Imminent and severe market correction

[Whiskers]

.Homebuilders have yet to offer two-for-one deals.

I'm waiting for something like this... to dash over there and buy a few.

 

[sassa]

Could be a turnaround in overseas markets tonight against the poor news.European markets have come off their lows and are in the green with swings of 1%+.Futures for the American Market have also risen from -59 to +4.Anybody savvy with reason/s for turnaround?

 

[sam76]

I noticed this as well.

Kauri is usually pretty quick with international news.

Sam76 to Kauri, you got your ears on?

 

[Whiskers]

Could be a turnaround in overseas markets tonight against the poor news.European markets have come off their lows and are in the green with swings of 1%+.Futures for the American Market have also risen from -59 to +4.Anybody savvy with reason/s for turnaround?

I think there has been a good rise in the MBA Purchase Applications. Trying to find some detail.

PS:

WASHINGTON, D.C. (April 9, 2008) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending April 4, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 725.6, an increase of 5.4 percent on a seasonally adjusted basis from 688.3 one week earlier. On an unadjusted basis, the Index increased 5.7 percent compared with the previous week and was up 10.9 percent compared with the same week one year earlier.

http://www.mortgagebankers.org/NewsandMedia/PressCenter/61777.htm

 

[wayneL]

Could be a turnaround in overseas markets tonight against the poor news.European markets have come off their lows and are in the green with swings of 1%+.Futures for the American Market have also risen from -59 to +4.Anybody savvy with reason/s for turnaround?

Probably the Citi deal: http://www.marketwatch.com/news/sto...x?guid={9FEC1075-89D6-4B1B-A672-A60A89EF2C09}

 

[Whiskers]

Rate-cutting cycle may be over. Sell Gold.

I better post it for the gold geeks too. :

FED RATE-CUTTING CYCLE MAY BE OVER
RBC Capital Markets says summer gold correction doldrums are coming
In a research report, RBC Capital Markets analysts feel that investors should consider taking profits in gold ahead of the traditionally weak summer season and then take advantage of an anticipated rise later in the year.

Author: Dorothy Kosich
Posted: Wednesday , 09 Apr 2008

RENO, NV -

RBC Capital Markets Tuesday urged investors to crystallize profits now and "take advantage of gold at lower levels within the June-July period."

In his analysis, Michael Curran noted, that over the past 28 years, gold has typically outperformed during the months of April and May, usually followed by a seasonal slowdown in the summer months, "and an upsurge in the early fall."

"We believe investors should take profits ahead of the end of a Fed rate cutting cycle and ahead of the seasonally quiet period for gold and gold equities in June, July and early August," Curran wrote. "Since the broader market began to react to the uncertainty over the US subprime mortgage crisis on August 14th, and the sell-off of all financial securities began, we believe that gold has discounted in the uncertainty in financial markets and the implied inflation expectation associated with rising commodity prices. We think recent news of possible IMF gold sales up to 400 tonnes are priced in at current levels, and would have limited impact on the market."

"On the back of this rationale, we advise clients to sell into the typically strong April-May timeframe, ahead of the seasonal slowdown usually observed in the early summer months," he said.

‘Combining our view that a seasonal slowdown for gold demand is around the corner in the summer months, and the possibility that the U.S. fed rate cutting cycle may come to an end shortly, we believe the timing is right for investors to take profits in the short term in gold and gold equities.

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=50435&sn=Detail

 

[Kauri]

Didn't thunk that bad news was welcomed.... aahh well.. heres some.. potentially.. The Euro is unlikely to be buoyed by the news another German bank may be in trouble. Speculation in the market at present suggests a smaller bank has been closed by the BAFIN. (Will post a link when.. and if... it hits the wires...)

Also I don't know how long the Eurozone is going to be propped up by Germany, without them the bottom would fall out of their pants.. I thunk..
and I still thunk German banks in general are a big risk going forrard..

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

German Economy Minister Michael Glos urges concerted C/B action to Avert A Big Bank Collapse .. no link... yet...

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

 

[dhukka]

Probably the Citi deal: http://www.marketwatch.com/news/sto...x?guid={9FEC1075-89D6-4B1B-A672-A60A89EF2C09}

Interesting sleight of hand on this deal that makes it seem much better than it actually is. $0.90 on the dollar doesn't sound too bad, but not when you factor in that Citi will indemnify the first 20% of losses. Why do it that way? So they don't have to write down as much....at least not initially. Read Less Than Meets The Eye for more.

