 12:19 pm
Thanks for the links.
What ticker symbol will get Yahoo to give me the 2-year Treasury?
psychodave | 03.19.08 - 12:21 pm | #

donna writes:
I wonder if ppl are selling commodities to buy Visa... hasn't been anything new on the market to buy in quite some time now.
donna | Homepage | 03.19.08 - 12:23 pm | #

Anonymous writes:
Investment banks Goldman Sachs Group Inc and Morgan Stanley are testing a new program that allows investment banks to borrow directly from the Federal Reserve, according to people at the banks.

Lehman Brothers has borrowed $2 billion under the program, CNBC reported on Wednesday. A spokeswoman for Lehman was not immediately able to comment.

http://www.reuters.com/article/ o...954536520080319

Come in HOG! The PIGS are lining up at the trough.

Please short me!
Anonymous | 03.19.08 - 12:23 pm | #

Simian writes:
Sams point about pretending that the economy is OK makes it OK works until -

1) 70% of GDP is consumer spending
2) 3 or 4% of consumer spending is from MEW
3) GDP goes down,employment goes down, income goes down
4) We crash and burn
Simian | 03.19.08 - 12:24 pm | #

CalculatedRisk writes:
Elvis, right now I don't think the rate cuts are helping CRE. The borrowing rates for CRE - if you can get a loan - are steady or rising.

Best to all.
CalculatedRisk | Homepage | 03.19.08 - 12:25 pm | #

Kicker writes:
At the end of the day, infrastructure is still poor, legal standards vary widely, protections for personal property and property rights almost non-existant (some push-back there as middle class grows)...

Long term, bullish on China, but I'll add...

- Price controls on food, electricity, oil.
- Real estate is in a *huge* bubble and the land isn't even *owned* it's rented from the state for 50 years.
- Lockup in the dollar market (nobody wants them so they are flooding back into the market)
- Huge overhangs in manufacturing that hasn't been able to move up the value chain (no pricing power)
- Central bank trying to control interest rates, currency, and inflation (the central bank holy trinity). Can't be done.
- Stocks trading because the shares are listed under lucky numbers
- No shorting of A shares
- Large discounts on H shares (overseas traded shares) compared to A shares of the same companies
- Large amounts of bad debt on banks balance sheets. Mostly in loans to state own zombie companies. Amount of bad debt is almost equal to reserves (600B).
- Environmental disaster
Kicker | 03.19.08 - 12:25 pm | #

Anonymous writes:
But they are going up. That must be good.

Everytime oil goes up, the pundits on CNBC are gleeful as it means that Exxon-Mobil will be boosting the Dow.

And NPR doesn't quite get the difference yet, either.
Anonymous | 03.19.08 - 12:25 pm | #

CalculatedRisk writes:
All, as far as UberNerd posts, Tanta is on her own schedule. I thought I posted an interesting analysis of starts yesterday - and how they have finally fallen enough to start reducing new home inventory (but starts need to fall more).

That's my kind of "UberNerd" contribution!

Best to all.
CalculatedRisk | Homepage | 03.19.08 - 12:27 pm | #

Anonymous writes:
Stunning coordinated gold-slamming going on today.

That should work, for about 2 days.
Anonymous | 03.19.08 - 12:27 pm | #

Worried writes:
Sebastian

"what does that say about the state of mind of people who are buying T-bills yielding less than 1%?"

Probably they are scared the banks are going to fail and want to hold the cash equivalent in their own safe

You tell me.
Worried | Homepage | 03.19.08 - 12:27 pm | #

Elvis writes:
CR, OK. But what about non-leveraged CRE? Buying with cash because income streams beat other investments? Although many do, not all buyers of real estate use leverage. Is the percentage of cash buyers significant enough to stabilize CRE?
Elvis | 03.19.08 - 12:30 pm | #

blackhat writes:
Maybe Misean can answer this:

Didn't China diversify their reserves over the last 1 and half years amounting to 1TRillion, and most of it went into commodities/precious metals???

anyone remember this?...think they might want to bring their commodity prices down about now by selling large positions in PM?...just a thought, or maybe not.
blackhat | Homepage | 03.19.08 - 12:31 pm | #

Misean writes:
As I've said G&S is a fairly small market.

