Saturday, November 1, 2008
Friday, October 17, 2008
Nouriel Roubini a.k.a Dr Doom
How bad the current financial storm will get? This from Nouriel Roubini, Professor of Economics at the NYU Stern School of Business:
"The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity where excessive leveraging and bubbles were not limited to housing in the U.S. but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: an housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.
"At this point the recession train has left the station; the financial and banking crisis train has left the station. The delusion that the U.S. and advanced economies contraction would be short and shallow - a V-shaped six month recession - has been replaced by the certainty that this will be a long and protracted U-shaped recession that may last at least two years in the U.S. and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown, the probability that the outcome could become a decade long L-shaped recession - like the one experienced by Japan after the bursting of its real estate and equity bubble - cannot be ruled out.
"At this point the risk of an imminent stock market crash - like the one-day collapse of 20% plus in U.S. stock prices in 1987 - cannot be ruled out as the financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown.
"A vicious circle of deleveraging, asset collapses, margin calls, and cascading falls in asset prices well below falling fundamentals, and panic is now underway."
NYT call Dr Roubini as Dr Doom, the professor who predicted the current credit crisis two years ago.
Buy gold safe haven, price of gold had drop good time to buy a gold coin or two for safe keeping.
Read disclaimer/comments policy.
"The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity where excessive leveraging and bubbles were not limited to housing in the U.S. but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: an housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.
"At this point the recession train has left the station; the financial and banking crisis train has left the station. The delusion that the U.S. and advanced economies contraction would be short and shallow - a V-shaped six month recession - has been replaced by the certainty that this will be a long and protracted U-shaped recession that may last at least two years in the U.S. and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown, the probability that the outcome could become a decade long L-shaped recession - like the one experienced by Japan after the bursting of its real estate and equity bubble - cannot be ruled out.
"At this point the risk of an imminent stock market crash - like the one-day collapse of 20% plus in U.S. stock prices in 1987 - cannot be ruled out as the financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown.
"A vicious circle of deleveraging, asset collapses, margin calls, and cascading falls in asset prices well below falling fundamentals, and panic is now underway."
NYT call Dr Roubini as Dr Doom, the professor who predicted the current credit crisis two years ago.
Buy gold safe haven, price of gold had drop good time to buy a gold coin or two for safe keeping.
Read disclaimer/comments policy.
Wednesday, October 15, 2008
LIBOR Rate Hardly Moved.
Despite multi trillion liquidity injection to the entire world financial systems the London LIBOR 1 month and 3 months interest rates hardly moved! Banks free and easy lending it's coming to the end sad to say. From now onwards ordinary folks like us getting bank loans will be proved harder then going to planet Mars because banks doesn't even want to lend to one another despite all this mambo jumbo trillion dollars rescue package, maybe the Maltian have some extra dollars to save or spare the earth from this credit crunch and helps earthling from falling to an economic deathly spiral into abyss.
One month LIBOR is normally some small percentage (say 15-30 basis points) above the Fed Funds Rate. It is now 297 basis points above the Fed Fund Rate.The key issue with LIBOR is the huge number of adjustable rate mortgages that are tied to it. Bernanke went on a slash and burn campaign of cutting interest rates from 5.25 all the way to 1.50 (375 basis points) yet LIBOR only picked up about 100 of them.
The current stock market bull run euphoria hardly proves anything to the bankers because the issues of counter parties risk still had not been totally and honestly encountered. Feds will have to ultimately separate the hays from the wheats. FDR during the world first depression in 1930 close down all American banks for one week so that government regulators can assessed the health of individual banks, savage those can be save and bankrupt those can't be savage. Only after that Feds pump in massive liquidity into the financial systems to jump start the economy.
Further more forcing the bankers to start lending facilities it's almost impossible when bank don't even trust one another.
Bloomberg : Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell.The equity stakes the government is purchasing in Citigroup Inc., Morgan Stanley and seven other big institutions come with no guarantee that the investments will spur lending and unfreeze credit markets. Nor do they give the government board seats or any other leverage to demand that that the firms actually use the money to help the economy.``The truth of the matter is, they can't put a gun to their head and say you have to lend this money,'' said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.
Treasury officials acknowledge they can't force banks to get the taxpayer money into the hands of their customers. Instead, officials are betting that the government's investment will create conditions where banks have a greater incentive to earn profits from lending than to hoard money to shore up their balance sheets.``It's in their economic interest,'' said David Nason, the Treasury's assistant secretary for financial institutions, in an interview with Bloomberg Television. ``When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it's incumbent upon them to go out and continue to lend.
