EMERGENCY: GLOBAL FINANCIAL MARKETS COLLAPSING
January 22nd, 2008WARNING: This is not a recommendation to buy sell or hold any financial instrument.
I’m going to call emergency here. I was waiting to see if Asia would get a foot hold today, but the slide is extending.
I hope Cryptogon readers have diversified well and are ready to face this situation.
We all knew it was coming.
There in an almost endless number of stories adding to the noise level right now. I’m going to focus on only the most critical information, such as disorderly trading/liquidity crises, currency controls, market halts, etc. I will be watching strategic technical levels on gold and EUR/USD.
Use this post as an open thread, if you like.
Good luck out there. Keep a clear head. Don’t panic.
AFTERWORD 1/23 02:20 GMT: Got DIA and PBW Call Options
I sent a limit order for some insanely out of the money Feb 2008 DIA call options, strike 133. There were no takers for my bid at .05. I left the order open. I woke up later to see that I got filled. HAHA. Same thing on some PBW calls, strike 29. Left bids in for .05, got them eventually. I don’t buy lotto tickets from the shop, but I will buy out of the money options on occasion.
I mean, how could it possibly go up? Right? With every media source saying we’re in recession and the world is ending, doom, etc… I mean, sure, maybe it is The End.
But, then again, maybe not. To quote Blade Runner, “I’ve seen things you people wouldn’t believe.”
So, if those DIA and PBW calls wind up being worth anything, let’s just say that I’ll be surprised, but not that surprised.
END UPDATES:
Thanks, guys. It’s been a pleasure calling the action with you. I’m exhausted and need some sleep.
UPDATE #15: 14:10 GMT: BANK OF AMERICA PROFITS DOWN 95%, WACHOVIA PROFITS DOWN 98%
Via: AP:
Bank of America Corp. said Tuesday its fourth-quarter earnings fell by 95 percent and Wachovia Corp. reported its earnings tumbled 98 percent, with both banks citing the lending crisis.
UPDATE #14: 13:35 GMT: FEDERAL RESERVE EMERGENCY RATE CUT: 3/4 OF A POINT
I love it when a plan comes together…
Via: Yahoo / AP:
The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, cut a key interest rate by three-quarters of a percentage point on Tuesday, the biggest one-day move by the central bank in recent memory.
The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent.
The Fed action was the most dramatic signal it can send that it is concerned about a potential recession in the United States. It marked the biggest one-day move by the central bank in recent memory.
The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Those discussions occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the United States, the world’s largest economy, could be headed into a recession.
In a brief statement, the Fed said it had decided to cut the federal funds rate “in view of a weakening of the economic outlook and increasing downside risks to growth.”
UPDATE #13 13:25 GMT: GOLD WEEEEEEEEEE!
Congrats to any of you who were nuts insightful enough to pull the trigger around UPDATE #9.
UPDATE #12: 13:00 GMT: U.S. Stock Futures Fall Sharply
The klaxons are blaring at Plunge Protection Team headquarters. Helicopter Ben is, right now, strapping himself in and getting ready to launch.
I’ll tell you right now: If the Dow actually goes down 500 points, I’ll be playing DIA call options lotto. No, that’s not a typo. I actually meant to write call options. I don’t recommend that any of you do this, because I’ll almost certainly lose a tiny bit of capital. But I have this thing about being upwind when the media starts a fire. When things look so totally obvious, and the mainstream media is in on it, I just go the other way.
So, if there’s a bloodbath out there, I will consider betting the other way. Catch a falling chainsaw. Tiny positions. Risk capital. Speculators only.
Via: AP:
Wall Street was expected to plunge at the opening of trading Tuesday, extending its huge losses from last week and taking more cues from heavy selling that has spread throughout the world. Indicators showed the Dow Jones industrial average was set to fall by more than 500 points when trading begins.
Fears of a recession in the United States that could pull down the global economy as well have infected markets around the world, and those declines further unnerved U.S. investors who were unable to trade Monday, when Wall Street was closed for Martin Luther King Jr. Day.
Dow futures fell 553, or 4.57 percent, to 11,553. Standard & Poor’s 500 index futures fell 67.20, or 5.07 percent, to 1,258.10. Nasdaq 100 index futures dropped 86.50, or 4.68 percent, to 1,763.00.
