World economy talk

[Monseratto]

Any predictions on how many % will the US Stock Market will crash tonight...?

[uls]

about the Dow... can't say...

as i'm typing this, the Dow is below 10,000 na.

massive liquidation

cash is king

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this crisis will create superbanks.

3 or 4 very very big banks will rule.

[tidus1203]

Get ready for choppy trading. Basta whatever happens NEVER EVER attempt to pick the bottom.

[uls]

Last night, the volatility index (VIX) went past 50

40 is already high... but past 50 was insane.

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next step is a Fed rate cut

[tidus1203]

What is there to cut? Cutting rates will not solve the problems. Throwing money and printing more money out of thin air will not solve the problems. The only way to solve the problem is to have that recession and make prices go low enough for buyers to come in and feel good. We just had the biggest housing and credit bubble pop on us and its because of low interest rates, so its quite ironic to solve the problem with more inflation. Looks at the thread title and I say I stand by this, I know the USD is doing well in the FX markets but I look at a currency value based on what it can buy rather than how much Euro or Yen I can get with it.

[uls]

yes, i understand Tidus... i'm just saying what they will do next...

not what i'd like them to do next.

We can clearly see what they are trying to do...

they are trying to re-inflate the deflating bubble.

The problem is not liquidity.

There's already soooo much liquidity out there...

the Fed has pumped more than a trillion dollars into the credit markets but the banks are still not lending... they are hoarding.

Why?

Coz if ur a bank, would u lend money to people or companies whose income is lost or threatened?

People are losing jobs, companies are struggling... what if they can't pay back?

Deflation and deleveraging is ongoing...

and the Fed is trying to stop the natural process...

The Fed is trying to restore things to as it was before...

it's not working.

[tidus1203]

You guys watch. Meron lang deflation in prices because of the slump in demand and lack of perceived credit (although the system is flooded with credit just stored and ready for use when things get better), once things get better all that new money will be unleashed out there and there goes oil and gold yet again and a new bubble will be created. This idiots made the same mistake the Greenspan made after the tech bubble bursted. So he created a new bubble in housing and credit so whats the new bubble? Commodities? Credit Card? Only God knows, basta I know that in the long run the USD is a flawed currency.

[tidus1203]

By the way the RBA (Reserve Bank of Australia) cut its interest rates by a full 1% or 100BPS. But we have to remember that thats coming from a 7% interest rates so now its 6% but for the Fed to cut that much from 2% is suicide. They are pretty much doling out money at those rates.

[uls]

And that's what the Fed is gonna do soon...

Their goal is to re-inflate the bubble.

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And another reason why banks are hoarding cash is they are getting ready for credit default swap payouts.

Fannie and Freddie credit derivatives have just been settled.

Next is Lehman credit derivatives.

[tidus1203]

http://www.youtube.com/watch?v=R1X6RQLZtoA

The Joker laughs at the bailout plan

[Monseratto]

Mga sirs, I heard that the "D" word is already being tossed around. Many say its not that far fetched anymore. Is it?

[uls]

Ya the D word is being mentioned a lot these days.

basta tuloy tuloy ang asset deflation, bank failures, job losses...

the R word will become the D word

[Monseratto]

Feds are now planning to lend directly to private businesses. Err...why did they save the banks in the first place?

Fed to lend to companies in emergency move

WASHINGTON - Frantically trying to stop the bleeding on Wall Street, the Federal Reserve took a first-time step Tuesday to get cash directly to businesses and hinted that interest rates could come down soon. Stocks continued their free fall anyway and hit new five-year lows.

The central bank invoked emergency powers to lend money to companies outside the financial sector and buy up mounds of commercial paper, the short-term debt that firms use to pay for everyday expenses like salaries and supplies.

The Fed, which has only loaned money to banks before, made the move as the gravest financial crisis in decades wore on and concern spread around the world.

In a speech to the National Association for Business Economics, Fed Chairman Ben Bernanke delivered a strong signal interest rates may need to be cut. And he warned the country could be stuck in the economic doldrums for some time.

"The outlook for economic growth has worsened," Bernanke said. "The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance."

[tidus1203]

GOLD! GOLD! GOLD! and maybe OIL! The Fed is gonna flood the system with money again and again and inflation will kick in later on when demand picks up again.

[uls]

the Fed is gonna buy commercial paper issued by companies...

commercial paper is supposedly bought by money market funds...

but the MM kinda stopped buying CP

Even if the Fed kept on injecting money into the credit market, ayaw parin magpautang mga bangko...

so eto ang Fed, the lender of last resort.

The banks are hoarding cash... they are preparing for something big.

---

In hindsight, they shouldnt have let Lehman fail.

They say Lehman didnt pose any systemic risk...

wrong!

When Lehman failed, a MM fund called Reserve Primary Fund took losses...

they stopped proceeds redemptions for a week.

That scared the hell out of MM investors.

and that sent shockwaves thru out the credit market

from then on, the credit market froze.

[tidus1203]

Thats the problem the Fed keeps on printing the creditors keep accumulating and when they are ready to release be prepare to ride the next bubble, just get out before it pops

[Monseratto]

Just how tight credit is?

GM may mortgage Detroit headquarters to raise cash

DETROIT — General Motors Corp. says it is looking to take out a mortgage on its towering headquarters complex as it continues efforts to raise cash to operate in an era of tight credit.

The automaker's top real estate executive said Tuesday that GM will make a presentation on Thursday to the Detroit police and fire pension board to see if it might be interested in investing in the Renaissance Center. The company also will talk with the general employees' pension board.

John Blanchard, executive director of GM worldwide real estate, said in an interview that it is common for companies to borrow on large assets, and it's something GM did in 1996 when it bought the seven-tower complex on the Detroit River.

While conceding that GM is in need of cash, Blanchard said it's just coincidence that it is pursuing a mortgage now.

GM had $21 billion in cash and $5 billion available through credit lines at the end of June for total liquidity of $26 billion. The company announced a liquidity plan in July that calls for cutting $10 billion in costs and raising another $5 billion through asset sales and borrowing over the next 15 months.

Fitch ratings analyst Mark Oline, however, has projected that GM could reach the minimum amount of cash required to run the business, $11 billion to $14 billion, within the next year.

The Detroit News reported Tuesday that GM would try to borrow about $500 million with the Renaissance Center as collateral, but Blanchard said the company has not discussed terms yet with the pension boards.

[tidus1203]

And as feared (feared by me ) the Federal Reserve cuts interest rates by 50BPS and now its as low as 1.50%. And the bad thing is every major central bank in the world except Japan (they have nothing to cut since their rates is already 0.50%) also followed. And guess what? Most likely in the official meeting they will cut again. Terrible! Just terrible!

http://www.cnbc.com/id/27046309

[Monseratto]

Another record drop or a technical rebound for the Dow Jones tonight?

[Monseratto]

The rate hike is having a positive effect for now. The central banks are running out of tricks. They should just bite the bullet and pick up the pieces after it bottoms out...