Friday, October 10, 2008

Volatility - Hallowed be Thy Name

I was attending a birthday event for my niece this evening and thus am unable to put together a full post due to time constraints. I am aiming for a Saturday wrap up and entertainment post instead. With everything going on, a little reading and thinking is in order anyway before writing a post.

My Apologies to the Gold Market
The author of Economic Disconnect would like to extend his heartfelt apologies to any and all in the gold market. It was my entering this morning that single handedly crashed the spot price for gold. While I know I usually have this effect, I was hoping that I would go unnoticed with all the drama happening. I am sorry and hope we can still be friends, or at least that you will not burn my house down. SORRY!

Seriously, the action in gold today made no sense. Luckily for me my small order was lost for most of the day and was not filled until after lunchtime. I got a nice 6% loss in one day, but it could have been much worse (about 18% from the open!). Small miracles!

Volatility - Hallowed be Thy Name
Everyone in my office area was running around this morning talking about the Nikkei crashing and a possible "circuit breaker" day here in the USA. While I would expect that from people that read this blog, this was coming from people I have never even heard speak about the markets! Wild Stuff. Suddenly everyone is watching. After a crash of 10% on the DOW at the open, the markets rallied harsh and were up on the day at one point. Stocks closed slightly down.

With the Lehman CDS auction all the rage, maybe that was the catalyst. Maybe a big hedge fund blew up. Maybe lots of things happened. We might know tomorrow or we may never know or there is nothing material to know. Who knows, you know?

Market Ticker has some sharp comments today, and you should take a look:
http://market-ticker.denninger.net/archives/604-POTENTIAL-ECONOMIC-SEIZURE-DEAD-AHEAD.html

Key excerpt:
"Open Market Operations) at The Fed. Read this report carefully. Note that there are no Agencies and no Treasuries left on The Fed's balance sheet. All gone. All that is left is $80 billion of crappy MBS. Bluntly, without printing raw money, The Fed is out of Treasuries with which to lend into the market, and thus cannot perform OMO any more; they must do "other things" (like print money.) We are now officially into the twilight zone and Fed Solvency is an issue on the table. President Bush spoke again but none one word about forcing transparency among financial institutions. Raise cash now and be prepared for potential essential good and service disruptions as the supply pipelines could begin to go dry on these as soon as early next week."

I had come to similar idea on FED printing and that is why I got into gold (sorry again guys!). With a G7 meeting which I am sure is going to involve money creation the world has never seen, something has to give. As far as supply disruptions and the like, I wish I could say that was impossible. But it is not.

Have a good night.

15 comments:

Anonymous said...

Welcome to the club.

G

PS: What took you so long?

Anonymous said...

GYSC

I'm not at all surprised by the drop in gold. Everything was being sold to get dollars. The dollar is over 82 now. Dollar up = gold down. The hedgies aren't like the banks and with the Lehman deal their only option to raise cash is sell asserts. The Banks are also doing margin calls on the hedgies as the markets fall forcing even more selling.

Lowered my downside 18 month target for the S&P 500 to less then 500 with between 50 and 100 companies currently making up that index gone.

Welcome to the Great Depression II it started yesterday when the S&P broke 960.

Kevin

getyourselfconnected said...

Kevin,
your sharp insight is a great resource for this site and I appreciate it. Minyanville has articles that show during the Great Depression strangely it was absent from mainstream media. We could be going into a dark time and not even know it. Keep up with the comments, I really value what you have to say.

Anonymous said...

What Kevin said: The rapid fall-off of gold in the closing hours on Friday could very easily be due to G-7 nations selling gold in preparation for a massive cash infusion into G-7 banks.

I'm not saying that's what happened, just that it's a possibility. It's not like the US has a lot of reserves sitting around for such a rescue after all...

IdahoSpud

Anonymous said...

Lollerz! Evn beta than I can has chzbgr!

sadguysontradingfloors.tumblr.com

G

watchtower said...

OK, where is the entertainment?

Even the Titanic had music as it was sinking, does our "S S Economic Titanic" deserve any less?

Bring on the music, the galley slaves are getting restless :)

getyourselfconnected said...

Sorry all,
Been a very busy weekend and I forgot the carpet installer was coming tomorrow so I had to empty out the living room tonight. Also the Patriots are paying the night game so I will be watching that. Another manic Monday set up tomorrow as the futures are looking weak right now. I will have something up tomorrow I hope, but I mat be moving all the items back into the living room! Take care.

watchtower said...

"FED REPORTEDLY SELECTS PIMCO AS ASSET MANAGER FOR COMMERCIAL PAPER"

Let construction of "Thunderdome" begin!

Anonymous said...

I will supply the mace.
Kevin, you bring the chainsaw.
Watchtower, you bring the axe.

TO THE THUNDERDOME!

youtube.com/watch?v=3hQC3nkftrk

G

Anonymous said...

The Treasury now has a $700 billion kitty to buy preferred shares in banks or take soured assets off their hands.

Those powers granted under the Troubled Asset Relief Program were meant to help Wall Street work through the current global credit crunch but officials said that the new plan will give direct aid to seriously distressed companies.

"There will be a third program announced on how we deal with potential equity investment or asset purchases in institutions that are not healthy or potentially failing," a Treasury official said.

This third program would be used to prop up companies identified as "systemically significant."
http://www.reuters.com/article/bondsNews/idUSN1413705720081014

I think that means politically connected.
Kevin

watchtower said...

...all we want is life beyond "Bankerdome"

Andrew said...

Hi Economic Disconnect,

I'm emailing you in regards to an email I sent to you last month about a partnership, have you had a chance to think about it?

If you would more information about the proposal, please let me know.

I look forward to hearing from you.

Kind Regards,
Andrew Knight.
Website Manager
Banking & Finance Division
Asia-Pacific Region

Boomerang.com.au (Australia) Pty Ltd
E: andrew.knight@boomerang.com.au

Anonymous said...

10-15-2008--- market news...

ruhroh!

http://www.cnbc.com/id/27197295

Dow Drops Below 9,000; Banks Skid

So let's talk about market stability shall we?

G

getyourselfconnected said...

All,
Sorry for another stretch of no posts. I have a bit of house stuff to do this week that is sucking more time than I would like. Until tomorrow check out this Washington Post article that interviews several regional bankers that were smart to keep lending standards fairly tight. These guys were ready to pounce when the bad banks went bust, but now the government is ramming money down the bad banks, and the good banks throats! You cannot kill capitalism any faster:

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403378.html

Sad times indeed.

Anonymous said...

...please where can I buy a unicorn?