Friday, October 24, 2008

Hey everybody! It's OCTOBER so get your black out!



Futures frozen after steep plunge [Reuters] Literally. CME's DJIA and SPX contracts hit their circuit breakers in futures trading about 5:15am CT. This halted trading briefly, so traders could calm down.

South Korea's currency, market plunge [WSJ]

I made a mistake, admits Greenspan. [FT]

Very quietly, after market close, Russia's financial authority notified (among others) quote vendors such as Thomson Financial that the Russian Market will be closed until further notice.

"There is now no safe haven globally other than a deeply indebted U.S. government," said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London.
[Ed. note: If that doesn't freeze the blood in your veins, nothing will.]

How much do you think this chaps Guiliani's hide: NYC extends term limit so Bloomberg can run again.

Chrysler cuts 25,000 white collar jobs. [WSJ]

US taxpayers take a bath on the Bear Stearns deal. [FT]
Remember the Fed helped out JPMorgan by taking on some of the most toxic paper? Guess what - we're eating $2.7 billion worth.

There's so much more, so I'll sum up this way: There was a Black Thursday (24 October 1929), followed by a Black Monday (28 October 1929), capped by BLACK TUESDAY (29 October 1929).
And yes, our quant clients have overlayed the charts from 1929 (Jan-Dec) and 2008 (Jan-Oct) and there is way too much similarity for comfort.
Hence seeing headlines of hedge fund redemptions (their clients are seeing the same charts), flights to YEN and USD.

The Dow's only at 8300. We still have a long way to go.

Wednesday, October 22, 2008

Rate till the cows come home

From Dealbreaker:
Some Congressman, not sure who 'cause I missed his name, just brought up the following IM conversation between two S&P employees, to former residential mortgage ratings managing director, Frank Raiter, from several months back (no name check on the deal but surely the DB brain trust can hazard a guess):

S&P employee #1: By the way that deal is ridiculous
S&P employee #2: I know, right. That model definitely does not capture half the risk
S&P employee #1: We should not be rating it.
S&P employee #2: We rate every deal. It could be structured by cows and we would rate it.

Congressman: What do you think this means, Mr. Raiter?
Raiter: Um...I don't know...I guess a casual acceptance of these things.
Sean Egan (of Egan-Jones) chimes in: Perhaps that cow was particularly talented?

I wish you were a wishing well

Monday, October 20, 2008

Monday, 20 October 2008 Market Report

Market is up on Bernanke's talk to Congress, hinting at rate cuts.

India Central Bank workers to strike Tuesday, 10/21/08.

The payouts on the Lehman default are to take place tomorrow. If there is any hint of a hiccup the markets will flip out. Expect hiccups.

From Forbes:
About 350 different counterparties to the Lehman CDS contracts attended the auction, where it was determined that Lehman's debt would be worth only 8.62 cents on the dollar in bankruptcy. Those who sold insurance against Lehman's default (the "protection sellers") therefore must pay out 91.38 cents for each dollar of debt they insured. This is the largest payout ever in the $55 trillion credit default swap market. After netting out offsetting positions, cash payments will be approximately $270 billion, a huge amount even for this crisis, which has seemed to know no limits on the size of write-offs. And all this for just one default!

22 States Are in Heap big Trouble
The states cited have already started laying off employees, freezing salaries, freezing hiring in the face of declining tax revenues.

Buffett believes in America, tells us to "buy American." Some background required: Bufffett has made a ton of money in the last couple of years betting against America - specifically shorting the US dollar. Also, Buffett's investment strategy is not quite the same as your's and mine: he buys ownership in companies, not stocks. He's buying infrastructure, the true wealth of a country.

China won't bail out Pakistan, turns to IMF
Pakistan joins Iceland, Hungary, and Ukraine on Debtor's Row.

Circuit City to close 150 stores, slash thousands of jobs to avoid bankruptcy. No word on when they appeal to Washington for a bailout.

