U.S. Treasury Calls Emergency Weekend Meeting of G20
October 9th, 2008Via: Radio Australia:
The co-ordinated interest rate cut by global central banks followed another disastrous day of trading in Asia, in which the Nikkei fell more than nine-percent, and the Indonesian stock exchange was suspended indefinitely. A few hours ago, the United States Treasury Secretary Henry Paulson welcomed the joint international move.
“US and global financial markets continue to be severely strained. A root cause of this situation is the housing correction and a lack of confidence in mortgage assets, as well as a lack of confidence in many of the financial institutions that hold these assets,” Mr Paulson told reporters.
“Because of this widespread uncertainty investors are hesitant to commit capital to financial institutions. Investor confidence is critical to restore liquidity and enhance the stability of our financial system.
“Today’s announcement of a coordinated rate cut including Europe, China and other large economies is a welcome sign that Central Banks around the world are prepared to take the necessary steps to support the global economy during this difficult time.”
Mr Paulson also says an emergency meeting has now been called, of the G20 advanced and developing nations. The meeting will take place in Washington this weekend, and will include finance ministers and others already in town for a scheduled meeting of the International Monetary Fund and the World Bank.
Research Credit: Eileen, PD
XM-25: You’d Better be Hiding Around Two Corners These Days
October 8th, 2008Via: Register:
What you put in your big fat .98-calibre** slugs is a small HE-frag warhead – but that’s not the clever bit. The clever bit is the electronic precision time fuse, which is set wirelessly by the gun’s systems at the moment of firing. This means that the slug will explode at exactly the distance from the muzzle you want.
…
You can combine this with a laser rangefinder, digital three-axis inclination sensors and computer gunsights to achieve some almost Judge Dredd-style results. For instance your enemy is hiding unsportingly in a trench or behind a wall. You can ping his hide with the rangefinder, select an extra metre or two of distance on the fuze, and shoot slightly high. The grenade-slug will explode just above the target’s head, spraying him with shrapnel despite his frontal hard cover. You could use the same trick to make your rounds explode right next to an enemy hiding around a corner.
Likewise, you can dial up slightly increased distance shooting at windows, thin walls, shrubbery or whatever. The projectiles will punch through to explode where you want them to, where impact-fused rounds would tend to go off too soon or too late.
Government to Spend £50 Billion to Part-Nationalise UK’s Banks
October 8th, 2008Via: Guardian:
The government has confirmed that it will spend £50bn to part-nationalise Britain’s biggest banks, in a dramatic attempt to stop the country’s financial system melting down.
Today’s momentous decision to pump £50bn of taxpayers’ money into the troubled banking sector came after government ministers and bank officials thrashed out the details of the plan into the early hours of the morning.
The £50bn bail-out is equivalent to £2,000 for every taxpayer in the UK, and analysts warned today that the public will “foot the bill” for the plan. The government is also now offering to lend £200bn to the sector – much bigger than previously thought – as short-term loans in an attempt to thaw the frozen interbank lending markets, plus a further £250bn to guarantee bank debts.
Eight banks and building societies will take part in the scheme – Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered.
Related: People Line Up to Buy Gold in Britain
Sad Guys on Trading Floors
October 8th, 2008Gold Sharply Higher on Rate Cuts
October 8th, 2008Via: Dow Jones:
New York gold futures traded sharply higher early Thursday following a coordinated rate cut by the Federal Reserve, European Central Bank and other major banks.
This has triggered safe-haven buying on ongoing worries about the world financial system, as well as buying as a hedge against potential inflation down the road as a result of easier monetary policy, traders and analysts said.
Around 8:40 a.m. EDT (1240 GMT), December gold was up $32.80 to $914.80 an ounce on the Comex division of the New York Mercantile Exchange. December silver was 54.5 cents higher at $11.925.
Gold was higher in overnight screen trading and remains firmer after initial volatility when the news broke that the Fed cut its federal-funds rate by 50 basis points to 1.5%. Others cutting rates included the Bank of Canada, Bank of England, European Central Bank, Sweden’s Riksbank and the Swiss National Bank.
“With the concentrated effort around the world, it shows fear,” said Charles Nedoss, senior account manager and metals analyst with Peak Trading Group. ” People are worried that No. 1, it is inflationary. And No. 2, where do you go from here if this doesn’t work.”
Syrian Troops Gather on Lebanese Border
October 8th, 2008Monitoring…
Via: AP:
A few tents and trucks dotting a green hill across the river are about all that is visible of a Syrian troop deployment on Lebanon’s northern border — a buildup that has raised concerns of a possible Syrian incursion.
There was no sign Wednesday that the Syrian troops were preparing to cross the border. Syria says the deployment — first made public several weeks ago — is aimed at preventing smuggling from Lebanon.
