9 replies to this topic

[toni]

Does anyone here agree with me that the Fed should do nothing tomorrow. Neither raise, nor lower the Fed funds rate. Then confine their statement to saying "when hustlers and gamblers and traders trying to shave a bit here and a bit there off the economy make a bet they either win or lose. When they win they win. When they lose they lose. The taxpayers do not bail them out when they lose. That would be a good lesson for those worthless middlemen. Maybe then they would go out and get a job and earn thier keep instead of trying to hustle their way through life. toni b

[nicolasillo]

Does anyone here agree with me that the Fed should do nothing tomorrow. Neither raise, nor lower the Fed funds rate. Then confine their statement to saying "when hustlers and gamblers and traders trying to shave a bit here and a bit there off the economy make a bet they either win or lose. When they win they win. When they lose they lose. The taxpayers do not bail them out when they lose.

That would be a good lesson for those worthless middlemen. Maybe then they would go out and get a job and earn thier keep instead of trying to hustle their way through life.

toni b

What they should do and what they will do is a completely different story. Take BOE for example: two days before lending money to Northern Rock they had stated that they are not going to bail out anyone! Just two days later they lend the money. The problem of course now for the BOE - I believe - will be when other Building societies will come out now (Alliance Leicester for example who lost 30% today) and ask for money too....then the real problem will start. Because I believe they won t lend money to anyone! I am in some kind of debt too, I think I ll go ask the BOE for a loan

Nobody wants to be the reason for the market going down hard. Thats why you saw that kind of reaction from the BOE. I believe the FED does not want to be the reason for the market going down either, so I wouldn t expect much tomorrow, maybe a brief rally if the cut only 25bps and PPI numbers come out in line or slightly worse. Then the next day if CPI will come out high then we can see the market going down.

News around are not so good either at the moment, Northern Rock, Alliance Leicester as well, maybe more to come. E-trade, BAC gave profit warnings just today, Novastar can t pay dividends anymore. Have a look at Bloomberg and read the news.....

Credit Suisse, Citigroup Take Losses on LBO Debt (Update4) Credit Suisse Group, Citigroup Inc. and JPMorgan Chase & Co. are taking losses on leveraged buyout loans to prevent deals from falling apart and avoid getting stuck with as much as $320 billion in debt.

PHH Sale to GE, Blackstone May Collapse as Banks Balk (Update5) PHH Corp., the New Jersey-based mortgage lender that agreed to be bought by General Electric Co. and Blackstone Group LP, said the $1.8 billion sale may unravel as lenders back away from some leveraged buyouts.

So I believe no matter happens tomorrow it will be short lived. Things are not that good, no matter what they say that when bad news are everywhere then this is good news as everybody becomes bearish. Completely different situation, consumers in the UK have been scared and for three days are lined up to withdraw their savings....give it a couple more days and if it continues with another building society saying they are in trouble and then we will see the real reaction.

The problem with the whole subprime situation is that none knows what are the losses, and most investors have no idea what is going on (including me). Thats why you see the overreaction everytime a bank announces it has losses.

Anyway, good trading tomorrow...

[selecto]

Nice post.

[nicolasillo]

Nice post.

thanks

[toni]

nacolasillo' Do they have anything like the FDIC in the UK? The way depositors are acting they might not. If not then depositors making a run on the banks that show signs of distress is good rational action. I would do the same in the same situation if there is no guarentee from a reliable guaranter. Still since the only way a guarenter can make good on his guarentee is if 99% take his word that it will be honored and do not ask for their money back. And the guarentee if honored will be honored with fiat currency. So if trust in the system ever goes it will all be over. A scary thought. More reason than ever to start putting disapline back into the system. That means when gamblers lose, they lose. Period. toni b

[Sentient Being]

I personally don't know enough about the entire macro-economic picture and the purpose of the Fed and the tools it has at hand to make any conclusion about how the fed should act. Instinctively I feel the fed should not try to bring back a bubble, or support a bubble. But if they see the collapse of our system at hand and feel they must act, who am I to say they have it wrong? No one. Quite frankly, I remember mortgages going for 16% years ago. 6% or 7% today seems fairly cheap to me. If people need them lower to survive in a house they bought, maybe they should be moving to an apartment. I'm not sure why it would need to be cheaper or if making them cheaper would do anything but make things worse in the long run. I think Greenspan MAY have screwed things up by making rates too low, I'm not sure making them low again will do anything but make things worse.

Edited by Sentient Being, 17 September 2007 - 07:05 PM.

[cedartree]

Do they have anything like the FDIC in the UK? The way depositors are acting they might not. If not then depositors making a run on the banks that show signs of distress is good rational action. I would do the same in the same situation if there is no guarentee from a reliable guaranter. Toni, People are taking their money out of Slippery Rock Bank because the Financial Service Authority only guarantees the first 2000 pounds at 100%, the next 32000 pounds at 90%, and nothing after that! We would all be in line with a guarantee like that. -Brian

[pdx5]

SB -- I strongly agree with you, in that Fed should stop making another credit bubble by monkeying with rates. The next bubble will be bigger and will cause a bigger explosion when it ends as every bubble in history has. Have'nt we learned from the maestro's blunders? The lowering of rates in 2003-2004 helped because there was no significant bubble to deflate and the economy recovered helped by taxcuts. But now we this terrible credit bubble of unknown consequences. But every one is looking at short term solutions and election 2008. So I won't be surprised if the US$ is sacrificed and rates lowered to 3% by election time.

Edited by pdx5, 18 September 2007 - 01:39 AM.

[dasein]

apropos, from a missive from Barcharts today:

Dec 10-year T-notes this morning are trading -0.5 tick as the market treads water ahead of today's PPI report and FOMC decision. Dec T-note prices yesterday closed slightly lower by 2 ticks in light trade. Bearish factors yesterday included the idea that the FOMC today will only cut by 25 bp and the continued decline in the 3-month Libor rate which indicated that inter-bank lending is loosening up. The main bullish factor yesterday was the continued investor run on UK mortgage bank Northern Rock and the Bank of England's need to reassure depositors once again. The BOE tried to take a hard-line on aiding the banking system during the banking crisis but that has now backfired in a loss of depositor confidence in Northern Rock, providing a warning to the Fed and the ECB that now is not the time for trying to punish financial institutions for taking too much risk or using poor lending or funding practices.

is there ever a right time?
klh

[toni]

If 2000pounds is 100% backed and 32000pounds is 90% backed and all above 32000pounds has no backing what can the B of E or the British Treasury say that means anything? They will have to put their money where their mouth is for their statement to mean anything. If they do that why should risk be taken into consideration by band trading desks. Take the wildest gambles. If you win put the winnings in your pocket. If you lose give the loss to the taxpayers and walk away whole. That is what the hedge funds and bank trading desks will have done if the Fed bails them out. If banks gamble with their assets by using multiples of leverage with their capital and they lose them they lose. Period. Let them go down. Future bankers would learn a lesson. As for hedge funds and scalping traders especially let them go down. The world would be a better place if they had never been born. toni b