Therefore central bankers will not only need to pump massive amount of liquidity into the market systems they also need to ensure sound lending environment of trust exist before the credit expansion begins. Anything lesser then that will be exercise in futility, markets negative sentiments towards the health of the real economy will simply overwhelmed whatever the central bankers initiatives to jump start the economy. This crisis of confidence in the financial system will take times and years of consistent efforts not a few quarters kind of problems but at least minimum 2 years or more to solve. For banks to starts lending again after the current crisis, at the moment seams impossible to do anything accurately right anyway, Feds will have to concentrate in having the right measures and responsed to bring the American economy to it's feet's again. Sound lending equal sound economy!
Meanwhile gold price it's one of the commodities most stable plus some upward trend compare with others commodities. Gold safe haven characteristics proved the most valuables assets in time of severe economy crisis.
Buy Gold!
Kindly Read Disclaimers/Comments Policy.
One month LIBOR is normally some small percentage (say 15-30 basis points) above the Fed Funds Rate. It is now 297 basis points above the Fed Fund Rate.The key issue with LIBOR is the huge number of adjustable rate mortgages that are tied to it. Bernanke went on a slash and burn campaign of cutting interest rates from 5.25 all the way to 1.50 (375 basis points) yet LIBOR only picked up about 100 of them.
The current stock market bull run euphoria hardly proves anything to the bankers because the issues of counter parties risk still had not been totally and honestly encountered. Feds will have to ultimately separate the hays from the wheats. FDR during the world first depression in 1930 close down all American banks for one week so that government regulators can assessed the health of individual banks, savage those can be save and bankrupt those can't be savage. Only after that Feds pump in massive liquidity into the financial systems to jump start the economy.
Further more forcing the bankers to start lending facilities it's almost impossible when bank don't even trust one another.
Bloomberg : Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell.The equity stakes the government is purchasing in Citigroup Inc., Morgan Stanley and seven other big institutions come with no guarantee that the investments will spur lending and unfreeze credit markets. Nor do they give the government board seats or any other leverage to demand that that the firms actually use the money to help the economy.``The truth of the matter is, they can't put a gun to their head and say you have to lend this money,'' said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.
Treasury officials acknowledge they can't force banks to get the taxpayer money into the hands of their customers. Instead, officials are betting that the government's investment will create conditions where banks have a greater incentive to earn profits from lending than to hoard money to shore up their balance sheets.``It's in their economic interest,'' said David Nason, the Treasury's assistant secretary for financial institutions, in an interview with Bloomberg Television. ``When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it's incumbent upon them to go out and continue to lend.
Therefore central bankers will not only need to pump massive amount of liquidity into the market systems they also need to ensure sound lending environment of trust exist before the credit expansion begins. Anything lesser then that will be exercise in futility, markets negative sentiments towards the health of the real economy will simply overwhelmed whatever the central bankers initiatives to jump start the economy. This crisis of confidence in the financial system will take times and years of consistent efforts not a few quarters kind of problems but at least minimum 2 years or more to solve. For banks to starts lending again after the current crisis, at the moment seams impossible to do anything accurately right anyway, Feds will have to concentrate in having the right measures and responsed to bring the American economy to it's feet's again. Sound lending equal sound economy!
Meanwhile gold price it's one of the commodities most stable plus some upward trend compare with others commodities. Gold safe haven characteristics proved the most valuables assets in time of severe economy crisis.
Buy Gold!
Kindly Read Disclaimers/Comments Policy.
Tuesday, October 14, 2008
A £516 trillion derivatives 'time-bomb'
Can't help it kind of feeling you may say, last few blogging have seen myself dwelling in the issues of derivatives. How we can whether through this financial turmoil will depends on the process of unwinding those derivatives that put a strangle hold on the financial system worldwide.
Bankrupted Lehman Brothers still had 400 billion of credit default swap (CDS), how and when this derivatives CDS going to unwind it's anybody guess. Like Buffet said he prefer holding cats by it's tail then rather trying to unwind a derivatives business. Who is holding the bags eventually it still anybody guess work, counter parties risk still a worrisome things.
Total derivatives worldwide it's £516 trillion! A massive financial thermonuclear time bombs.
Stock market it's up steeply from Australia to Europe today, do it signify that the current financial turmoil it's done and over. At the Chinese saying said "good things is at the back stage", a lots of issues from counter parties risk to the issues of bank solvency still had not been solved by Central banker. By pumping liquidity to the banking systems only solved one parts of the many problems arises from this credit crunch. The true pictures will come into play when unwinding the massive derivatives time bomb!
