Imminent and severe market correction

[Kauri]

Leemons are copping a hiding... all sorts of stories of credit contagion fears with reports of banks pulling lines that will only add to liquidity lockup in the market. If she stumbles, it's not a cold that the US has, it will be full blown SARS...

UBS has downgraded a number of US bank stocks today including Lehman, State Street and BNY reflecting the lack of confidence in the US banking system.
not a good outlook for our lot....

The fall in the Fed NY Empire State mfg index along with the larger-than-expected drop just announced in U.S. industrial production.... not a good sign for the metals complex.... or miners????

Cheers
...........Kauri

 

[treefrog]

sure this should be on a different thread but.......

"Since July the dollar index has tumbled, down another 10% in the last 8 months. It's the spiraling downward dollar that is fueling crude oil's continuing advance. It has been that same weak dollar that has helped to fuel other commodities like gold, silver and copper. I'm not saying it's solely responsible, but the extremely weak showing of the dollar is, at a minimum, aiding the commodity bulls. I believe the one event that could turn the tide on commodities is the lowering of interest rates by the European Central Bank (ECB). World markets are suggesting that the economic weakness felt here in the U.S. is not isolated. To date, the ECB has been adamant that inflation is the primary concern and rates abroad have remained elevated. The interest rates here in the U.S. are heading lower, so until the ECB changes its policy stance, commodity bulls will likely reap the rewards.

At the hint of an ECB rate cut, we'd lock in any and all commodity profits.

Happy trading!

- Tom Bowley "

 

[Kauri]

Sharp falls in Lehman Brothers stock and MF Global have the rumour mill clambering all ove r t hem... if they don't h ave prob lems then they s oon will
Ch eers
...........Kauri

 

[theasxgorilla]

To date, the ECB has been adamant that inflation is the primary concern and rates abroad have remained elevated.

[rant] Love it how the US refers to Europe in the blanket statement 'abroad' and how the word elevated is used to convey a sense of something being above what is normal, yet ECB rates are fracin' 4%[/rant]

 

[Bushman]

Sharp falls in Lehman Brothers stock and MF Global have the rumour mill clambering all ove r t hem... if they don't h ave prob lems then they s oon will
Ch eers
...........Kauri

Another self fulfilling prophecy in the making. Confidence is the ultimate fundamental for a bank that trades on reputation it would seem.

So it continues. Some would claim the whole credit crunch has been a self fulfilling prophecy....capitalism eating itself.

 

[Kauri]

The Nikkei newspaper.... reports that some investment trusts are risk-hedged and conditionally guarantee principal. But, the funds have knock-in provisions, often 30% below the Nikkei levels when they were created according to the newspaper report. Some of these funds hit their triggers on Monday and more are expected to hit their triggers, adding to pressure on Japanese stocks....
Cheers
...........Kauri

 

[numbercruncher]

Could the fed run out of money ?

Sub-prime collapse 'beyond the US Federal Reserve'

FEARS are growing that the US Federal Reserve may soon find itself short of the funds needed to continue propping up the nation's financial system.

The central bank yesterday used its financial muscle to back the bail-out of the stricken Wall Street investment banking giant Bear Stearns, which will be taken over by rival JPMorgan Chase at a fraction of its worth last week.

But analysts believe the threat to the financial system, which continues to flow from the collapse of the sub-prime mortage market last year, is getting too big for the Federal Reserve.

"This is now beyond the Fed," ANZ international economist Amy Auster said.

"It is not going to be able to deal with this situation on its own."

Cash reserves drying up

She said the US central bank had already extended support of about $US400 billion ($426 billion) to the US financial system, compared with its assets of $US800 billion.

She said financial system losses yet to be reported could easily exceed another $US400 billion.

"What is missing at the moment is the US Treasury," she said.

But Treasury Secretary Hank Paulson has already declared his hostility to federal measures to help the sinking financial sector.

"Let me be clear: I oppose any bail-out," he said in a speech 10 days ago.

"Most of the proposals I've seen would do more harm than good - bailing out investors, lenders or speculators who, instead of getting a free pass, should be accountable for the risks they took," he said. "

I believe our efforts are best focused on helping homeowners who want to stay in their homes."