In Asia, Japan’s Nikkei stock average closed down 5.65 percent — its biggest percentage drop in nearly a decade. Hong Kong’s Hang Seng index lost 8.65 percent a day after showing its biggest losses since the Sept. 11, 2001, terrorist attacks.
UPDATE #11: 10:00 GMT: BUY PROGRAM
Europe turning slightly positive. HAHAHA. You’ve gotta love it. They’re trying a buy program now for sure. Germany lags, still down 2.6%.
UPDATE #10: 09:15 GMT: European Markets Down Slightly, Shaking Off Earlier Losses
Ok, did somebody finally got a grip on this thing? Wow, man, that was weird. All European markets were down pretty hard, as you would expect, but they just turned around. European version of the PPT?
Declines very moderate right now.
UPDATE #9: 09:00 GMT: Gold 1 Hour Hammer
Believe it or not. Got my MACD cross, too. Here goes nuthin’.
Definition of Hammer, Japanese Candlestick formation.
UPDATE #8: 08:30 GMT: GOLD INTRADAY BREACH OF $850, THEN BOUNCE
It’s trying to bounce.
If you’re going to play catch a falling knife chainsaw, this is where you would extend your arms.
Personally, I’m holding off. One hour MACD still hasn’t crossed up.
UPDATE #7: 08:05 GMT: GOLD MAKE OR BREAK $850 SUPPORT
Make or break. This is the big one.
UPDATE #6 08:00 GMT: Dollar Rally Continuing, Gold to Try Support at $850
Guys, at times like this, all you can do is go with the charts. I’m looking for an excuse to buy gold in here (see Update #1), but it’s weak. Damn weak. $850 is a big deal and we’re going to test that in the next few minutes.
UPDATE #5: 05:20 GMT: INDIA AND KOREA TRADE HALTED
Via: AFP:
THE Indian and South Korean stock exchanges today suspended trading after their indices suffered sharp falls.
Mumbai’s main share index fell 9.75 per cent when it opened this morning, triggering an automatic one-hour halt in trading, the Bombay Stock Exchange said.
The benchmark 30-share Sensex index halted trading at 15,888.64, down 1716.71 points. The index had closed down 7.41 per cent on Monday, recording the steepest one-day fall ever, and the day that it also became the hardest hit Asian market.
South Korea’s stock market in Seoul also briefly suspended trading today as the benchmark KOSPI index dropped more than 6 per cent, dealers said.
Trading resumed at 1.30pm in Seoul (0430 GMT) following a five-minute break. Six minutes later, the index was down 6.23 per cent (104.87 points) at 1578.69.
The KOSPI is now more than 23 per cent below its November peak.
UPDATE #4: 05:00 GMT: Asia Pacific Markets Currently Down More than 5%
Downward momentum pouring on.
Australia All Ordinaries: -6.65%
China Hang Seng: -8.04%
India Bombay Stock Exchange: -9.75%
Indonesia Jakarta Composite: -9.24%
Japan Nikkei: -5.03%
Korea Seoul Composite: -5.27%
Taiwan Weighted: -6.43%
UPDATE #3: 04:00 GMT: Asia Pacific Markets Currently Down More than 5%
Remember this is just today (doesn’t include yesterdays collapse).
Australia All Ordinaries: -5.52%
China Hang Seng: -6.03%
Indonesia Jakarta Composite: -7.58%
Taiwan Weighted: -6.43%
UPDATE #2 03:25 GMT: EUR/USD
Hourly MACD cross up on EUR/USD. All intraday stochastics extreme (under 20 or under 10). Near term low 1.4400. Next support is a daily at 1.4331. Lots of resistance overhead.
The U.S. Dollar has been rallying as traders are exiting stocks and going to cash. That’s the only reason I can see for the bump up on USD. I am using this window of temporary strength to take cash out of the U.S. and buy gold.
UPDATE #1 03:20 GMT: Gold Breakdown, for Speculators Only
I’m going to buy any MACD cross up on the hourly interval, above $850. My stop is $844.
Jim Sinclair’s latest commentary is good. DJIA and S&P futures are down 3-5%, so the bloodbath will continue Tuesday. The government will almost assuredly intervene in the morning to reflate. It shall be an interesting day.
