Oct. 15th, 2008

solarbird: (molly-content)
Good morning.

Yesterday proved out to be a day of declines in equities and bonds both; today is so far working out the same. Investors are retreating to cash outright, apparently. The Dow has fallen as I write below 9,000 again; the S&P 500 has lost half its gain from Monday. Todd Harrison at Minyanville thinks we'll explore a trading low here for a while before moving further south in early 2009.

The Federal involvement in back "unsecured assets" coverage will rise to around US$1.4 trillion, according to the FDIC. Brad Setzer quotes G7 pledges to "accommodate whatever quantity of U.S. dollar funding is demanded," and yes, that is a quote. He calls it "unprecedented," sad that the word has lost much of its impact over the last few months, noting that "[t]he US and the major European central banks have effectively agreed to lend without limit to make good on their pledge to avoid a systemic bank failure." In a separate post, he notes that this is because the system is "on the precipice" of systemic failure.

The question remains, however, whether this will do any good without simultaneous forcing of transparency on bank assets. (Karl at Market Ticker thinks not, as you can tell from the link.) So far, all moves on this front have been in the other direction, towards less mark-to-reality (via extension of mark-to-fantasy rules). Yves at Naked Capitalism is not at all convinced. Bloomberg notes that none of the new authority allows anyone to order more lending; it just gives them money and then Paulson hopes they'll do something with it. (Mish has commentary here.) The TED spread is not significantly improved from yesterday (it's down, but moving within the same range); the LIBOR is doing a little better - but only a little. (Yet more Mish commentary here.) John at Across the Curve describes the continued gridlock in financials, but notes that non-financial companies seen as "safe haven credits" such as General Mills are seeing movement.

eta: I don't usually do these mid-post, but in this case, I want to make sure everyone sees in context how badly shipping continues to suffer as the Baltic Dry Index falls dramatically and some shippers are finding lines of credit necessary to ship simply unavailable.

Remember the CMBS, the risk measurement on commercial property? It's still insane.

Fitch has issued credit ratings downgrades for the state of Rhode Island. Iceland's equity markets reopened and fell 77% in a day, with bank shares getting no bids, so it could be worse. Several Hungarian banks are considering suspending foreign-currency lending, with one major bank having already done so.

Dr. Roubini at RGE Monitor says this will be the worst recession in 40 years - but he's apparently still convinced it won't be as bad as the Great Depression, or the previous Panic before that. But he's raised his total losses estimate quite a bit, to between US$2 and 3 trillion.

Interesting side effects; Peter Schiff at the San Diego Tribune says to just stop paying your mortgage; under the new aid-and-recovery rules, imprudent borrowers will be bailed out, while prudent and on-time buyers will continue to be screwed by a combination of no relief and additional falling property values. I note this mostly for the benefit of the anger at the bailout processes so far. The New York Times talks about "The Frugal Teenager - Ready or Not." The article talks a lot about feelings of entitlement, in that annoying way characteristic of the Times.

Finally, a bit of social economics, Time had an article on gender-based wage disparity, talking in part about this study showing that in gender transition, transwomen see their earnings decline 30-ish percent, and transmen see their incomes rise about 2%. You might take a look.
solarbird: (Default)
Today's fall of 733 points in the DJIA was the 2nd largest by point total ever, just a bit behind the 29 September drop of 777.68 points. By percentage, it makes the top ten at 9th worst (7.87%), just below the week after the Crash of '87. Other than those two dates in 1987 (the Crash itself, and the week after), all other worse dates are from before 1933. (Data from Wikipedia, here.)

The S&P 500, a much broader index than the Dow Industrials, actually did worse, falling just over 9%, to 907.94 - a 42% decline since October 7th last year, its highest close. The TSX lost 631.81 points, down nearly 6.4%. US Treasuries sold off much of the day, again, as cash continues to be hoarded, but late buying ended up pushing end-of-day yields very slightly down.

Most of this is on bad news; the Baltic Dry Index, a measurement of shipping activity, has augured in, with banks doing very, very little of the necessary lending. Various people suggest that hedge funds are imploding, with each implosion setting off another round of implosions. And consumers are running scared, for good reason.

It's almost certainly meaningless that Mondays' bounce started the instant the major averages hit their 1987-1995 trendline, but I mention it anyway. It's also too early to call this the shortest damn Wave 4 ever, but the five-day charts do show a very clear head-and-shoulders. Well, okay, it's not as clean on the NASDAQ, but on the Dow and S&P500, it's nearly picture-perfect.

In social mood update news, Andrew Sullivan thinks that if he wins (as I've been saying for some time that he will), Senator Obama will get to be a Depression president. Isn't that delightful.

As a silver lining, oil closed below $75/barrel today in continued anticipation of demand plummet - but with severe negative effects on the TSX and its energy sector. The Canadian dollar has seen a larger swing down than I anticipated on the problems in the energy sector. This timing is extremely problematic in that it will hurt a broad spectrum of energy efforts, making recovery later more difficult. And finally, in not at all good news, the TED spread did not decline at all during the day, staying within a very high trading range throughout. The LIBOR is down, but not significantly as of yet. They're both still off their peaks, but far, far, far into crazy territory.

eta: Read National Review White House Correspondent Byron York try to blame it all on minorities. Watch New York Magazine correspondent Matt Taibbi lay on with the smackdown. See Byron York EJECT EJECT EJECT. (Seen previously, thanks [livejournal.com profile] kathrynt for making me actually read it.)

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