Solarbird (solarbird) wrote,

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overnight deteriouration

There's a huge CDS auction tomorrow (or today, depending upon when you read this - Friday). It's Lehman Brothers. Do not assume this will go well. I thought earlier it would be okay, and it still might, but things are becoming disorderly overnight; TED spread is insane, LIBOR is insane, there was a dislocation in the US treasury market today with some durations having to be withdrawn and reissued at shorter, higher-yield durations to sell. There are reports of a other government bond failures.

The Nikkei is down 10% for the second straight day, with Osaka halting trading for a while; it's resumed now but I don't know how their circuit-breaker system works so I don't know what the limitations are. Some bank stocks were reportedly getting no bids on sell attempts. The Hang Seng is down 7% but recovering a little.

Forex is insane. The Yen is undergoing another moonshot as Japanese banks are reportedly trying to isolate themselves from the US and Europe, ala the way Europe isolated itself from Iceland after Iceland imploded:
Despite all the efforts shown by G7 central banks and governments, the credit market remains in turmoil. No one is lending to one another, at least on a term basis. The talk this morning is that Japanese banks have effectively stopped such loans to US and EZ counterparties. The funding situation on the corporate side also looks dire with GM likely to be downgraded and the CP market looking to be effectively shut down aside from whatever the Fed can fund. -- Haruya Ida (Thompson/Reuters)
Much more importantly, I've been hearing reports of trade being stopped by credit unavailability; it's getting bad enough to get noticed. It's so bad that banks are not taking US Treasuries as capital for lending. Karl Denninger talks about what this means and why it affects you, personally, and how pervasive credit is for basic domestic shipping, and what that means.

Dr. Roubini says we're likely to be fucked, for lack of a better word and that the Paulson plan has clearly failed, and prescribes a list of actions that must be taken immediately to prevent a global depression. Naked Capitalism has further commentary. These are compatible with but not the same as Karl's list of necessary actions (same link as above).

Anything you might have gotten from me in a non-public forum should be considered to have understated any risks. Nothing is guaranteed but conditions have deteriourated significantly in the last several hours.
Tags: economics
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