Have the FED print up a fresh $2B and exchange it with LEH for worthless MBS, then short the G&S market and this is what can happen. I've been expecting a pull back, the plunge at the New York open was a bit much.

/SCTFH power down

Of course I can't find a Moving Average on dollar/yen that gets broken over a month run other than the 5 day.

http://quotes.ino.com/chart/?s=F...=d1&w=1&t=l& a=5

Cheers,
Misean | 03.19.08 - 12:32 pm | #

wawawa writes:
Good one from Suddent Debt.

http://suddendebt.blogspot.com/2...ed-as- bank.html
wawawa | 03.19.08 - 12:34 pm | #

Misean writes:
blackhat,

They've been diversifying, but not to that big of an extent. They're still very big in paper. They're making resource plays not commodity plays. They're buying mines, miners, joint oil deals...that sort of thing.

Cheers,
Misean | 03.19.08 - 12:35 pm | #

Peter writes:
Back to the original thread... the TED spread has now hit a new intra-day high of 1.92 (on my 20 minute delayed poor man's view of Bloomberg).

The spread is now up 27bp on the day. Yuck.
Peter | 03.19.08 - 12:36 pm | #

tg writes:
Watching Volker last night one meme was overconsumption and that it would have to come to a stop. There is a great difference between stopping voluntarily and being told the stores are out of something.
tg | 03.19.08 - 12:37 pm | #

blackhat writes:
Misean,

Good answer. Makes more sense to just own the mine, oil, etc...better way to mitigate those pesky rises and falls for the hungry dragon...
blackhat | Homepage | 03.19.08 - 12:40 pm | #

Sebastian writes:
Worried said: "Probably they are scared the banks are going to fail and want to hold the cash equivalent in their own safe"

Exactly. So the question you should be asking yourself now is "Okay, just for the sake of argument let's say the world *isn't* coming to an end: What would I want to own?"


S.
Sebastian | 03.19.08 - 12:41 pm | #

Elvis writes:
blackhat,
I recommend seeing the current edition of the Economist that has a cover story on China. Something like "New Colonialism" and how China is using other parts of the world for commodities.
Elvis | 03.19.08 - 12:42 pm | #

Anonymous writes:
"the main Shanghai index is down about 38%"

and yet it's still up over 20% y-o-y. It has a lot further to fall.
Anonymous | 03.19.08 - 12:43 pm | #

Elvis writes:
"Okay, just for the sake of argument let's say the world *isn't* coming to an end: What would I want to own?"

A liquor store.
Elvis | 03.19.08 - 12:43 pm | #

blackhat writes:
Sebastian,

I'd go 50% international funds, 30% domestic, 20% utility funds.

Domestic shores up, you switch 50 to 60% domestic 20% foreign...blah blah blah...as long as fundementals return you just index away and take you slightly above inflation returns...hurray!
blackhat | Homepage | 03.19.08 - 12:44 pm | #

blackhat writes:
Elvis,

I'm reading it...14 sections I think. Very useful.

Thanks.
blackhat | Homepage | 03.19.08 - 12:45 pm | #

Bob_in_MA writes:
Blackhat: Europe is now China's largest trading partner. Don't be suprised to see China switch the dollar to the Euro...

Blackhat, I think you're definitely wrong about that. What has changed is that China's growth of trade with Europe is now growing much faster than it is with us, but 20+% is with the US and the next few are all Asian countries.

Germany is as dependent on exports as China, there two biggest destinations are the UK and us.

Decoupling seems to rest on all the countries of the world with export surpluses will over-come the loss of the biggest importer, by exporting more to each other... does not compute.
Bob_in_MA | 03.19.08 - 12:46 pm | #

sam writes:
Life can always be worse folks!:
http://www.foxnews.com/story/ 0,2...,339270,00.html

A German retiree is taking a hospital to court after she went in for a leg operation and got a new anus instead, the Daily Telegraph is reporting.