Prepare yourself for even more election fraud - West Virginia Gazette reporting Democrat votes getting flipped to Republican ones.

And we've been waiting for this one - stupid Catholic bishop from the Plains states to criticize the Dem candidate for (wait for it) - abortion.
Archbishop Chaput of Denver speaks out against Obama because he is pro-abortion. Chaput wants more unwanted babies born because they're easier marks for predatory priests.

Sunday, October 12, 2008

Beware of Sunday announcements from Finance Authorities

At 1:30pm Chicago, there has already been a flurry of news reports coming out of London (7:30p GMT) about what the UK govt is going to do on Monday, and what might happen to the LSE.

Instead of summing up headlines, I'm just posting a snapshot of the Google search on "london stock market suspended."

Click on image for larger view.

Saturday, October 04, 2008

A graph is worth a thousand words


Friday, 3 October 2008, House of Representatives passed the "Paulson Rapes the Rest of America" bill, 263 - 171. We're in so much trouble.

Thursday, October 02, 2008

Best roller coaster ride EVER

Well, by now everyone knows the market closed down 350 pts. And it was not all about the worry over the House and the Boondoggle Paulson Rescue Plan. Speaking of which, I faxed the Illinois delegation and Dems who voted YES the first time, telling them to vote NO. Not only did the Senate basically leave the plan unchanged, but added $150 billion MORE in pork.

And now, on to the news:
Anyone out there a Bank of America customer? Well, read on: BofA is converting several systems simultaneously on the weekend of October 17-19. And now for anecdotal (aka inside information): my new boss is a refugee from LaSalle Bank. She & her entire department were given the boot by BofA, but she still has plenty of colleagues on board there. And they forwarded her internal emails about BofA converting several systems over the same weekend.
Does that strike you as odd? It did to us too!
The friends on the inside went on to advise: print out copies of all your accounts right before that weekend so you have proof of your monies. Also, take out sizeable chunks of cash for a "just-in-case" scenario.
And now I'm reading the same thing on Dealbreaker!

Tomorrow is the first Friday of the month and that means the unemployment numbers come out. Whoopee!

The Oracle of Omaha, Warren Buffet himself, who just picked big chunks of Goldman Sachs and GE* on the cheap, remarked: ". . . a global credit crisis he calls an "economic Pearl Harbor."
*GE, while assuring us it is perfectly fine, eliminated its dividend payment.

It's not just the U.S. panicking over the growing depression. Let's take a look around the world:
PM Brown irritated with Irish. Ireland on Thursday announced it would backstop liabilities & guarantee deposits of its six biggest banks. Brown said Ireland was poaching business from the U.K.
Over in Germany & France, a fight breaks out over a rescue fund. That is, France wants one for the Eurozone and Germany doesn't.
German response was "the crisis was U.S.-centered and suggested European governments are overreacting if they pursue coordinated plans for bank bailouts."
British reaction: "also sceptical about the idea of a pan-European fund, preferring to tackle crises on an ad hoc basis."
Meanwhile, the rest of the world is acutely aware the Eurozone has no institutions or processes to react to a bank failure (like a UK's Northern Rock or US' WaMu). And they're pulling out of the Euro.

And right on cue, the UK informs its citizens that the terror threat is at CRTICAL levels. And if you're wondering, yep - they're blaming Al Qaeda. How handy.

Nouriel Roubini, NYU Economics professor who predicted much of the course of the meltdown, was on a web call hosted by Riskmetrics. The WSJ beat reporter notes "And that’s not the scariest part, he says! The scariest part is that, every time the government steps up its response, the market reaction gets weaker and weaker."
And he's right. Even if the bailout passes, it won't help the markets (although Bush/Paulson will claim it's because the House dithered). But Paulson/Bernanke have been throwing everything including the kitchen sink at the problem since August 2007 and you know where we're at today.

Meanwhile, Benelux's second bank (Fortis was first) gets a bailout: Dexia gets 6.4 billion Euro.

Best roller coaster ride EVER.