Collapse on Wall Street
This is what collapse looks like on Wall Street. October looks like it is going to be bloody beyond belief. Read the story closely and smell the fear. T here is now a $400 trillion derivatives bubble hanging in the balance. The government has drawn the line on bailouts. That's good but it means the Fed is getting seriously squeezed and it hasn't dealt with Ike yet. We don't have a clue as to how much damage Ike did yet but it was serious. The price of gold has been bombed as bad as the price of oil. Both are due for huge breakouts and capital is looking for the exits. Today is going to be a busy, busy day. We have passed the Plunge Protection Team's pay grade.
I have no way of knowing because I won't take the enormous time to d oit; but I wonder if Lehman was also trading oil. You see all the lies that the short-sighted markets tell themselves have maturity dates beyond the markets' visual range. Then, like two trains, they round ab end from opposite directions and things get "marked to market". Lehman is only one car in the train. Bear Stearns was the first; then Lehman. Fannie and Freddie are a different train wreck with the same cause. B of A just bought Merril Lynch. How many times have I said it was always going to be a liquidity crisis that broke things open? There isn't enough opium in Afghanistan or Coca in Bolivia to fix this one.
http://money.cnn.com/2008/09/14/news/companies/lehman_brothers/index.htm
(Yes, I live in L.A. and it was a God-awful train crash we had.)
MCR
I know, I know, I'm 69 and from a different epoch.
ReplyDeleteBut when I was 16, my grandfather, who came from sawmills of Alabama, told me, "Never borrow more than you can pay back tomorrow if you have to."
My first suspicion that something Dark had come along was when someone I admired came to year's end and their accountant advised going out and buying everything so they could declare it on their taxes. Which they did.
I have a feeling, Mike, that the ones who come through this will end up thinking more like my old grandpa from the sawmills of Alabama.
I've traded the markets for over a decade. I will tell you the futures markets are utterly broken. Anything of real value -all commodities, are now under strict control of a record percentage of speculators. Real hedgers like Grain Elevators are folding up shop because they cannot fund the margin money required to hold hedged positions until contract settlement. This means a major move away from any connection to "fundamentals" and price discovery for any commodity is being ruled by speculators that eat each other alive. All this means less liquidity and sharper moves. The big picture means a shrinking of producers. The farming industry continues to shrink. The global wheat cushion 10 years ago was over 100 days, today it's 32 (ref, History Channel, "Wheat"). The ramifications mean we are heading off a cliff soon to strike when many people won't see it coming. Chevron asked people in the North yesterday to conserve fuel for fear of shortages, but in the first day of trading since Ike hit, whole sale gasoline prices went down. This is another example of how the futures market will continue to help us consume raw commodities at record paces while paying almost nothing considering their importance. The bottom line, the farm in America is going from not just a losing money maker, but to non-existence and will do so in a matter of a few years at these levels.
ReplyDeleteI've traded the markets for over a decade. I will tell you the futures markets are utterly broken. Anything of real value -all commodities, are now under strict control of a record percentage of speculators. Real hedgers like Grain Elevators are folding up shop because they cannot fund the margin money required to hold hedged positions until contract settlement. This means a major move away from any connection to "fundamentals" and price discovery for any commodity is being ruled by speculators that eat each other alive. All this means less liquidity and sharper moves. The big picture means a shrinking of producers. The farming industry continues to shrink. The global wheat cushion 10 years ago was over 100 days, today it's 32 (ref, History Channel, "Wheat"). The ramifications mean we are heading off a cliff soon to strike when many people won't see it coming. Chevron asked people in the North yesterday to conserve fuel for fear of shortages, but in the first day of trading since Ike hit, whole sale gasoline prices went down. This is another example of how the futures market will continue to help us consume raw commodities at record paces while paying almost nothing considering their importance. The bottom line, the farm in America is going from not just a losing money maker, but to non-existence and will do so in a matter of a few years at these levels.
ReplyDeleteHi. How can I subscribe via RSS to this Blog?
ReplyDeleteThanks
Were we wrong to fret about Peak oil?
ReplyDeletehttp://blogs.tnr.com/tnr/blogs/environmentandenergy/archive/2008/09/16/was-peak-oil-a-stupid-fear.aspx