Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19
Is There a Stock Market Breakout Ahead? - 6th Nov 19
These Indicators Aren’t Putting to an Economic Resurgence - 6th Nov 19
Understanding the Different Types of Travel Insurance - 6th Nov 19
The Biggest Gold Story Of 2020 - 6th Nov 19
Best Money Saving FREE Bonfire Night Fire Works Show Sheffield 2019 - 5th Nov 19
Is the Run on the US Dollar Due to Panic or Greed? - 5th Nov 19
Reasons Why Madrid Attracts Young Professionals - 5th Nov 19
Larger Bullish Move in USD/JPY May Just Be Getting Started - 5th Nov 19
Constructive Action in Gold & Silver Stocks - 5th Nov 19
The Boring Industry That Hands +500% Gains - 5th Nov 19
Stock Market Chartology vs Fundamentals - 4th Nov 19
The Fed’s Policy Is Like Swatting Flies with Nuclear Weapons - 4th Nov 19
Stock Market Warning: US Credit Delinquencies To Skyrocket In Q4 - 4th Nov 19
Stock Market Intermediate Topping Process Continues - 4th Nov 19
Stock Market $SPY Expanded Flat, Déjà Vu All Over Again - 4th Nov 19
How To Buy Gold For $3 An Ounce - 4th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Stock Market Futures Bounce Sharply Higher

Stock-Markets / Financial Markets 2009 Mar 23, 2009 - 04:50 AM GMT

By: PaddyPowerTrader

Stock-Markets Best Financial Markets Analysis ArticlePreliminary details of U.S. Treasury Secretary Tim Geithner 's (aka the one trillion Dollar man) plans have prompted a strong session in equities overnight with the Dow futures currently up 195 and Europe looking chirpy. Now I may sound like a worn out old 45 but don't believe the hype. The markets are as ever buying the rumour and will sell the fact(s).

Today's Market Moving Stories

  • Angela Merkel and Peer Steinbruck want to pressure the EU to abandon mark-to-market accounting in favour of model-based accounting (mark-to-model). They believe that mark-to-market accounting is one of the reasons why banks are not providing credits, while critics say that abandoning the rules now would create a lack of transparency. There is also pressure for an end to mark-to-market accounting in the U.S., though Tim Geithner is said to be opposed.
  • Spanish newspaper El Pais has an article containing angry reactions from Spanish banks' to the ECB 's tightening of liquidity rules. The ECB will continue to provide unlimited liquidity in its repo operations, but it has hardened the conditions for the certain types of securities, including asset-backed securities, where it will now apply a haircut of 40-60% i.e. they will only advance you 40-60% of the alleged value the securities. One banker quoted said this would hit Spain particularly hard, and in the absence of a market for these products, it will essentially provide a price ceiling. It's also bad news for Irish financials.
  • Japan's BSI quarterly survey of industrial sentiment paints a very bleak picture, falling to its lowest level in its short history. This points to a very weak Tankan survey, due for release on 31 March. Despite this Asian equities rallied hard overnight led by financials.
  • Oh and US banks and credit unions are still going wallop with two corporate credit unions , with combined assets of $57 billion, gone over the weekend. But Citigroup still plan to spend about $10 million on new offices for CEO Vikram Pandit and his lieutenants. It's good to see that they are a grounded and frugal as ever.
  • And Bernie Madoff is on Twitter ! Well not really but mildly diverting.

Why Does Failure Merit Reward
An eventful week lies ahead. Today should see the Geithner $500bn toxic debt plan finally take flight, with details expected at 12.45 GMT. It will be the most important moment of this crisis so far, but the plan looks flawed and the process has become messy and unpredictable.

Essentially the US government wants to create a series of leveraged hedge funds to buy the banks' bad loans and mortgage securities at “market prices” and have the assets privately managed. There will be three parts to the program:

  1. A set of public/private investment funds to buy mortgage securities, funded on a dollar-for-dollar basis by the government, and run by private fund managers,
  2. Another set of partnerships funded by non-recourse loans from the Federal Deposit Insurance Corporation up to 85% of value, to buy loans from the banks,
  3. An expansion of TALF (term asset-backed secure lending facility) to include older securities instead of just new ones.

According to weekend reports, the government will be funding about 95% of the plan and private investors 5%, for which they will get a much larger proportion of the equity. The problem with all previous plans was that if the government paid too little for the assets, it would not help the capital position of the banks; if it paid too much, taxpayers would be in the hole.

It seems to me that unless there is something we still don't know, the plan is fundamentally flawed. It seems to be based on the proposition, mistakenly held by many politicians and commentators around the world in my view, that the crisis is one of sentiment and confidence – that if we don't panic, and stay calm, the economy will simply recover. But actually this financial crisis is very soundly based: US and European banks did make bad loans and buy over-priced securities and derivatives . As a result, they have actually lost money. This is not a situation where a panic attack is leading to a bank run, where depositors' fears can be soothed and the run brought to an end by reassurance. The banks are genuinely insolvent and the world's credit system is genuinely dysfunctional.

The Fed will first provide quantitative easing details in a day or so before taking its first steps into the unknown later in the week.

Economic Collaspe GameEquities

  • European sunrise stocks on the rise this morning include Deutsche Bank, AXA and Legal and General, all up about 6%.
  • Other early winners are Daimler on news that it plans to sell special shares to Aaber Investments of Abu Dahabi and raise €1.95bn for a 9.1% stake at only a 4% discount to Friday's close. It looks a sweet deal.
  • Goldman Sach's also has a research note out boldly stating that is was the best time in 10 years to buy European auto shares.
  • San Francisco based PE firm Hellman and Friedman (who already own Gartmore) is putting together a group of investors that may bid for Barclays iShares unit . The shares are up 5% this morning.
  • McInerney's have reported a pre-tax loss of €206m for the year ended December 2008 slightly behind broker estimates. Charges related to land write downs, restructuring costs and goodwill impairment totalled €159.6m. Given it has €219m of net debt their recently secured an agreement to restructure its UK lending facilities is crucial.
  • There is talk that the much hyped private equity consortium Mallabraca has not gone away and this time is interested in taking a stake in building society EBS.

And Finally… Wall Street Blues

Disclosures = None

By The Mole

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules