Imminent and severe market correction

[Aussiejeff]

Wow! Looks like all the promises made by World Guvmints to "guarantee everything so far" including the kitchen sinks has worked a treat. All's well. Let the borrowing begin again in earnest!

Beats me why the Masters Of The World just don't come out and say "We have also decided to guarantee ALL CDS & derivatives to whatever value you can ever imagine". It's worked so far for whatever Trillions they have cooked up. The markets have gone nuts on a buying spree.

So, surely that would fix everything. GUARANTEE THE LOT - RIGHT NOW! These derivatives and default swaps are just imaginary figures anyway, aren't they? So why don't guvmints take the ultimate punt and make the claim. What's to lose? Imaginary guvmint reserves? They must be imaginary, since I can't imagine how the hell they are going to pay back what they have already promised!


aj

 

[mayk]

So, surely that would fix everything. GUARANTEE THE LOT - RIGHT NOW! These derivatives and default swaps are just imaginary figures anyway, aren't they? So why don't guvmints take the ultimate punt and make the claim. What's to lose? Imaginary guvmint reserves? They must be imaginary, since I can't imagine how the hell they are going to pay back what they have already promised!


aj

Haven't they done that indirectly by talking stake into most financial institutions?

 

[Julia]

I've just started a thread on CDS's in the hope we can transfer comments which presently exist on this topic in several threads into the one place.

 

[chops_a_must]

Iceland then Argentina and South Korea. Who's next?

Argentina Default Looms as Pension Funds Seizure Roils Markets

By James Attwood and Bill Faries

Oct. 22 (Bloomberg) -- Argentina's planned seizure of $29 billion of private pension funds stoked concern the nation is headed for its second default in a decade.

Investors say President Cristina Fernandez de Kirchner's decision may further hurt markets already reeling from slumping commodity prices and slower growth. The retirement system, set up in 1994 to help bolster capital markets, owns about 5 percent of companies listed on the Buenos Aires stock exchange and 27 percent of shares available for public trading, data compiled by pension funds show.

Argentine bond yields soared above 24 percent before the announcement late yesterday, and the benchmark Merval stock index tumbled 11 percent. The last time the government sought to tap workers' savings to help finance debt payments was in 2001, just before it stopped servicing $95 billion of obligations.

``It's the final of many nails in the coffin from an institutional investor perspective,'' Bill Rudman, who helps manage $3 billion of emerging-market equity at WestLB Mellon Asset Management in London. Argentina is ``disappearing into irrelevance.''

The government's proposal to take control of 10 funds, including units of London-based HSBC Holdings Plc and Bilbao, Spain-based Banco Bilbao Vizcaya Argentaria SA, still needs congressional approval. Fernandez said yesterday her decision is ``in a context where the biggest countries'' are taking steps to protect their banks because of the global financial crisis.

``Instead, we're taking them for our retirees and workers,'' she said during a rally in Buenos Aires.

Borrowing Needs

Argentina's borrowing needs will swell to as much as $14 billion next year from $7 billion in 2008, RBC Capital Markets, a Toronto-based unit of Canada's largest bank, said yesterday.

South America's second-largest economy hasn't had access to international capital markets since its 2001 default. Holders of about $20 billion of defaulted bonds rejected the government's 2005 payout of 30 cents on the dollar, and Fernandez has said she's considering proposals to offer a new deal.

The cost of protecting Argentina's bonds against default soared yesterday, as five-year credit-default swaps based on Argentina's debt jumped 2.38 percentage points to 32 percentage points, according to Bloomberg data. The contracts to protect against or speculate on default pay the buyer face value should a borrower fail to adhere to its debt agreements.

The proposed takeover ``makes the chance of default in the short-term less likely by inflicting immense damage to the long- term credibility of the government and the financial system with its own people,'' said Paul McNamara, who helps manage $1.2 billion of emerging-market assets at Augustus Asset Managers Ltd. in London.

Investment Mix

Amado Boudou, the head of Argentina's social security administration, said yesterday the government will keep the same investment mix for the funds, with 60 percent in bonds and 10 percent in stocks. He called the privately run system an ``enormous error.''

Currently, about 55 percent of the 94.4 billion pesos ($29.3 billion) held by the private pension funds is invested in government debt, according to the pension regulator's Web site. A takeover would allow the Fernandez administration to write off the sovereign bonds held by the funds, said Javier Salvucci, an analyst with Buenos Aires-based Silver Cloud Advisors.

``It's a short-term fix that may cause more fiscal and macro pain in the long haul, which has been typical of the last two administrations,'' said Will Landers, who manages $5 billion in Latin American equities at BlackRock Inc.

Volume Quadrupled

Since the pension system began in 1994, trading volume on the Buenos Aires stock exchange has quadrupled. The funds were net buyers of domestic equities for a third straight month in September, investing about $144 million, according to Deutsche Bank AG. They have about $4.1 billion in domestic stocks, strategist Guilherme Paiva wrote in an Oct. 15 note.

The government's plan is ``one additional factor to count against Argentine assets,'' said Vinicius Silva, an emerging market strategist at New York-based Morgan Stanley, which recommends that emerging-market equity investors have a ``zero' weighting in the country.

Nestor Kirchner, Fernandez's husband and predecessor as president, began tightening restrictions on private pension funds last year, requiring them to keep more investments in the country to sustain economic growth. The rules forced the funds to ``repatriate'' about $3 billion in mostly Brazilian assets, Sebastian Palla, chairman of the country's pension fund association, said in February.

Fund Sales

Foreign emerging-market funds sold about $250 million in Argentine stocks through August this year in the biggest outflow since 2000, according to fund flow tracker EPFR Global in Cambridge, Massachusetts. The Merval is down 51 percent this year compared with 39 percent for the Bovespa in neighboring Brazil.

Bond markets also have tumbled. Yields on the government's 8.28 percent bonds due in 2033 have almost tripled to 24.69 percent from 8.83 percent a year ago.

Seven years ago, as the government tried in vain to stave off a debt default, it pressured the pension funds to participate in bond swaps that pushed forward repayment dates. That December, strapped for cash to pay salaries, it ordered the funds to transfer $3.2 billion in bank deposits to state-owned Banco de la Nacion.

The latest move is ``much, much worse,'' said McNamara at Augustus Asset Managers Ltd.

``It's not just shoving a little bit of debt in at the edge, it's taking over the whole system,'' he said. ``It does even more damage to the concept of encouraging people to invest in the domestic financial industry.''

To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.netBill Faries in Buenos Aires wfaries@bloomberg.net
Last Updated: October 21, 2008 22:01 EDT

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDuA9V2SI6GY&refer=home

 

[Uncle Festivus]

Iceland then Argentina and South Korea. Who's next?



http://www.bloomberg.com/apps/news?pid=20601087&sid=aDuA9V2SI6GY&refer=home

And you say gold is doomed???

 

[mantronic]

Gold hasnt been doing anything great lately.

 

[chops_a_must]

And you say gold is doomed???

And what a mighty reaction it had.

These things haven't exactly been unknown.

 

[Uncle Festivus]

Gold hasnt been doing anything great lately.

It's just hit $AU1400, currently $AU1150. These are the figures that matter to me at least.

 

[Uncle Festivus]

And what a mighty reaction it had.

These things haven't exactly been unknown.

The gold price in every other currency other than $US has been hitting record highs.

 

[chops_a_must]

It's just hit $AU1400, currently $AU1150. These are the figures that matter to me at least.

That's a very big retrace though...

 

[mayk]

Beginning of the end of regulation free market.

http://economix.blogs.nytimes.com/2008/10/23/greenspans-mea-culpa/

For more effect read it in the background of the following music.
http://www.youtube.com/watch?v=cBBHJZD7BXM

 

[derty]

Forget all that gumph about sub-prime and CDO's, Fox News know why the DOW is tanking:

 

[kingbrown]

usa markets now in limitdown
ie sells are being limited to a 6.4% drop on the open



Fox news is sounding like like this may be it ?

any current comments ??

 

[CanOz]

This will go down in History my friend! Limit down BEFORE the open!!! Are you kidding me

I'm not going to call a bottom or anything stupid like that but its starting to smell a bit like capitulation to me!

Cheers,

CanOz

 

[chops_a_must]

usa markets now in limitdown
ie sells are being limited to a 6.4% drop on the open



Fox news is sounding like like this may be it ?

any current comments ??

Yep... I think this is it.

I wish I could take a screenshot, because my screen is rather hilarious.

Short citi and GE, which is a bit of a laugh for me. :

 

[chops_a_must]

This will go down in History my friend! Limit down BEFORE the open!!! Are you kidding me

I'm not going to call a bottom or anything stupid like that but its starting to smell a bit like capitulation to me!

Cheers,

CanOz

It was happening virtually every other day in the ag commodities late last year and early this.

Gonna be fun Can. Got any positions or strategies?

 

[cuttlefish]

Downright scary really - thats an amazing futures number.

 

[kingbrown]

Its starting to sound like they're just going to pull the plug in the states today.

Cashed up and ready to go here !!! he he

 

[CanOz]

It was happening virtually every other day in the ag commodities late last year and early this.

Gonna be fun Can. Got any positions or strategies?

No posies on anything at the moment Chops. Waiting for a retrace on several FX pairs...but i like AUDJPY...thanks to Kauri.

So i am 100% CASH and to be honest i'll be lucky to make 10% out of this in the next week on my FX account.

You?

Cheers,


COz

 

[chops_a_must]

No posies on anything at the moment Chops. Waiting for a retrace on several FX pairs...but i like AUDJPY...thanks to Kauri.

So i am 100% CASH and to be honest i'll be lucky to make 10% out of this in the next week on my FX account.

You?

Cheers,


COz

Yes, I had a long iron condor on GE, and I got out of the short put last night, because I didn't like the way it was trading. I thought it was precipice material.

So I was left with a bear call spread on GE with a put.

Have had a bear call spread on C all week, and am short GLD.