The woman woke up to find she had been mixed up with another patient suffering from incontinence who was to have surgery on her sphincter.

The clinic in Hochfranken, Bavaria, has since suspended the surgical team.

Now the woman is planning to sue the hospital. She still needs the leg operation and is searching for another hospital to do it.
sam | 03.19.08 - 12:47 pm | #

ron writes:
GLD and commodity can be very rough rides, with the unwind in the carry trade expect large price movements. Also gold does have real time use in the luxury market and as it's price rises these markets tend to look for other metals that can be used or demand continues to drop therefore pushing up inventory levels.
AG commodity prices will be the more important for wheat, corn etc which is driving up prices worldwide.
ron | Homepage | 03.19.08 - 12:48 pm | #

Mike writes:
Wow, someone ripped her a new one, eh?
Mike | 03.19.08 - 12:48 pm | #

SC writes:
The 800lb Gorilla is Level 3 assets. That Gorilla was sitting on the chest of the investment banks until the Fed did the TLSF and opened the discount window to the IBanks.

The Gorilla is now off their chests and they can breathe.

Mr. Gorilla is still in the room and eyeing the IBanks as if they were a ripe banana.
SC | 03.19.08 - 12:49 pm | #

m writes:
"Endeavour Capital Fund Falls About 28% on Japanese Bond Trades

By Saijel Kishan and Tom Cahill

March 19 (Bloomberg) -- Endeavour Capital LLP, the London- based hedge-fund firm founded by former Salomon Smith Barney Inc. traders, fell about 28 percent this month on losses in Japanese bonds, according to two investors.

The $2.88 billion Endeavour Fund sold ``substantially all'' of its Japanese government debt this week, Chief Executive Officer Paul Matthews said today in an interview. He declined to comment on the March decline.

...

``We're experiencing a massive de-leveraging event,'' said Gina Sanchez, who manages about $4.2 billion for the California Endowment in Los Angeles. ``We're really going to find out who has actually been hedging and who has got too much leverage on. There's going to be more blowups.''

``As long as we have the support of our banks this is survivable,'' said Matthews."

Nice wording for: "We are as good as dead!"
m | 03.19.08 - 12:50 pm | #

Angry Saver writes:
If enough people are interested, I can do an uber-nerd rant on the fallacy of lowering interest rates at the expense of prudent, responsible citizens for the benefit of greedy banks, speculators and debtors all against a backdrop of rising inflation and a looming demographic, fiscal and currency crisis.

Or I could just comment an how A-Rod's contract is worth more than the efforts of 14,000 Bear Stearns employees as well as 210 failed mortgage lenders.
Angry Saver | 03.19.08 - 12:52 pm | #

Bob_in_MA writes:
Elvis,

I read the Economist pretty assiduously. They are definitely in the decoupling camp, ie., China's growth will fall from 11% to 7-8%.

I don't think they make a convincing case. Here's the Economist on China's stock market losses:

There are also reasons to believe that the losses—in excess of $1 trillion—are not as devastating as they first appear. Much of the capitalization of the Chinese markets is tied up in shares held by the government, so whatever the extent of the losses, less than half has been borne by private investors.

OK, but here the majority of losses are borne by institutional investors, likewise insulated.

Every week the Economist seems to have a couple articles telling me why everything will be great in China. Me thinks they protest to much...
Bob_in_MA | 03.19.08 - 12:52 pm | #

Sebastian writes:
blackhat said: "I'd go 50% international funds, 30% domestic, 20% utility funds..."

I prefer to play a little more aggressively than that, but I take your point. I'm long-term bullish, but not in the LTBH sense, just in terms of the "what is the intermediate/long-term direction of the market?" sense.

Core belief: If I don't believe recession is in the cards, I'm bullish.


S.
Sebastian | 03.19.08 - 12:53 pm | #

homedad43 writes:
My wife would like to dopeslap me for the PM purchase recently.

Still, with the whipsawing and the new rise of TED spreads, I think that it'll come back.

