Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

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
PaddyPowerTrader.com

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 http://www.MarketOracle.co.uk - 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