But the United States and some anti-Syrian politicians in Beirut have warned that Syria could attempt an incursion, a concern raised especially after a Sept. 27 car bombing in Damascus killed 17 people.
In Washington, Deputy State Department spokesman Robert Wood on Monday said, “Any intervention by Syrian troops into Lebanon would be unacceptable.”
SEVERAL CENTRAL BANKS CUT RATES SHARPLY
October 8th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
I was in the market yesterday, as the Dow was continuing to tank. I was looking to buy October call options on DIA, strike 115. In English, as the Dow was tanking, I was looking to make a very high risk, high reward bet that the Dow would rise sharply over the next several days.
I never pay the ask on options. The spread was .06 x .09. So I sent in a limit order for .07, which put me on top of the bid. I went to bed. When I woke up, I checked to see if I got filled. I saw that the Dow declined further and sharply from where I entered my order for those calls.
“Oh goody, I got filled for sure,” I thought.
I logged into TradeKing and saw that, not only did I not get hit, but those options had increased in value as the market tanked!
INCREASED.
The moral of the story: When you smell a rat, pay the ask.
There are a couple of explanations of why the premium on those calls increased as the Dow declined. The first one is simply that people knew emergency rate cuts were hours away and were looking for a cheap way to be up wind when the fire started. Another explanation is that black box systems started making very long shot bets the other way as the downside move became more extreme.
Anyway, it will be interesting to watch those 115s from here.
Via: Reuters:
The Federal Reserve led a global round of emergency interest rate cuts Wednesday in an effort to contain the worst financial crisis since the 1930s.
The Fed said it was cutting its key federal funds rate by 50 basis points to 1.5 percent. China, the European Central Bank (ECB) and central banks in Britain, Canada, Sweden and Switzerland also cut rates in the coordinated response which analysts had been demanding.
“Incoming economic data suggests that the pace of economic activity has slowed markedly in recent months,” the Fed said in a statement.
“Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.”
World stock markets cut heavy losses after the move.
The dollar fell further versus major currencies and U.S. Treasuries rose. German government bond futures wiped out gains, while European bank shares turned positive.
Stock Markets in Russia, Indonesia Halted
October 8th, 2008Via: Bloomberg:
Russia, Indonesia, Ukraine and Romania shut their stock exchanges after shares plummeted in the worst week for emerging-markets in at least two decades.
Russia’s Micex Index dropped 14 percent, having already slumped 20 percent this week, before trading stopped at 11:05 a.m. in Moscow. The exchange won’t reopen until Oct. 10 unless the Federal Financial Markets Service says otherwise, Micex spokesman Alexei Gerasyuk said by phone. The Jakarta Composite index fell 21 percent in its biggest weekly slump in at least 25 years, according to data compiled by Bloomberg.
Investors are fleeing on concern the worsening global credit crisis will cause more banks to collapse and push the global economy into recession, lowering the price of the commodities that drive developing nation economies. The benchmark MSCI Emerging Markets index is headed for its worst weekly decline since it was established in 1987 after falling 21 percent.
Retirement Accounts Have Lost $2 Trillion So Far
October 8th, 2008Via: AP:
Americans’ retirement plans have lost as much as $2 trillion in the past 15 months — about 20 percent of their value — Congress’ top budget analyst estimated Tuesday as lawmakers began investigating how turmoil in the financial industry is whittling away workers’ nest eggs.
The upheaval that has engulfed financial firms and sent the stock market plummeting is also devastating people’s savings, forcing families to hold off on major purchases and even delay retirement, Peter Orszag, the head of the Congressional Budget Office, told the House Education and Labor Committee.
As Congress investigates the causes and effects of the meltdown, the panel pressed economists and other analysts on how the housing, credit and other financial troubles have battered pensions and other retirement funds, which are among the most common forms of savings in the United States.
AIG Executives Pampered at California Spa After Bankruptcy
October 8th, 2008Via: Los Angeles Times:
When the going gets tough, the tough get pedicures.
Just days after the federal government committed $85 billion of taxpayers’ money to a bailout of insurance giant AIG last month, senior execs from the troubled company headed to Southern California’s ultra-swanky St. Regis Resort in Monarch Beach for a week of wining and dining top salespeople.
“They had a conference here,” resort spokeswoman Kristi Turek confirmed Tuesday, “but we don’t get into details of what they did during that time.”
As it happens, congressional investigators released AIG documents earlier in the day showing that the company paid more than $440,000 for the event, including nearly $200,000 for rooms, $150,000 for meals, $23,000 in spa charges and almost $7,000 for golf outings.
The post-bailout getaway for American International Group execs is just one of a series of jaw-dropping revelations to emerge this week about the behavior of some of the companies involved in the financial crisis.