Otherwise, I have to start wearing a helmet.
homedad43 | 03.19.08 - 12:55 pm | #

Sebastian writes:
Angry Saver said: "Or I could just comment an how A-Rod's contract is worth more than the efforts of 14,000 Bear Stearns employees as well as 210 failed mortgage lenders."

One of my favorite historical rants: When Dan Rather was still on the air, he was being paid more than all the BBC correspondents in the world, combined.


S.
Sebastian | 03.19.08 - 12:56 pm | #

Elvis writes:
Bob in MA,
You might be right. I don't know enough about China (yet) to make a reasonable opinion either way.
Elvis | 03.19.08 - 12:58 pm | #

Angry Saver writes:
Homedad,

Buy your wife gold jewelry. Kills two birds with one stone.

For me, gold, silver or jewels are an insurance purchase, not an investment. You need insurance, but you don't want to use it.
Angry Saver | 03.19.08 - 12:58 pm | #

m writes:
Gasoline price spike has only just begun

Motorists should expect to pay upwards of $3.75 a gallon in the coming weeks as prices at the pump catch up with record crude, but relief may arrive by summer.

CNNMoney.com staff writer
Last Updated: March 19, 2008: 11:35 AM EDT


High gas prices force Americans to drive less
NEW YORK (CNNMoney.com) -- Gasoline has hit record levels - and experts say it will likely continue to soar in tandem with the skyrocketing price of crude.

The national average retail price for gas has risen about 30 cents in the past month to $3.279 a gallon, exceeding the all-time high set last year, according to the motorist organization AAA.

And experts say motorists should prepare to pay nearly $4 a gallon - and in some places even more than that - before the price of gas finally comes down in the late spring as high prices crimp demand.

The price of gasoline usually increases this time of year. Several factors contribute to the runup: Low refinery output due to maintenance, a switch from winter to pricier summer blends, and the looming high-demand summer driving season.

Experts say this time around the spike will be more pronounced, mostly due to the surging price of oil and, to a lesser extent, refiner's attempts to grow their profit margins.

"It's all crude," said Tom Kloza, chief oil analyst at Oil Price Information Service. "The crude market is morbidly obese."

Oil prices - which account for 80% of the price of a gallon of gas - have jumped 20% in just over a month as investors pour money into commodities of all types.

Commodities like oil are seen as a hedge against inflation and the falling dollar - which has been trading at record lows - triggered by economic woes and interest rate cuts from the Federal Reserve.

Oil, already trading near $90 a barrel on the back of strong global demand, took off in February as the economy worsened and the Federal Reserve cut interest rates with crude now spiking to record highs on a near-daily basis - settling at a record $109.85 on March 13th.

But as oil prices rose gasoline prices stayed stagnant and profit margins enjoyed by refiners shrank. Now those profit margins have become so small refiners have little incentive to make gasoline.

"The refiners are saying, 'Hey we're not making any money,'" said Tim Statts, vice president of risk management for Summit Energy, a firm that buys energy for big users. "The gasoline price almost has to come up to continue bringing the product to market."

According to John Kilduff, an energy analyst at the trading firm MF Global in New York, refiners are making about $6 off of every barrel of oil they turn into gasoline. That's down from over $38 a barrel last spring.

Refiners are operating at just 85% capacity, down from a normal rate of around 90%, according to figures from the Energy Information Administration.

Killduff said the low operating rate is partly due to refiners being shut down for maintenance but also due to the small profits they're getting on gasoline.

"There's no market incentive to rush your unit back into production," he said. "[Gas prices] can't go any lower in relation to crude."

So how high will gas prices go?

While several areas will see prices over $4 a gallon, Kloza said he expects the nationwide average to peak somewhere between $3.50 and $3.75. Kilduff is calling for a high of $3.50, and Statts thinks we'll see the $3.30s.

All three analysts think prices will peak early, in April or May, then decline as the economy worsens and demand for gas - already flat or falling - continues to deteriorate.

"[The falloff in demand] that occurs around $3.25 a gallon takes a lot of the mojo out of gasoline," said Kloza. "These prices are real speed bumps for the economy."

