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Thursday, September 18, 2008

Japan v2.0: GLOBAL Liquidity Trap

We are heading for a Liquidity Trap. Believe it. I see Japan v2.0… on a GLOBAL scale.

A quick recap of yesterday’s more important developments.

via NakedCapitalism:

“Three month T-bills finished at a two basis point yield, and may even have traded at negative yields. Signs of ZIRP*.

Gold rose $68 and is still going up in Asia. The dollar fell against the yen, a sign of continued carry trade unwinds.

Credit default swaps on financials blew out, with Morgan Stanley hard hit: Spreads on protection for its bonds rose 220 basis points to over 900.

The TED spread, an indicator of stress in the interbank lending markets, shot upwards to 238 basis points.

CDS spreads on Treasuries rose to 30 basis points. Nine months ago, CDS on Treasuries were an oddity rather than an actively written contract, and the spread was 2 basis points.

Swap spreads widened considerably.

Today's TSLF auction was, as Alea put it, a "disaster" with prices and bid to cover up big time.”

*ZIRP = Zero Interest Rate Policy

32 comments:

Vorlon said...

Mr Ben,

Tks for the daily market news and analysis. Guided by your charts, I bought SKF at $110. Sold at $140 on Monday.

If we are headed to a massive global depression, what can we do to protect our wealth? Hold cash? Buy gold? What can we invest in?

Besides you, 2 other persons that I regularly read for the big picture are: Bob Hoye and Bill Cara

http://www.321gold.com/editorials/hoye/hoye091508.html

http://www.billcara.com/

http://www.billcara.com/archives/2008/09/daily_report_for_thu_sep_18_20.html#more

I think you will value their market thoughts / views, esp those of Bob Hoye.

Mr Cara also has a very active community that chats / discusses vigorously on politics, the economy, stocks. Very interesting.


Fond Regards,
Vorlon

fajensen said...

"""
If we are headed to a massive global depression, what can we do to protect our wealth? Hold cash? Buy gold? What can we invest in?
"""

A couple of guns, lots of factory loaded ammo and a place to live that has arable land with it and where the buildings are easily defended. Said place of course located a fair bit of distance away from major cities but within reach of decent neighbours such as yourself.

The shit will truly fly once the middle class finally realises that they *will* be joining the illegal immigrants in the competition for food stamps!

Anonymous said...

Poor bulltards. Stick up the ass AND melting... ouch... :P

Anonymous said...

Ben,

Any thoughts, comments on the UK short selling ban? How will this affect SKF and other short etfs?

TIA.

Anonymous said...

Ted spread was > 300 basis points.

Regarding Japan & ZIRP -- Japan was a creditor, US is debtor -- the outcome may not be the same.

dougiefreshh said...

Yea, come'on Ben - what's the guess on SKF? $170 if C folds?

The middle class will push the lettuce pickers back over the border and will gladly take their jobs.



Ben/Paul - I used my house as collateral for a CDS, but I'm upside down on my mortg. Can you give me some money please? Heheheheh. Check this out..pretty funny...yet true..

http://www.businesspundit.com/sub-prime/page3.php

michael said...

Question around and to Ben:
When will the statements "worst XXX since 1929" be changed to "worst XXX [including 1929]".

Any guesses?

Anonymous said...

What a crazy day? Just show you that the stock market has become a casino...Stocks are overvalued anyway...

dearieme said...

With Bank of Scotland ceasing to exist, it's clearly the worst time since 1695.

fajensen said...

The drop in yield on short bonds may be caused by businesses and individuals covering cash deposits above the bank guarantee - in case the bank folds.

Here in Denmark your are only covered for DKK 300000,-- even my little business need to buy short bonds!

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