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Friday, August 10, 2007

Repo Mania: More Liquidity

Central banks the world over started injecting liquidity yesterday and followed through again today. Its repo mania!

The liquidity isn't really helping... yet. In fact, markets are freaking out: Fed Funds Begin Trade at 6%; Highest Open Since 2001 (Update1)

" Federal funds began trading at 6 percent, the highest opening rate since January 2001, as demand for cash increased amid concern that losses in U.S. subprime mortgage debt will trigger a global credit crunch. "

" Fed funds traded above the central bank's 5.25 percent target for a second straight day. "

Bank are hoarding cash; either because the have to or because they want to. Either way, this is bad news for everybody. This puts a lot of LBO's that are in the pipeline into serious danger of being abandoned. Equities involved in these deals are being repriced accordingly: ABN Amro Drops as Market Turmoil Raises Doubt on Bids (Update1)

" ABN Amro Holding NV shares fell the most in almost six years on concern turmoil roiling financial markets may hinder the world's biggest banking takeover. "

Hedgies continue to get whacked and implode the world over: Deutsche Bank's DWS Says Fund Has Lost 30% Since July (Update1)

" Deutsche Bank AG's DWS unit, Germany's biggest mutual fund company, said the value of one of its investment funds has fallen by 30 percent since the end of July as subprime mortgage losses roiled credit markets. "

Anybody that thinks this is just another buying opportunity should take Econ 101 or has failed Econ 101. The credit bubble has burst. We are now in the process of de-leveraging everything. This no mere 10% correction that is pending. This is the big one: U.S. Stocks Are at Beginning of Bear Market, Marc Faber Says

" U.S. stocks are at the beginning of a bear market in which benchmark indexes may fall more than 30 percent, investor Marc Faber said.

Faber, managing director of Marc Faber Ltd. and publisher of The Gloom, Boom & Doom Report, said losses in mortgage-backed bonds are not "contained or easily solvable'' with interest rate cuts by the Federal Reserve. He called for the Dow Jones Industrial Average to drop below 12,000 in an interview today.

Faber told investors to bail out of U.S. stocks a week before the 1987 Black Monday crash, according to his Web site. He correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent, the smallest annual rise since 1987. He also told investors to buy gold in 2001, before it more than doubled. "

I remember him saying the 'hiccup' in February this was a warning sign of what was to come. This will take years to work its way through the system.

Thursday, August 9, 2007

Credit Jitters Spread: ECB Comes to the Rescue.

Things are coming apart this morning...

ECB Offers Unlimited Cash as Bank Lending Costs Soar: The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130.2 billion) to assuage a credit crunch.

BNP Paribas Freezes Funds as Loan Losses Roil Markets: BNP Paribas SA, France's biggest bank, halted withdrawals from three investment funds because it couldn't ``fairly'' value their holdings after concern over U.S. subprime mortgage losses roiled credit markets.

I love it. Follow this: 1) A massive sustained increase in liquidity by central banks results in a massive global Credit Bubble. 2) The Credit Bubble starts to deflate and so the central banks come to the 'rescue' by injecting more liquidity.

Wednesday, August 8, 2007

Tuesday, August 7, 2007

Monday, August 6, 2007

Cramer: "We Have Armageddon!"

The now infamous Cramer meltdown. "We have Armageddon!"

(I have several bets out there that Cramer will die one day from a massive heart attack or aneurysm on air. So close... the closest yet...)

Unfortunately his meltdown also makes it look like he knew this was coming. He did not.
In fact, he strongly recommended home builders at what turned out to be the absolute top. Cramer with amnesia... and making fun of bears.