Read the following article : A £516 trillion derivatives 'time-bomb'
By Margareta Pagano and Simon Evans.
Buy gold no counter parties risk!
Kindly read Disclaimer/Comments Policy.
Bankrupted Lehman Brothers still had 400 billion of credit default swap (CDS), how and when this derivatives CDS going to unwind it's anybody guess. Like Buffet said he prefer holding cats by it's tail then rather trying to unwind a derivatives business. Who is holding the bags eventually it still anybody guess work, counter parties risk still a worrisome things.
Total derivatives worldwide it's £516 trillion! A massive financial thermonuclear time bombs.
Stock market it's up steeply from Australia to Europe today, do it signify that the current financial turmoil it's done and over. At the Chinese saying said "good things is at the back stage", a lots of issues from counter parties risk to the issues of bank solvency still had not been solved by Central banker. By pumping liquidity to the banking systems only solved one parts of the many problems arises from this credit crunch. The true pictures will come into play when unwinding the massive derivatives time bomb!
Read the following article : A £516 trillion derivatives 'time-bomb'
By Margareta Pagano and Simon Evans.
Buy gold no counter parties risk!
Kindly read Disclaimer/Comments Policy.
Monday, October 13, 2008
Financial Armageddon
Financial Armageddon, serious words indeed. below it;s the except from Micheal Panzner book Financial Armageddon (hopefully Michael won’t mind me posting so much of his text desperate time requires desperate measure as someone said):
Eventually, with a decades-long orgy of credit expansion unraveling fast; the meltdown of stock, bond, commodity, and other markets; a cratering economy; and more of the nation’s largest financial institutions precariously on the edge, the Federal Reserve and Washington as a whole will have reached a critical juncture. There will be widespread pressure, bordering perhaps on hysteria, for somebody, somewhere to take action and stem the rapidly rising tide of disaster.
Only then, after being unwilling to react quickly and forcefully enough early on, the Federal Reserve will abruptly shift gears, no longer fearing the consequences of an aggressive monetary response. In a sense, they will have nothing to lose. With immediate effect, they will give up their self-imposed yoke of restraint and move wholeheartedly into money-creation mode. That will mark the beginning of the second phase of the great unraveling.
Sound familiar? Here’s some more from Chapter 6 (”Systemic Crisis”)
No doubt a systemic meltdown will provoke a similar response. For the financial system and the markets, however, the fallout will likely be worse than any downturn in many decades, owing to a unique combination of modern developments and incendiary circumstances. The explosive growth of derivatives trading and leveraged hedge fund investing, hidden behind a shroud of lightly regulated secrecy, means that few people will have a handle on where dangerous risk is concentrated or overall levels of exposure — not until it’s too late…
-SNIP-
Simply put, people will find it difficult to react in timely, logical or focused fashion to the unfolding calamity…
-SNIP-
Despite increased levels of sophistication and the broad use of modern risk management systems, no one can be sure how new or exotic instruments and markets will behave when conditions take an ominous turn. The sheer scale of the unfolding financial crisis—in terms of the number of participants, firms, regulators, products, countries, and markets—will make it difficult to penetrate the problems…
-SNIP-
This time, however, a vast and efficient global communications network will ensure that destructive energies are rapidly transmitted to billions of people. So, too, will trading technology that facilitates and encourages traders and investors to act on their impulses. Many will find it too easy to shoot first — or point and click — and ask questions later in a 21st-century rush for the exits.. Not only will the fastest or sharpest operators look to get out. Firms that have come to depend on leverage, including hedge funds, brokers, and even banks, will also face immediate and rapidly growing pressure to scale back positions because of demands for additional cash collateral or reduced access to financing. Meanwhile, those who still have the wherewithal to initiate fresh positions or act independently will look to dive in and take advantage of the stampede.
-SNIP-
A constant global ripple effect will occur as positions are adjusted to take account of risk management strategies or cash-raising demands. The widespread use of flawed models will further aggravate the situation.
-SNIP-
By the time the systemic crisis is full-blown, there will almost certainly have been a domino-like collapse of more than a few large intermediaries and allegedly sophisticated global financial firms, including hedge funds, insurers, and brokers. As the number of failures grows, concerns over counterparty risk will take center stage. Lenders, investors, and risk managers will fret and gossip about which institution is next. Worries about fraud and chicanery will boost anxiety to a fever pitch. Even firms not in dire straits may suddenly find themselves at risk. In times of upheaval, a lack of information and concern about the ability of others to manage their exposure often spurs a self-fulfilling prophecy, where idle chatter alone leads to institutions being squeezed or cut off—just when they need access to financing most.