More could follow Bear Stearns

There remains a vast quantity of financial assets of doubtful value that will expose banks and other financial institutions to the kind of panic that brought investment bank Bear Stearns to the brink of disaster on the weekend.

"When the fifth-largest investment bank is in trouble, you have to become concerned about the solvency of the system and the banks in the system," Ms Auster said.

In 2006 alone, there were $US550 billion of "collateralised debt obligations" issued, she said.

These are the bundles of mortgages and other securities that have been at the heart of the sub-prime crisis.

Ms Auster said the market for these securities depended upon the ratings agencies, bond insurance and collateral.

"All three elements of this infrastructure - the three bands of the bridge have collapsed," she said.

When the Federal Reserve announced its extraordinary Sunday afternoon bail-out of Bear Stearns, it also extended a lifeline to all the other major investment banks, offering them access to emergency funding for the first time since the 1930s.

As in Australia, the central bank is assumed to be the lender of last resort for the commercial banks, which take deposits from the public, but not for investment banks and stockbroking firms.

But the tangled web of counter-party arrangements that has developed between financial institutions over the past decade means that allowing Bear Stearns to go broke would have jeopardised major banks.

"If Bear Stearns defaulted on their paper, it would pull at least another bank down," senior economist with finance broker ICAP, Matthew Johnson, said.

Drop in the ocean

Mr Johnson said he estimated the Federal Reserve was halfway through the ammunition it had to deal with the crisis.

"The $US450 billion remaining is a drop in the ocean compared to the asset classes in trouble," he said, noting that in addition to mortgage-related debt, some of the big private equity deals were beginning to unravel.

The biggest risk to the real economy is that credit dries up, as bankers become scared to lend.

Morgan Stanley chief economist Gerard Minack said while the Federal Reserve was cutting interest rates, its efforts were being neutralised by the banks.

"Nobody is enjoying easier financial conditions," he said.

Mr Minack said there were no grounds for equating the coming recession in the US to the Great Depression, but it could still be as nasty as the downturn in 1974.

Ms Auster said Australia would not escape the effect of the recession, with its share market having already fallen further than US markets.

http://www.news.com.au/business/story/0,23636,23393912-462,00.html


Now if they did run out of assigned money, one would assume they will begin creating more and this will surely unleash massive inflation and a collapsing USD

 

[Aussiejeff]

Could the fed run out of money ?

http://www.news.com.au/business/story/0,23636,23393912-462,00.html

Now if they did run out of assigned money, one would assume they will begin creating more and this will surely unleash massive inflation and a collapsing USD

Wot? A *Banana-rama Republic* scenario for the US? Oh, the Horror!

Even more pertinent, could our very own RBA run out of money if one of OUR major banks collapsed too? Would Preside.... err .... PM Rudd bail out the RBA if it ran out of *puff* - with cash from the future fund?? (hmmm... just how IS the capital in the future fund travelling atm, btw?).

How much dosh does our own "Treasury" have salted away?

Hmmm.


AJ

 

[Uncle Festivus]

Could the fed run out of money ?



http://www.news.com.au/business/story/0,23636,23393912-462,00.html


Now if they did run out of assigned money, one would assume they will begin creating more and this will surely unleash massive inflation and a collapsing USD

Mmmm..... nice one nc......I think you know it's happening now

 

[Dezza]

Goldman Sachs News - http://www.reuters.com/article/ousiv/idUSWNAS527620080318

Lehman Bros News - http://www.bloomberg.com/apps/news?pid=20601087&sid=aBdqPHWUilCY&refer=home

Falls, but not as big as expected by analysts. Must've been really pessimitic analysts when a 53% fall is considered alright. Good start for tomorrow though!!!

 

[Kauri]

I don't know much about hedge funds but was wondering if anyone would know...
Do they go in for FX much..if so the violent moves in the FX pairs today may have caused more damage to those caught on the wrong side??
Maybe even Banks trading rooms??...
Maybe even the %5...

after all the COT suggests there were quite a lotta longs on some of the most punished crosses...