Who yelled Fire to bring this on?
(Finally I might add. We’ve all been discussing this for such a long time, but I didn’t think the panic would start across the Pond!)
Please remind what the MACD is.
I think I am going for more Icelandic Krona while the dollar is high.
So glad not into stocks, bonds, etc.
Pray for the weak that they hold strong and find heart and keep their money during the stampede as all rush towards the exits.
P.S. I am also going to the liquor store early a.m. tomorrow to buy lots of booze. I’ve got my food stocked up but really have gone through my liquor stash during this last visit of mom’s to the hospital. No kidding. I think we’re all going to be in an external markets induced state of shock for awhile. When time for meditation fails…. I go for the next best thing.
Moving Average Convergence Divergence (MACD) is a technical indicator. I’m just watching to see how far the dollar rally can go.
Thursday or Friday Kramer was selling doom (“DIJA 2000 point drop”) and a monoline bailout plan on CNBS. Cokehead Kudlow and some of his guests did the same. They saw the fire long ago but only spoke up when they saw management pissing on it.
I agree with Brad. I will be surprised if the Fed doesn’t try and intervene tomorrow – I was actually expecting a move on Friday. What’s it going to take though? IMO at least 75bps, with a bit of PPT action to get things going.
I’ll probably spend some Euros on Gold tonight.
It will be an interesting day, that I have no doubt.
I think the PPT members are supposed to be meeting in Switzerland this week – or is it next?
To keep the whole kit and kaboodle afloat is going to be a real majik act for the PPT.
Paulson Cancel Davos Appearance
For some, scoring an invitation to the annual meeting of the World Economic Forum is like getting asked to the prom. For others, it is just another invitation to blow off. (Treasury Secretary Henry M. Paulson Jr. just bailed out at the 11th hour.)
-more-
http://dealbook.blogs.nytimes.com/2008/01/21/who-is-here-and-who-is-not/
{SIGH!} I always wondered how I would handle it when this day came. You see, my invested funds have been handled by my Baby Boomer older brother since I was a kid, and even though I’m almost 41, I can pretty much count on, can pretty much bank on, being treated like a sixteen-year-old kid when it comes to making decisions about those investments, even when the realities of the financial market are out there in plain view for all the world to see. And I’m pretty sure he deletes the links that I e-mail him explaining how bad things are getting and why. That’s the one “good” thing about personality disorders. It’s always the same thing again and again and again and again, no matter how completely, totally, utterly inappropriate it is. And that so many so-called responsible adults are so disordered speaks volumes about why we are so freaking doooooooooomed.
And I guess the fact that I’m venting in this fashion means that I’ll probably be of a mind to pull the plug tomorrow. Even that may just be a stopgap measure if the collapse manifests as hyperinflation. But I’ll make sure I enjoy those few months as best I can. Even with an almost 51-year-old having denial-tantrums as background noise.
I’m a newbie here, but I think I signed on at the right time. I expect an undeclared bank holiday very soon, the morning after which our dollars will be worth dimes.
I think you’re right, mike52t. The banks, right down to you smaller local ones, are getting nervous. My bank’s ATM machine always seems to be out-of-order these days (arggh!), making cash withdrawls impossible. Funny, until this credit crunch started making the news, the ATM always worked fine.
Fed cuts 75 bps. Paulson rehashes last week’s speech.
HAHAHA
I think I can hear the confetti shredder turning at maximum RPMs.
Rick Santelli on CNBC said that the Fed Funds Rate Futures already have another 50 bps discounted for the end of January. Some other CBs will probably cut in the next week.
Looks like the Fed cut’s not gonna help much…
Via Bloomberg
http://www.bloomberg.com/apps/news?pid=20602013&sid=aqb47ECxZLAs&refer=commodity_futures
Crude Oil Falls as U.S. Rate Cut Fails to End Recession Concern
By Mark Shenk
Jan. 22 (Bloomberg) — Crude oil dropped to a six-week low on skepticism that an emergency interest rate reduction by the U.S. Federal Reserve will keep the world’s biggest energy consuming country from falling into recession.