-SNIP-
Few areas of the financial system will be unaffected when the meltdown rages. In the insurance sector, for example, debt downgrades and defaults will occur at a quickening pace… At least some of the $2 trillion held in money market funds will anxiously flee to safer pastures as the prices of one or more pools fall below par — “breaks the buck” — because of shaky markets and holdings that turn out to be much riskier than expected.
Chilling the above prediction was unfolding right before our eyes for the pass few months, how far this current financial crisis will go on no one have a clue.
Buy Gold Safe Haven!
Kindly Read Disclaimer/Comments Policy.
Eventually, with a decades-long orgy of credit expansion unraveling fast; the meltdown of stock, bond, commodity, and other markets; a cratering economy; and more of the nation’s largest financial institutions precariously on the edge, the Federal Reserve and Washington as a whole will have reached a critical juncture. There will be widespread pressure, bordering perhaps on hysteria, for somebody, somewhere to take action and stem the rapidly rising tide of disaster.
Only then, after being unwilling to react quickly and forcefully enough early on, the Federal Reserve will abruptly shift gears, no longer fearing the consequences of an aggressive monetary response. In a sense, they will have nothing to lose. With immediate effect, they will give up their self-imposed yoke of restraint and move wholeheartedly into money-creation mode. That will mark the beginning of the second phase of the great unraveling.
Sound familiar? Here’s some more from Chapter 6 (”Systemic Crisis”)
No doubt a systemic meltdown will provoke a similar response. For the financial system and the markets, however, the fallout will likely be worse than any downturn in many decades, owing to a unique combination of modern developments and incendiary circumstances. The explosive growth of derivatives trading and leveraged hedge fund investing, hidden behind a shroud of lightly regulated secrecy, means that few people will have a handle on where dangerous risk is concentrated or overall levels of exposure — not until it’s too late…
-SNIP-
Simply put, people will find it difficult to react in timely, logical or focused fashion to the unfolding calamity…
-SNIP-
Despite increased levels of sophistication and the broad use of modern risk management systems, no one can be sure how new or exotic instruments and markets will behave when conditions take an ominous turn. The sheer scale of the unfolding financial crisis—in terms of the number of participants, firms, regulators, products, countries, and markets—will make it difficult to penetrate the problems…
-SNIP-
This time, however, a vast and efficient global communications network will ensure that destructive energies are rapidly transmitted to billions of people. So, too, will trading technology that facilitates and encourages traders and investors to act on their impulses. Many will find it too easy to shoot first — or point and click — and ask questions later in a 21st-century rush for the exits.. Not only will the fastest or sharpest operators look to get out. Firms that have come to depend on leverage, including hedge funds, brokers, and even banks, will also face immediate and rapidly growing pressure to scale back positions because of demands for additional cash collateral or reduced access to financing. Meanwhile, those who still have the wherewithal to initiate fresh positions or act independently will look to dive in and take advantage of the stampede.
-SNIP-
A constant global ripple effect will occur as positions are adjusted to take account of risk management strategies or cash-raising demands. The widespread use of flawed models will further aggravate the situation.
-SNIP-
By the time the systemic crisis is full-blown, there will almost certainly have been a domino-like collapse of more than a few large intermediaries and allegedly sophisticated global financial firms, including hedge funds, insurers, and brokers. As the number of failures grows, concerns over counterparty risk will take center stage. Lenders, investors, and risk managers will fret and gossip about which institution is next. Worries about fraud and chicanery will boost anxiety to a fever pitch. Even firms not in dire straits may suddenly find themselves at risk. In times of upheaval, a lack of information and concern about the ability of others to manage their exposure often spurs a self-fulfilling prophecy, where idle chatter alone leads to institutions being squeezed or cut off—just when they need access to financing most.
-SNIP-
Few areas of the financial system will be unaffected when the meltdown rages. In the insurance sector, for example, debt downgrades and defaults will occur at a quickening pace… At least some of the $2 trillion held in money market funds will anxiously flee to safer pastures as the prices of one or more pools fall below par — “breaks the buck” — because of shaky markets and holdings that turn out to be much riskier than expected.
Chilling the above prediction was unfolding right before our eyes for the pass few months, how far this current financial crisis will go on no one have a clue.
Buy Gold Safe Haven!
Kindly Read Disclaimer/Comments Policy.
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