Cheers
..........Kauri

Seems so...
Sydney Morning Herald .. Rubicon Japan Trust is expecting a $30 mln margin call due to the recent fall in AUD/JPY. The trust has warned that it is not in a position to meet the call and risks a default. Shares in Rubicon fell 57%

 

[mayk]

A short bubble of DOW burst after Fed dissapoints with only a 75bp rate cut. I just hope that DOW stays positive for the day , it's just short of 25bps....

 

[Aussiejeff]

The only imminent and severe market correction ATM is the one about to hit the All Ords at 10am this morning.... time to take air sickness pills.... prepare for takeoff!

Oh, and "All-Ords Airways makes no guarantees that you will arrive safely.... please ensure you have filled out your insurance forms.

Thankyou"

Hehe.


AJ

 

[skating101]

This may sound like a stupid question but still I can't figure out the answer. How come inflation is such a worry in Australia with our interest rates being raised to avoid it while in america inflation doesnt seem to be an issue (or at least appears that way with their huge interest rate drops)

 

[treefrog]

This may sound like a stupid question but still I can't figure out the answer. How come inflation is such a worry in Australia with our interest rates being raised to avoid it while in america inflation doesnt seem to be an issue (or at least appears that way with their huge interest rate drops)

IS an issue in USA - featured prominately in the interest rate decission and appears to be behind why they only went -.75% not the 1%, but they are doing nothing about it while they try to entice the financials back in the jar

 

[dhukka]

Click here for a timely reminder of what a dead cat bounce looks like:

 

[sassa]

A timely fillip for the markets the 75 basis points cut,but if one is to read the press release from the FOMC -

http://www.federalreserve.gov/newsevents/press/monetary/20080318a.htm

-they are only delaying the inevitable.The release is packed with concern about the state of the economy.Inflationary measures are showing up in prices,commodities and currency markets.They are concerned about the slowing consumer spending and the weakening labour market.
I guess it is a case of "give today and take away tomorrow."The markets may bounce for a while but reality has to win.

 

[treefrog]

A timely fillip for the markets the 75 basis points cut,but if one is to read the press release from the FOMC -

http://www.federalreserve.gov/newsevents/press/monetary/20080318a.htm

-they are only delaying the inevitable.The release is packed with concern about the state of the economy.Inflationary measures are showing up in prices,commodities and currency markets.They are concerned about the slowing consumer spending and the weakening labour market.
I guess it is a case of "give today and take away tomorrow."The markets may bounce for a while but reality has to win.

well that's me disappointed fer the day - ready to take a few ST long positions on the US news / action and no follow through at all - financial sector trying to hold but think it too will succumb

back to the gloom and doom positions I hold and add a few more

must be a lot of cows out there bullin', the bulls just can't make any worthwhile contribution

 

[ithatheekret]

Wot? A *Banana-rama Republic* scenario for the US? Oh, the Horror!

Even more pertinent, could our very own RBA run out of money if one of OUR major banks collapsed too? Would Preside.... err .... PM Rudd bail out the RBA if it ran out of *puff* - with cash from the future fund?? (hmmm... just how IS the capital in the future fund travelling atm, btw?).

How much dosh does our own "Treasury" have salted away?

Hmmm.


AJ

Capital shortfalls are generally made up through an increase in leveraging .

Makes one wonder how much leverage there is out there .

Kev did tell the RBA to use any other means at their disposal , other than a rate rise . Unfortunately they didn't order enough wine for that meeting .

We got the rate rise anyway , another on the way , but has any leverage been created elsewhere ???

Interventions ???

The low rate currencies are still viewed as funding vehicles , it's just now that the US has joined the global team , once it's rate goes clearly negative at 1% as inflation remains at higher altitudes , it will get a guernsey and a helmet .

Then Treasury just needs a permission slip from the Treasurer and one from the Senate to apply for a platinum card at discount rates .

 

[Trembling Hand]

Bit of a no vote going on in Europe to Uncle Ben's efforts. Ftse & Dax back to flat. Honkers didn't have a great finish either. SPI is down 1% to open the night session. Probably nothing to worry about. :