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Yesterday, I said
Nov. 13th, 2008 02:32 pmYesterday, I said:
Gift cards are now FDIC insured. "Um," I went, "...what?" because I thought sure this had to be a theft from The Onion or some other parody paper, but, it's not. Alphaville (first link) notes that this makes them into bearer bonds of a sort, an old-timey instrument mostly gone away because of how convenient it was for laundering money.
All the ABX traunches fell to lower levels of hell today, with the best AAAs of the lot now fetching 38c or so on the dollar. Risk spreads on commercial property lending have gone asymptotic (remember, up == bad here). The dollar index took a hit, but not a big enough one to get excited about; the Baltic Dry Index is still hanging out in the low 800s; the Fed continues not to even really try to defend its target rate of 1%, with the closest in recent days being last night's 35 basis points. (The actual effective fed funds rate is around .25-.30.) The banking system continues to be hopelessly bankrupt, with the banks propped up by US$380B or so in Federal Reserve lending, not counting other instruments which bring it up to, well, really, we don't entirely know. The slosh is around $480B now (discount window, TAF, TIOs) but that doesn't include the TARP, so probably US$1.2T or so? That lines up very roughly with some of the data you can actually get from the Fed - which is, by the way, being sued under the Freedom of Information Act for refusing to disclose TARP data. So it could be more.
This AP article lays out the OMG WE'RE ALL GONNA DIE argument being made for a Ford and GM bailout. Personally, I think Chapter 11 could do them a lot of good. Ford today traded at US$1.90/share, GM at US$2.95 a share, the former closing very slightly up, the latter closing down even in this rally. Mish talks about the UK being on the brink of meltdown, with the UK "very likely" to enter a deflationary spiral next year. (Mish thinks it's a race between the UK and the US.) Dr. Roubini continues to be extensively pessimistic about the next couple of years, of course, with what he's calling "stag-deflation."
Suddenly, the M1 is interesting. Keep an eye on that, because most of what Mr. Bernanke and Mr. Paulson have left is printing.
US exports are falling, and the dollar is strengthening, and China is increasing export rebates. As Brad says, this is not helpful.
Today's 30-year treasuries auction was poor, with low demand, as September deficit figures came in ugly, substantially on bailout costs. Quarterly tax revenue was down 7% from a year ago. All these make a bad combination.
In fact, Forbes notes that either all the credit spread data is out of whack, or credit spreads are forecasting the Great Depression of 2009, '10, '11, '12, and '13. Sadly, US growth did fall off a cliff in October. But as noted in comments in the previous post, the TED spread has continued to fall nicely - well, until today, when it was up again a little, but not much; still holding just a bit below 2.00. The LIBOR continued to fall, however, which is good.
The S&P needs to hold and bounce off current levels or technicals say things get very, very ugly in the next month or so.I expected up, but I didn't expect +58.99 / +6.92%. However, to give you an idea of the volatility involved, remember that we are still below Monday's close, and still at a significant loss for the week.
Gift cards are now FDIC insured. "Um," I went, "...what?" because I thought sure this had to be a theft from The Onion or some other parody paper, but, it's not. Alphaville (first link) notes that this makes them into bearer bonds of a sort, an old-timey instrument mostly gone away because of how convenient it was for laundering money.
All the ABX traunches fell to lower levels of hell today, with the best AAAs of the lot now fetching 38c or so on the dollar. Risk spreads on commercial property lending have gone asymptotic (remember, up == bad here). The dollar index took a hit, but not a big enough one to get excited about; the Baltic Dry Index is still hanging out in the low 800s; the Fed continues not to even really try to defend its target rate of 1%, with the closest in recent days being last night's 35 basis points. (The actual effective fed funds rate is around .25-.30.) The banking system continues to be hopelessly bankrupt, with the banks propped up by US$380B or so in Federal Reserve lending, not counting other instruments which bring it up to, well, really, we don't entirely know. The slosh is around $480B now (discount window, TAF, TIOs) but that doesn't include the TARP, so probably US$1.2T or so? That lines up very roughly with some of the data you can actually get from the Fed - which is, by the way, being sued under the Freedom of Information Act for refusing to disclose TARP data. So it could be more.
This AP article lays out the OMG WE'RE ALL GONNA DIE argument being made for a Ford and GM bailout. Personally, I think Chapter 11 could do them a lot of good. Ford today traded at US$1.90/share, GM at US$2.95 a share, the former closing very slightly up, the latter closing down even in this rally. Mish talks about the UK being on the brink of meltdown, with the UK "very likely" to enter a deflationary spiral next year. (Mish thinks it's a race between the UK and the US.) Dr. Roubini continues to be extensively pessimistic about the next couple of years, of course, with what he's calling "stag-deflation."
Suddenly, the M1 is interesting. Keep an eye on that, because most of what Mr. Bernanke and Mr. Paulson have left is printing.
US exports are falling, and the dollar is strengthening, and China is increasing export rebates. As Brad says, this is not helpful.
Today's 30-year treasuries auction was poor, with low demand, as September deficit figures came in ugly, substantially on bailout costs. Quarterly tax revenue was down 7% from a year ago. All these make a bad combination.
In fact, Forbes notes that either all the credit spread data is out of whack, or credit spreads are forecasting the Great Depression of 2009, '10, '11, '12, and '13. Sadly, US growth did fall off a cliff in October. But as noted in comments in the previous post, the TED spread has continued to fall nicely - well, until today, when it was up again a little, but not much; still holding just a bit below 2.00. The LIBOR continued to fall, however, which is good.