 

[IFocus]

At some point(to state the obvious) the global markets will price in the risk for financial chaos / losses but IMHO we are not there yet

SMH today

T

HE US financial crisis is spilling across Western Europe and into developing Asia, dragging the world economy closer to the brink of recession, the International Monetary Fund warned overnight.

http://business.smh.com.au/oneinfour-chance-of-recession/20080409-24wk.html

2 X Sub-prime losses still to come, profit down grades still to get into swing

 

[Kauri]

$US index daily...on the verge of breaking??? with ramifications for the US pairs, stocks et al??

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

 

[Kauri]

$US index daily...on the verge of breaking??? with ramifications for the US pairs, stocks et al??

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

It would seem that the MAS changing the bands on the SGD NEER is not doing the US any favours...
Cheers
..........Kauri

 

[sassa]

The Fed has tried,is trying,but things don't seem to be working out as they would have hoped.

"Money markets in the US and Europe are signalling renewed fears about the financial strength of banks, with key confidence barometers almost returning to the levels that preceded the collapse of Bear Stearns.

The concerns are being highlighted by the difference between overnight lending rates set by central banks and three-month Libor, the rate at which banks lend to each other. This spread, known as the overnight index swap rate, has been rising in the US and remains elevated in Europe, indicating that banks are reluctant to lend to each other.

“Libor is still dysfunctional and, for whatever reason, banks still appear unwilling to lend funds,” said Dominic Konstam, head of interest rate strategy at Credit Suisse.

The difference between the overnight central bank rates and three-month Libor was typically about 12 basis points before global credit turmoil grew worse last summer.

In the US on Wednesday, that spread rose rose 2bp to 77.5bp. The difference had climbed above 80bp on concerns about Bear, then fell back to 60bp in mid-March after the investment bank was sold to JPMorgan Chase.

In the UK, the swap rate gained 2.45bp to 95.45bp on Wednesday. In Europe, the swap rate was up 1.29bp at 74.68bp. It had been 67bp after the Bear sale.

Investors also sought the safety of government debt on Wednesday, pushing the yield on the two-year Treasury down 12bp to 1.75 per cent.

Tensions are rising in the money markets in spite of the injection of huge amounts of liquidity into the banking system by central banks. Traders say market conditions suggest the Bear rescue has not completely alleviated worries about counterparty risks. Until confidence is restored, the availability of credit to investors and companies will be restricted, potentially hurting the broader economy."
http://www.nakedcapitalism.com/2008/04/stress-returns-to-interbank-lending-it.html

 

[josjes]

The Fed has tried,is trying,but things don't seem to be working out as they would have hoped.

"Money markets in the US and Europe are signalling renewed fears about the financial strength of banks, with key confidence barometers almost returning to the levels that preceded the collapse of Bear Stearns.

The concerns are being highlighted by the difference between overnight lending rates set by central banks and three-month Libor, the rate at which banks lend to each other. This spread, known as the overnight index swap rate, has been rising in the US and remains elevated in Europe, indicating that banks are reluctant to lend to each other.

“Libor is still dysfunctional and, for whatever reason, banks still appear unwilling to lend funds,” said Dominic Konstam, head of interest rate strategy at Credit Suisse.

The difference between the overnight central bank rates and three-month Libor was typically about 12 basis points before global credit turmoil grew worse last summer.

In the US on Wednesday, that spread rose rose 2bp to 77.5bp. The difference had climbed above 80bp on concerns about Bear, then fell back to 60bp in mid-March after the investment bank was sold to JPMorgan Chase.

In the UK, the swap rate gained 2.45bp to 95.45bp on Wednesday. In Europe, the swap rate was up 1.29bp at 74.68bp. It had been 67bp after the Bear sale.

Investors also sought the safety of government debt on Wednesday, pushing the yield on the two-year Treasury down 12bp to 1.75 per cent.

Tensions are rising in the money markets in spite of the injection of huge amounts of liquidity into the banking system by central banks. Traders say market conditions suggest the Bear rescue has not completely alleviated worries about counterparty risks. Until confidence is restored, the availability of credit to investors and companies will be restricted, potentially hurting the broader economy."
http://www.nakedcapitalism.com/2008/04/stress-returns-to-interbank-lending-it.html

As soon as I saw Gold jump from $905-$930 yesterday and it's now making ascent to $940 I knew that there are more skeletons in the closet from the banks coming out .....

 

[sassa]

And from the same site,a damning report if correct.

1. A rumor is circulating that Lehman sold $2.5 billion in CLOs, but the buyer insisted Lehman retain 25% of the worst tranches. Oh, and that buyer was the Fed.

