So, the bears take control of stocks today, decide to force the hand of ... optimists. Technical factors playing a role, too, including options, futures expirations. Others are turning "it" into a referendum on the Global Economy.
Craziness looking pretty full, right? humm... Time to start slowly reaching into deep pockets at hand. Bruised and bloodied first. Of course, if your pockets were full already, then ... "shame on you!" (The markets have been shrugging off bad news for a while, now.)
Some of these companies are really going to be ready to buy their own stocks soon. Many of them have the cash on hand to do it (including the commodities/materials companies).
There are a lot of unknowns, but, hey, only insiders get a sure thing.
Oh, here's a look behind the curtain (so many journalists flash us the treasury interest rates, but they don't show all the credit rates very often nor what people are paying for credit protection derivatives):
Countrywide Bonds Offer Juicy Yield for the Hearty.
They appear to have relied a too much on short-term financing, as far as I can tell, based on a quick scan; but insolvency is a f'r stretch, perhaps even as high as 10% default rates (one assumes that they don't hold all junk!). That guy at Merrill may have some "splain'" to do...
S&P notches down Countrywide's counterparty rating ... one notch. And this is "causing" everything? Pshaw.
Update1, 20% will do it, thank you: Today's general guess is that the haircut for sub-prime linked "stuff" ought to be circa 20%, here and here (with big upside if the actual rate turns out less). Consensus on this is a good first-step to the markets clearing this stuff. Probably even better than some discount-window "rate cut".
(And, the idea of the Fed "liberalizing its collateral requirements" is the epitome of 'moral hazard', right? When the people making decisions with OPM face trial, one way or another, then relaxing the rules might be acceptable).
There was a general easing today, already, with market rates trading way below "target" rates (3-mo treasury bills are way down at 3.65 !).
Update2, We Live In Historic Times: The dash-for-cash: "... the yield on the one-month Treasury bill dropping precipitously, to 2.55%. “This is the biggest rally in bills over a 1-day and 2-day period ever, surpassing even the move made during the 1987 equity market crash,” writes Maria Ramirez of MFR Inc." - WSJ Market Blog; Keep in mind that the US T-Bill market is considered the most liquid in the world and sizes up to $ 1 Trillion or so. As always, it is hard to disentangle just how much of it was buying & selling or people buying & selling in anticipation of others buying & selling (or rate cuts).
btw, one has to remain suspicious of the reported size of the yen-carry trade unwind, even if it is not a small amount of money borrowed in yen. How many people would be putting on carry trades at expensive 120 yen to dollar? Even 9% move in dollar-yen in short periods of time is not wildly unusual, so ... Another source, disagrees, however, suggesting yen-euro, but if someone is putting on same at unhedged 150+yen/euro, how nuts is that?!
Update3, Enter Lawyers, Stage Right: "Bankruptcy lawyers and restructuring professionals, though, might not be so crushed to see the largest mortgage lender in the United States land in Chapter 11. For them, it would be like rain after a long, long drought." -NYT
