Ares
12th May 2010, 08:55 AM
Equities now officially have an active memory of about 24 hours. The biggest market drop in history is now long forgotten, and the only consolation to investors is that SEC is actively fixing the problem even though it has no idea what the problem is. Overnight, futures went up by 20 handles in the span of 4 hours as the invisible bid appeared yet again, afraid of what would happen if the immediate drop in ES was not breached. Luckily, funding markets are not nearly as stupid as stocks, and as a result the TED spread has yet to show any signs of moderating. At last check 3 month LIBOR was 0.4302%, the highest it has been since Q3 2009, and certainly a change from the funding market calm that had enveloped all market participants like Federal Reserve "no risk" amniotic sack over the past year. At the same time the 3 Month Bill is once again grinding tighter, as investors unsure what to buy, buy everything: stocks, bonds, oil and especially gold. Another perfectly insane day in US capital markets glutted by endless liquidity.
TED Spread below:
<img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/summers/TED%205.12.jpg"/>
TED detail:
<img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/summers/TED%205.12%20detail.jpg"/>
And a slightly less cynical perspective on capital markets from Contrary Investor:
"The scabs formed over the psychological and financial wounds of the 2007-early 2009 period have been ripped wide open once again. The chances for credit contagion are real. We already know the solutions of the ECB, the Fed, etc. will be more borrowing and more printing of money. At some point the law of diminishing psychological returns will set in. As mentioned, at some juncture we expect a tipping point where markets perceive further bailouts as destructive, as opposed to supportive of asset prices. The global central bankers are now clearly slaves to asset prices. There is no other politically acceptable alternative. We need to take it all one step at a time as the chances for market intervention, whether overt or covert, are running very high in many an asset class. "
Our advice is as it has been since May of 2009: stay out of the markets except for gold. Gold is safe, as it is a direct bet on the stupidiy of our politicians and the lunacy of our money printers... which lately just happen to be one and the same thing.
http://www.zerohedge.com/article/liquidity-situation-getting-worse-rrelentless-ted-spread-marches-ever-wider
TED Spread below:
<img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/summers/TED%205.12.jpg"/>
TED detail:
<img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/summers/TED%205.12%20detail.jpg"/>
And a slightly less cynical perspective on capital markets from Contrary Investor:
"The scabs formed over the psychological and financial wounds of the 2007-early 2009 period have been ripped wide open once again. The chances for credit contagion are real. We already know the solutions of the ECB, the Fed, etc. will be more borrowing and more printing of money. At some point the law of diminishing psychological returns will set in. As mentioned, at some juncture we expect a tipping point where markets perceive further bailouts as destructive, as opposed to supportive of asset prices. The global central bankers are now clearly slaves to asset prices. There is no other politically acceptable alternative. We need to take it all one step at a time as the chances for market intervention, whether overt or covert, are running very high in many an asset class. "
Our advice is as it has been since May of 2009: stay out of the markets except for gold. Gold is safe, as it is a direct bet on the stupidiy of our politicians and the lunacy of our money printers... which lately just happen to be one and the same thing.
http://www.zerohedge.com/article/liquidity-situation-getting-worse-rrelentless-ted-spread-marches-ever-wider