By July 4, when many Americans pack up the sedan and head for the mountains or beach, prices could be back around $3. If anyone can still afford a vacation.
m | 03.19.08 - 12:59 pm | #

squeezed writes:
If I don't believe recession is in the cards, I'm bullish.

Thanks for clarifying your stance...again.
squeezed | 03.19.08 - 1:00 pm | #

Jim writes:
Hey you didn't really think this meltdown would be over in a day, did you? Or that Benwizard would be able to solve it? Benwizard is kinda like a suburbanite with a back yard full of mosquitos who has only one newspaper to whack them with (often he misses). Ben needs a can of insect spray and he ain't got it. Maybe it doesn't exist.
Jim | 03.19.08 - 1:01 pm | #

Anonymous writes:
"most people agree the current market values are wrong and the real value of the assets will inevitably be higher"

Sorry, sam, but when the values are incalculable due to 'sophisticated' cash-flow projections and coincidental default rates, and those projections and default rates are changing daily, and by changing, they are getting worse, not better.

Mark to market is that one true clearing mechanism needed to properly re-price that which has been mis-priced. Let the market clear. Everything else is pure, unadulterated BULLSHIT!
Anonymous | 03.19.08 - 1:02 pm | #

Worried writes:
if treasuries are at rock bottom because people dont trust the banks then a recession is gauranteed. without money in the banks working for others it will be GD 2.0

I just get more worried when this Seb fellow talks!
Worried | Homepage | 03.19.08 - 1:02 pm | #

Cobradriver writes:
Kicker | 03.19.08 - 12:25 pm |
Bob_in_MA | 03.19.08 - 12:52 pm |

Within the last couple of months I saw a special on History International on China. It dealt with the transformation from government to private enterprise. The show was from early 07. It was amazing how much central control the gov still has over corps. The local offical with his board of cronies told the business manager..."You WILL make a profit within six months".

Yep,that'll make a company profitable! I fully realize there are very profitable companies doing business there but jeez...

Heck I think I remember an article from the last year that mentioned China would like to get into ship production just to eat up some of the excess steel prodution coming online.

Yes sir,the next couple of years will be interesting!

Chris
Cobradriver | 03.19.08 - 1:04 pm | #

Sebastian writes:
Worried said: "I just get more worried when this Seb fellow talks!"

I'm genuinely sorry to hear you say that, since I've taken great pains to put the current "panic" conditions into long-term perspective.

Oh, well.


Sebastian
Sebastian | 03.19.08 - 1:05 pm | #

sam writes:
Imagine the shock and awe of wall street workers as they get destroyed


Wall Street's pink slip parade

Job losses at Bear Stearns after the JPMorgan buyout could launch another big round of layoffs in the banking sector. And those jobs may never come back.

NEW YORK (CNNMoney.com) -- There's already been a wave of layoffs on Wall Street this year, and the Bear Stearns buyout could trigger another round of pink slips.

During the first two months of 2008, 18,000 jobs have already been lost in the hard-hit mortgage markets, according to research firm Challenger, Gray & Christmas, accounting for an overwhelming majority of the 22,000 jobs lost in the financial sector overall this year.

But analysts said Monday they expect 15,000 to 30,000 more job losses by the end of the year in the financial sector, including half of Bear Stearns' 14,000 workers following JPMorgan Chase's (JPM, Fortune 500) impending takeover of the company.

Spokespeople for Bear Stearns (BSC, Fortune 500) and JPMorgan Chase were not immediately available for comment.

The impact on New York City, where the bulk of the finance market is based, would be sizable. Marcia Van Wagner, deputy controller for the budget for the New York City comptroller's office, expects 5,000 job cuts at Bear Stearns' New York offices alone. She added this would be only a fraction of the overall job losses in the industry.

The mortgage-backed security market, which Bear Stearns has a big presence in, will be particularly hard hit, said John Silvia, chief economist for Wachovia. Silvia said that the crisis at Bear Stearns will lead to 5,000 job losses nationwide per month over the next three or four months.

To put this in perspective, Moody's Economy.com senior economist Marissa Di Natale said that if 30,000 finance jobs are lost through the end of the year, this would be less than a third of the losses from prior financial disasters, such as the Sept. 11 attacks or the Black Monday crash of 1987.