The overnight lending rate was lowered to 3.5 percent from 4.25 percent, the Federal Open Market Committee said in a statement in Washington. Oil in New York has declined 12 percent since touching a record $100.09 a barrel on Jan. 3 on speculation demand will drop as global economies slow.
“Recessionary fears have spread from the U.S. to overseas markets in a pronounced fashion,” said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis. “The Fed move has given us some support but it’s not enough to reverse the downward course of the energy market. A recession will be bearish for both energy and industrial metals usage.”
Crude oil for February delivery fell $2.39, or 2.6 percent, to $88.18 a barrel at 10:11 a.m. on the New York Mercantile Exchange. Prices touched $86.11 before the Fed announcement, the lowest since Dec. 6. Prices are up 72 percent from a year ago.
There was no floor trading in New York yesterday because of the Martin Luther King Day holiday. Yesterday’s electronic trades will apply toward today’s close.
Brent crude for March settlement declined 73 cents, or 0.8 percent, to $86.78 a barrel on London’s ICE Futures Europe exchange. Brent touched $85 today, the lowest since Oct. 25. Futures reached a record $98.50 on Jan. 3.
Oil would slide to “the low $80s” if all outstanding speculative contracts were sold, analysts at Goldman Sachs Group Inc. including London-based Jeffrey Currie, said in a report today. Investment funds have sold oil contracts amounting to as much as 100 million barrels in the past two weeks, Goldman said.
No Refuge
“One factor that may keep oil from falling much further is the fact that there isn’t any refuge for investors to put their money,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The energy market looks healthy when you glance over at real estate, stocks and the dollar.”
The dollar fell against the euro after the announcement of the first emergency interest-rate cut in seven years. The dollar dropped 1.1 percent to $1.4565 against the euro at 10:11 a.m. The dollar touched an all-time low of $1.4967 on Nov. 23.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net .
Last Updated: January 22, 2008 10:20 EST
The price of oil dropping? The concept is so alien to me. Could even a recession have the long-term effect of keeping oil prices down?
Kevin and/or others, what do you think of Ultrashort Index ETFs, like SKF (financials), SRS (real estate), and SZK (consumer goods)? A good bet?
I’m a total n00b, but I’m trying to learn enough to make a few smart choices as TSHTF…
Loveandlight,
I read your post early this a.m. and its taken me all day to figure I wanted to bend your ear with some of my thoughts?
Why pray tell, do you give your brother authority over your investments? I’m figuring if you are reading Cryptogon, you know more than enough to manage things yourself (said while I’m in the morass of bank statements that I’m so way behind on).
Money and families – I’ve bent Kevin’s and a number of other peoples ears since September I think. It is so complicated amongst families to deal with monetary issues!
At some point, actually, I think after Enron, I defied my father’s ghost and sold the stock he and mother gave me as gifts over the years. It is still a good stock. But I had also read where companies were exempted by some finagle by the Bushies that companies were going to be given an exemption on their financial statements – re they could lie to their investors.
At that point in my life, I’d had it up to here with all of the market manipulation bullshit and sold it all. Put into gold and silver, preparedness: heat and food, and a good car for my long commute from Mom’s to home,etc. I’m still working at it.
When I attempted to apply this sort of clean slate thinking to my Mother’s money (which I have managed since 1999) the shit hit the fan with my sister’s who remain enthralled in the vision of “my father’s stock market.”
They refuse to grasp the concept that stocks – as they are today – are not what they were in the day’s of father’s stock market.
In 1987, I think, my father dove back into the stock market as it crashed. But I remember the hard times in the 60’s when he couldn’t sleep at night, pacing the floor because of his investments that had gone sour.
NO ONE LIKES TO LOSE THEIR MONEY TO A BAD INVESTMENT.
Anyways, I want to lend you my support that you take control of your own money.
You might not know what to do with anything at first. But you will learn.
I don’t know what your relationship with your brother is, but likely it might improve (after the initial fight about trust, etc.)
You will learn to like managing your own.
Best wishes.E
Commodity Boom Over For Now
you guys pointed out that JPMorgan has huge volumes of junk holdings on their books, yet, somehow they appear to have kept this hidden, and have had less impact than other banks?
I took military stocks out of my IRA, because I thought debt would prevent big future projects, however, this sector might be immune to cash flow problems. The US is still sinking a lot into 2008 expenditures.