2. The quality of Lehman's first quarter earnings was terrible. It recorded a gain on widening debt spreads. That means the marker value of its debt fell because the market thought Lehman was less creditworthy. That reduction in market value of debt was a gain that flowed though its income statement.

In addition, "LEH recorded a gain of $695 million in the category of level 3 Corporate equities. That’s ten times the levels recorded in the last 2 quarters of 2007, and it’s not some first quarter of the year aberration either””the year-ago quarter yielded a gain of $13 million. This during a quarter when the major equity indexes took significant hits."

Aren't unaudited financial statements just wonderful.

http://www.nakedcapitalism.com/2008/04/buyout-clos-used-for-fed-loans.html

 

[sassa]

Further on the Citi deal to sell $12b. of debt to private equity firms.

" Exactly how does this confirm the value of anything? What this did was muddy the waters. Citi had to indemnify the buyers from the first 20% of the loss so Citi effectively got somewhere between 70 and 90 cents on the dollar for those loans. We will not know the exact amount until a later date.

The deal was made in this manner specifically to muddy the waters. It appears that Citi is setting up a con game in which they may pretend they got 90 cents on the dollar when they really didn't. That 20% indemnification clause in the sale is like a PUT option. That option has a value and it's a huge mistake to pretend otherwise.
"It demonstrates that there is a market for this paper," said Marshall Front, Chairman of Front Barnett Associates in Chicago, which owns about 450,000 Citi shares. "This whole process of credit unfreezing, which started with the Federal Reserve opening the discount window to investment banks, is beginning to play out."
Yes there is a market, at the right price. There's a market for anything, anytime, at the right price. And the price in this case was a 10% guaranteed markdown plus a free PUT option that has the potential to make the total markdown as high as 30%. And Citi had to agree to finance that! That's quite a market. If I was Marshall Front I would not be talking up that market too loudly. This whole setup smacks of desperation. Citi's dividend can't last long at this rate.

http://globaleconomicanalysis.blogspot.com/

 

[Kauri]

And from the same site,a damning report if correct.

1. A rumor is circulating

Whaaaat... rumours.. What about the one about the Dutch set-up... and also about further US writedowns.... after the German rumours last night proved up with Weserbank.. well.. who knows..
Cheers
..........Kauri

and the $US index doesn't look too flash for some reason..

 

[explod]

Whaaaat... rumours.. What about the one about the Dutch set-up... and also about further US writedowns.... after the German rumours last night proved up with Weserbank.. well.. who knows..
Cheers
..........Kauri

and the $US index doesn't look too flash for some reason..

It hasnt' looked too flash for 7 years, it hit the top of the down trend channel last week or so, just the normal bounce off to head lower, I expect below 70 in the next few days, previous all time low 70.6

Will put a rocket under gold too (oops wrong thread)

 

[Kauri]

It hasnt' looked too flash for 7 years, it hit the top of the down trend channel last week or so, just the normal bounce off to head lower, I expect below 70 in the next few days, previous all time low 70.6

Will put a rocket under gold too (oops wrong thread)

My charts only go back four years... is this the channell that it is bouncing off??
Cheers
...........Kauri

 

[Kauri]

and further to the dump on the $US, Former MoF Sakakibara reiterated USD/JPY has further to fall to JPY 90.00 overnight, he expects Fed to cut Fed Funds to 1.00% and suggests EUR/JPY has long way to fall to Y130 within 6-months on basis ECB will start cutting rates.
Cheers
..........Kauri

P.S.. the overnight applys to his statement inUS time, not the yen falling to 90 overnight... I thunk..

 

[Kauri]

And from the same site,a damning report if correct.

1. A rumor is circulating that Lehman sold $2.5 billion in CLOs, but the buyer insisted Lehman retain 25% of the worst tranches. Oh, and that buyer was the Fed.

2. The quality of Lehman's first quarter earnings was terrible. It recorded a gain on widening debt spreads. That means the marker value of its debt fell because the market thought Lehman was less creditworthy. That reduction in market value of debt was a gain that flowed though its income statement.

In addition, "LEH recorded a gain of $695 million in the category of level 3 Corporate equities. That’s ten times the levels recorded in the last 2 quarters of 2007, and it’s not some first quarter of the year aberration either””the year-ago quarter yielded a gain of $13 million. This during a quarter when the major equity indexes took significant hits."

Aren't unaudited financial statements just wonderful.

http://www.nakedcapitalism.com/2008/04/buyout-clos-used-for-fed-loans.html

Lehman has dissolved three funds, taking over the assets.

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