But Silvia noted that many of these jobs were eventually added back. He doesn't think this will happen this time around since the changes to the mortgage market in the wake of the subprime meltdown have been so dramatic. "The pace of mortgage business is not coming back, so you don't need all these people," he said.

Although job cuts are likely at other investment banks, Bear Stearns is likely to suffer the worst, analysts said. David Trone, analyst for the investment bank Fox-Pitt Kelton Cochran Caronia Waller, said the worst-hit area will be Bear's fixed-income trading division. He estimates that less than a third of workers in that division will keep their jobs.

"The majority of cuts will be in fixed income because that's the troubled area," he said, adding that JPMorgan already has an established bond trading business.

Trone also said that half of Bear Stearns' investment banking and equities workers are likely to get cut. But he thinks that workers involved with trading and securitization of prime mortgages - which are loans to high-quality borrowers - will be best insulated from any layoffs.

"It's a unique and strong business that JPMorgan doesn't have much of a presence in, and they've been after it for some time," he said.

Brad Hintz, analyst for Sanford C. Bernstein, agreed, saying that he didn't think anybody in Bear's prime mortgage-related businesses would lose their jobs. But generally speaking, Hintz added that it was not a happy day at Bear Stearns.

"I wouldn't want to be a staff guy [at Bear Stearns today]," he said.
sam | 03.19.08 - 1:08 pm | #

Angry Saver writes:
Cobradriver,

China is huge in the ship building business. Jiangnan Shipyard Company.
Angry Saver | 03.19.08 - 1:09 pm | #

john M. writes:
NEW YORK, March 19 (Reuters) - The Federal Reserve is draining permanent U.S. banking reserves via a $15 billion sale of Treasury bills from its portfolio, the Federal Reserve of New York said on Wednesday.

The Fed plans to sell $3 billion on each of five T-bill issues. They will be due 06/12/08; 07/10/08; 07/17/08; 07/24/08 and 07/31/08, the New York Fed said.

This is the second draining operation the New York Fed announced on Wednesday. Earlier the regional Fed, which conducts open market operations for the central bank system, conducted $7.25 billion in overnight reverse repurchase agreements.

Fed funds last traded at 2.375 pct, above the Fed's current target rate of 2.250 percent. (Reporting by Richard Leong; Editing by Tom Hals)
john M. | 03.19.08 - 1:12 pm | #

homedad43 writes:
Homedad,

Buy your wife gold jewelry. Kills two birds with one stone.

For me, gold, silver or jewels are an insurance purchase, not an investment. You need insurance, but you don't want to use it.
Angry Saver | 03.19.08 - 12:58 pm

Believe me, I purchased it as insurance...the total amount that I own is a small minority of total investments but where else to go? As to jewelry, we were able to purchase some decent grade stones some years ago from a jeweler who was closing. Independent appraisal showed a nice deal...
homedad43 | 03.19.08 - 1:14 pm | #

sam writes:
NOW THS IS REAL SCARY FOR MANY OF US.....

Social Security's running out of time
Because the trust fund is invested in Treasuries, the real problem starts not in 2040, but a decade or so from now.
By Allan Sloan, senior editor at large


(Fortune Magazine) -- One of Washington's rites of spring is almost upon us. It's the wonks' version of the Cherry Blossom Festival - the release of the annual Social Security trustees' report showing the health of our nation's biggest social program. Each year the report touches off a debate, mostly misguided, about Social Security's financial status. Given the political environment this year, you can expect more heat than usual when the report comes out. But you're unlikely to see much light.

So let me try to illuminate things for you. Forget all the talk you'll hear about how Social Security is okay until 2040 or thereabouts. That is, as we'll soon see, utter nonsense. The real problem starts only a decade or so from now, when Social Security begins to take in less cash than it spends.

How can I say that, given Social Security's $2.3 trillion (and growing) trust fund? It's because the fund owns nothing but Treasury securities. Normally, of course, Treasury securities are the safest thing you can hold in a retirement account. But Social Security's Treasuries won't help cover the program's cash shortfall, because Social Security is part of the federal government. Having one arm of the government (Social Security) own IOUs from another arm (the Treasury) doesn't help the government as a whole cover its bills.

