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Wednesday, August 15, 2007


Expect more pain today.

Yen Rises to 4 1/2-Month High Against Dollar on Subprime Losses: Currencies are on the move as massive amounts of liquidity is re-arranged around the globe. The Carry Trade unwind is in full force now. High yield currencies are dropping fast as the hot money is pulled out to repay loans in low yield currencies. The safe haven bid is back and the US dollar is feeling the love.

Emerging-Market Stocks, Currencies Drop as Subprime Woes Mount: Everywhere everyone has suddenly come to the same conclusion: "We've been drastically underpricing risk. Doh." Now everyone is doing the same thing at the same time, reducing their risk exposure.

Sentinel Management Group Halts Client Redemptions (Update5): When money market funds implode, you should be very very concerned. Well to be precise, you should have been concerned back when you first discovered a money market fund that had ridiculous yields....

To make matters worse, Sentinal is used by the hedgies to park their cash until they need it. Its a money market fund for hedge funds. Guess what? They need the money. Desperately. That was supposed to be their source of liquidity...

Coventree Seeks Emergency Funding for Second Day (Update5): Canada's largest non-bank issuer of asset backed commercial paper failed, again, to roll over their debt. Coventree could be Canada's first investment bank casuality...

Subprime-Infected Funds Drive Demand for Dollars (Update2): The dollar is no longer the currency you love to hate. Now, it's the currency you can't live without. Such is the power of the safe haven bid.

Countrywide Cut to `Sell' at Merrill; Bankruptcy Seen Possible: This is a perfect example of why analysts should be shot. Cut to Sell after a 40% decline. Way to go. Genius.

U.S. Consumer Prices Rose 0.1% in July; Core Rate Gains 0.2%: CPI was in line. Nothing to see here. Traders have other fun things on their collective plates anyways...

U.S. MBA's Mortgage Applications Index Rose 3.4% Last Week: This one always cracks me up. The talking heads on bubble vision view this as 'bullish' and a sign 'that there is demand for homes'. Ridiculous. Applications are rising simply because people are applying, getting rejected and re-applying. People are scrambling to re-finance.

What happens when there is only one exit and everybody wants to get out?
I think I know and its going to be glorious.