TED spread and other indicators

Good morning, everyone.

Yesterday, I drew a terrifying but silly chart in the comments of one of yesterday's posts. It's silly because technicals trading on the TED is insane and you shouldn't do it; nobody does that there, it makes no sense. It's also silly because those lines are kinda crap, by technicals rules; they aren't really touching a lot of points, and should. But what it indicated if you applied those rules to the TED was TO THE MOON, ALICE! BANG-ZOOM!

This morning, this key spread - the rate banks charge each other for extremely-short-term loans - has spiked up to levels not seen since the 1987 stock market crash, which is to say to the goddamn moon, at 2.85. (Currently down a bit to 2.79, but that's within normal jitter.) That's over ten times the normal .25 carry rate. The banks now appear absolutely convinced someone big is about to die, and probably that several bigs are about to die.

I also was going along with the bounce theory driven by the financials today, and am obviously not seeing it at the moment. At all. In fact, this stinks of capitulation, as people are fleeing en masse into "safety" - Treasuries, Oil, Gold. (As I type, Dow -248.90, Nasdaq -57.57., S&P 500 -31.07, all very steep declines with gaps down in the open; gold and oil are up, and 35-day T-bills are only paying 0.17%, which is astoundingly low.) I am not calling a crash here - you simply cannot call a crash to the day and snapback rallies can materalise out of nowhere, particularly with an actively interventionist government being, well, actively interventionist - but I do feel obligated to point out that this is where you see crashes.

And I do think this is where people have decided that this is for reals. I think the Treasury non-action gave people a moment of fantasy, that it's actually all okay, but the AIG demi-nationalisation has slapped that right back out of them.

But I don't know; we'll just have to see. At the moment, the Dow is now down 267.87, NASDAQ down 60.91, S&P 500 down 32.44, and the graphs have just reset to lower resolution to handle the wider trading range down. Today will be interesting.

uh

303 basis points peak

The TED, a measure of interbank super-short-term lending rates, just bounced off 303 basis points (slightly higher than this chart shows; the chart is lagging), which is a fancy way of saying 3.03% interest, compared to a normal of 25 basis points, or 0.25%. This tracks money banks loan to each other for extremely short periods of time, money necessary to do business; money necessary to do things like transfer direct-deposit paycheques. This means that banks are telling each other they consider it reasonably enough likely that any given counter-party will not survive the night that they need to charge not their normal small-profit courtesy rate (0.25%) but 12 times that.

The last time the TED hit close to this figure was during the 1987 stock market crash, which was a 20% haircut for the major indices, when it hit 306 basis points. It's now dropped back down a little (297 bp).

I am hearing spooky rumours. I'm not going to repeat them because they are unvalidated. But I am hearing spooky rumours.

one of those

This is one of the less worrysome rumours, that now has a good source:

S&P's Chambers: Pressure building on AAA rating
Wed Sep 17, 2008 12:19pm EDT
Reuters
By Walden Siew

NEW YORK (Reuters) - Pressure is building on the pristine "AAA" rating of the United States after a federal bailout of American International Group Inc, Standard & Poor's sovereign ratings committee chairman said on Wednesday.

The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve "has weakened the fiscal profile of the United States," S&P's John Chambers told Reuters in an interview.

"Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating," Chambers said. "There's no God-given gift of a AAA rating, and the U.S. has to earn it like everyone else."

If treasuries lose AAA, the entire game is over. Meanwhile, here's more on how the Fed is running out of money, and raising more through emergency auctions. The last few months, those have mostly - overwhelmingly - been sales to sovereign wealth funds and similar foreign-governmental interests. Is this a good idea, and is it a stable situation?

also: TED to 304. Not tasty.

Stoplight

Stoplight

i am apparently a hat

Take a picture of yourself right now.
Don't change your clothes. Don't fix your hair. Just take a picture.
Post that picture with no editing. (Except maybe to get the image size down to something reasonable. Don't go posting an eight megapixel image.)
Include these instructions.


i am apparently a hat

o.O

I saw this on Naked Capitalism and thought it was a joke, but it isn't:

The action by the four banking agencies provides more favorable accounting treatment of so-called good will, an intangible asset that reflects the difference between the market value and selling price of a bank. ... Under the proposal issued this week, the regulators would permit buyers of banks and thrifts to count some of the good will toward meeting their regulatory capital requirements.

GOODWILL IS NOT FUCKING FUNGIBLE. GOODWILL IS DEFINITIONALLY NOT QUANTIFIABLE. GOODWILL IS. NOT. MONEY.

...this is Imaginationland crazy. This is Wackyland crazy. I...

Good luck.