Here's why the trust fund has no financial value. Say that Social Security calls the Treasury sometime in 2017 and says it needs to cash in $20 billion of securities to cover benefit checks. The only way for the Treasury to get that money is for the rest of the government to spend $20 billion less than it otherwise would (fat chance!), collect more in taxes (ditto), or borrow $20 billion more (which is what would happen). The spend-less, collect-more, and borrow-more options are exactly what they would be if there were no trust fund. Thus, the trust fund doesn't make it any easier for the government to cover Social Security's cash shortfalls than if there were no trust fund.

Social Security's negative cash flow becomes so horrendous - hundreds of billions of dollars a year - that our nation's twenty- and thirtysomethings aren't going to let the government cover it, regardless of how many Treasuries the trust fund holds. So forget about 2039 or whenever. Starting worrying about 2016 or 2017.

You can see this for yourself in Table VI.F8 in Social Security's 2007 trustees' report. Compare "income excluding interest" with "cost," and you get cash flow numbers. (I'm ignoring interest, because it's paid with Treasury IOUs, not with cash.) You see that the system's cash flow is projected at about positive $92 billion this year. Nice. But by 2020 it's negative $96 billion, rising to about negative $280 billion in 2025, half a trillion in 2030. That is unsupportable, unless we plan to devote the federal budget to baby-boomers' retirement. Which I hope we don't.

I'll spare you the history lesson about why no one worried much about how to invest the huge - albeit temporary - surpluses that Social Security began to rack up in the 1980s, when Social Security taxes were raised and future benefits trimmed as a result of the famous Greenspan Commission report. It would be nice to have $2.3 trillion in useful assets in an equivalent of a sovereign wealth fund - but we can't turn back time.

We can still buy time by investing current cash surpluses in non-Treasury assets. But that would require a change in the law and a change in the Washington mindset, neither of which seems to be in the offing.

The bottom line: If you hear a presidential candidate talking about 2030 or 2040 when the report comes out, ignore it. But if one of them starts talking about 2016, pay attention. It means that he or she is seeing the big picture, not just sniffing cherry blossoms.
sam | 03.19.08 - 1:16 pm | #

Malaclypse writes:
"We can still buy time by investing current cash surpluses in non-Treasury assets. But that would require a change in the law and a change in the Washington mindset, neither of which seems to be in the offing."

What non-Treasury assets would you recommend? Something safe, like mortgage-backed securities?
Malaclypse | 03.19.08 - 1:21 pm | #

MFtom writes:
OT - Looking over lis pendens filings in Miami Dade County (to commence foreclosure action)-- you normally have gigantor bank as trustee for the XYZ Loan Trust Series 2007-9, plaintinff vs. John Doe, defendant... A lot of the recent filings where the plaintiff is a trustee for a Wamu Series or Long Beach Mortgage series trust, Washington Mutual is also being listed as a defendent. Anecdotal, but it looks like WaMu is spending a lot of $$ defending itself in Miami-Dade County alone.
MFtom | 03.19.08 - 1:36 pm | #

Brian Wilson writes:
Catch a wave and you're sittin' on top of the world.
Brian Wilson | 03.19.08 - 1:50 pm | #

Worried writes:
"since I've taken great pains to put the current "panic" conditions into long-term perspective."

"panic"? Ah yes my great grand parents did survive the great depression

No need to panic.

Dont panic!!

For Gods sake dont panic!!!!!

Calm down Worried! You are just feeding the troll! Dont panic so!!!
Worried | Homepage | 03.19.08 - 1:57 pm | #

Lorax writes:
Seb,

FYI, 8 months ago i 100% into international markets...nothing stateside...

But hey i'm young....
Lorax | 03.19.08 - 1:59 pm | #

Elvis writes:
One need not panic until the squirrels, rabbits, dogs, cats and songbirds are gone from the neighborhood. Then, start panicking, or consider researching recipes for human flesh.
Elvis | 03.19.08 - 2:00 pm | #

Lorax writes:
Sam,

interesting timing..last night on Bloom..

