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IDS World Markets Thurs 9th October 08


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Back from my trip to Atlantic City. Things are definitely slow there from the looks of it and from the feedback I got from the staff. In fact the stock market was a very frequent topic by both the players and the employees. In one instance a pit boss was conversing with another when one of them said BYD was down to 6.75. He first dismissed the quote as not being possible but then I confirmed that was the price. He just put his hand to his face and cringed, one of those "my whole retirement fund is in that stock" reactions.

 

I still have casino stocks on my shopping list for when I get long this market. Im thinking that if I avoid the ones who had huge expansion plans and borrowed alot to fund those expansions Ill be ok. At this point any of the casino stocks that dont go belly up should triple or more within 5 years.

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The Ministries of Silly Rate Cuts of various countries and assorted federations, unions and dictatorships got together yesterday and decided to... make a silly rate cut. Markets are reacting in the following manner:

 

"The cost of borrowing in dollars for three months jumped to the highest level since December, the British Bankers' Association said.

 

The London interbank offered rate, or Libor, that banks charge each other for such loans rose 23 basis points to 4.75 percent, the BBA said today. It was at 4.21 percent a week ago and 2.82 percent a month ago. "

 

http://www.bloomberg.com/apps/news?pid=206...zupM&refer=home

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Doc,

Any thoughts on this?

 

http://justoneminute.typepad.com/main/2008...oll-for-go.html

 

"The credit derivatives markets have settled their largest default event yet, with Fannie Mae and Freddie Mac credit default swaps fetching prices close to par at auction."

697753[/snapback]

 

What is it supposed to mean? Prices some people agreed to pay some other people at a point in time I guess. Does it mean that the people think that Fannie and Freddie's debt is worth 98% of par with USG backing? If so, there's the potential for a huge shock there... I guess.... I really don't know. I try to stay away from things, the workings of which I can't comprehend.

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Good Morning!

 

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What is it supposed to mean? Prices some people agreed to pay some other people at a point in time I guess. Does it mean that the people think that Fannie and Freddie's debt is worth 98% of par with USG backing? If so, there's the potential for a huge shock there... I guess.... I really don't know. I try to stay away from things, the workings of which I can't comprehend.

697762[/snapback]

 

Wasn't this market suppose to be frozen and no one want these things? To get 98% is quite shocking.

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From the comment section of that article:

 

The MBS (pool of mortgages) which contained a slice of mortgages (not houses) which had a current value of 60-70% (based upon default and foreclosure rates) had a value of between 92% and 98%. The Lehman auction will include bid items consisting solely of Stinky Stuff tranches (check 'Deliverable Obligations' list) and will provide an even better level of clarity regarding overall valuation than did the FM auction.

 

Although it is not being said, the Lehman auction may obviate the need for a Treasury buy in of Stinky Stuff. At the worst, it will provide a market rationale (or lack thereof) for the price offered or taken by the Treasury wrt the MBS which they propose to purchase.

 

This does not mean that the Paulson Plan was not necessary. It was and is. Without the Treasury standing as a 'market of last resort' the FM auction could well have failed and the Lehman auction would certainly have failed. The absurd price which Merrill took in a vain effort to save itself made that a virtual certainty.

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Getting close.

697754[/snapback]

 

Yup, market wise the easy short selling money has been made.

 

Real economy is only starting to show the cracks in the colossus

 

"FerroChina Ltd., a Chinese steelmaker, said it is unable to repay loans totaling 706 million yuan ($104 million) because of the ``current economic crisis,'' and a further 4.52 billion yuan in loans and notes may also be at risk.

 

Production at FerroChina's plants has been suspended and the mill is in talks with creditors and potential investors, the company said today in a statement to the Singapore Stock Exchange, without identifying companies. "

 

http://www.bloomberg.com/apps/news?pid=206...QFZ4&refer=home

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They just can't make up their minds. First they say the banks aren't lending because they don't trust each other (and by extension, trust the valuation of their assets), yet they claim we need to suspend M2M and transparency so the banks can have more "reserves" to lend upon.

 

Seems to me we're turning Japanese. We'll get banks full of zombie assets they won't lend upon, and won't trust other banks because of their zombie assets.

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