Talk was "if i was SS admin" i would sell me tresuries to the fed, take on their GSE RMBS's since i could hold it longer term then sell the notes later date....

I thought that was a splended idea...
Lorax | 03.19.08 - 2:03 pm | #

Peter writes:
Do I hear 2%?

The TED Spread (for those of you still following the original thread) is now at 1.99%... up 34bp on the day.
Peter | 03.19.08 - 2:05 pm | #

Lorax writes:
just wait until the fed or someone in govt decide since they own the notes the homes will qualify foir section 8

boy wouldnt that help neighbors values
Lorax | 03.19.08 - 2:06 pm | #

Barley writes:
I think the word "fear" is a bit much - uncertianty or hesitation is better.
Barley | 03.19.08 - 2:10 pm | #

Peter writes:
2%!

All treasuries are moving up in price today, as are most of the Munis that I've checked... as well as corporates.
Peter | 03.19.08 - 2:15 pm | #

Average Citizen writes:
Barley, what exactly would put the "Fear" into you? Just asking because I would like my husband to have a little, he still wants to buy a house?
Average Citizen | 03.19.08 - 2:15 pm | #

ajn writes:
where is the 1yr ted spread can someone post that?
ajn | 03.19.08 - 2:23 pm | #

Elvis writes:
Average Citizen writes:
Barley, what exactly would put the "Fear" into you? Just asking because I would like my husband to have a little, he still wants to buy a house?

For me, anyway, my car breaking down in the middle of the Ozarks in front of a bunch of hillbillies who keep telling me I have a nice mouth.
Elvis | 03.19.08 - 2:24 pm | #

Kicker writes:
Talk was "if i was SS admin" i would sell me tresuries to the fed, take on their GSE RMBS's since i could hold it longer term then sell the notes later date....

Maybe GNMA notes. Explicit government guarantee and higher yields.

Of course, it will cost the Government money with higher yields on Treasuries. I'm not sure Congress would be excited about a "bailout" that wasn't directly pandering to the public.
Kicker | 03.19.08 - 2:26 pm | #

Average Citizen writes:
Or getting stuck in the mud in the mountains, and walking beside the mountain lion tracks to get help... that scares him. Financially though, he thinks they're going to pull a rabbit out of the hat and there are not going to be consequences for our actions.
Average Citizen | 03.19.08 - 2:27 pm | #

barkingtribe writes:
The TED hits 2.
barkingtribe | 03.19.08 - 2:29 pm | #

Elvis writes:
"there are not going to be consequences for our actions."

Just tell him there are never consequences for our actions and then still his had into a pot of boiling water. That'll learn'em.
Elvis | 03.19.08 - 2:31 pm | #

CathyG writes:
For real world data, messy as they usually are, these waves are eerily regular. At every 4-5 months, the next peak should be rolling in around April.

So what will the Chairman do next? In 2003 he gave a 30 minute talk at my old alma mater that very neatly laid out all the innovative moves he's made so far. What's scary is that he doesn't seem to have any left - at least he didn't then:

http://youtube.com/watch?v=_UmhCusFt8s
CathyG | 03.19.08 - 2:39 pm | #

Average Citizen writes:
Let's save that for the less than truthful realtors, I am about ready to beat him with a sock full of dog crap though.
Average Citizen | 03.19.08 - 2:39 pm | #

Elvis writes:
Sounds unpleasant, albeit necessary.
Elvis | 03.19.08 - 2:44 pm | #

Guy writes:
Definitely George Bush's fault, right Paul?
Guy | 03.19.08 - 3:04 pm | #

energyecon writes:
That is insane about the TED - wonder what the 30 day CP spread looks like tomorrow... and then Thurs we get a look at outstanding balances and see if CP shrank again or no...
energyecon | 03.19.08 - 4:39 pm | #

Barely Manninuff writes:
Can a crash be avoided when the TED is this stretched out?
Barely Manninuff | 03.19.08 - 5:33 pm | #