Financial Crisis Updated 10-7-8
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Financial Crisis Updated
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10-8-8
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Market Activities on Monday-Tuesday
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Monday Market Action
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DJIA Drops -800
Then Recovers 500 back
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EU Market Mayhem:
London Biggest Drop Since 1987
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Global Disintegration of $$$ Within Days?
Europe Into the Abyss?
"We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars."
Analysis of financial crisis by well-respected columnist, Ambrose Evans-Pritchard. LINK HERE.
Note a statement by Ambrose:
"The European Central Bank – which raised rates into the teeth of the crisis in July – has played a shockingly destructive role in this enveloping slump. Its growth predictions this year have been, and still are, delusional. Neglecting its global role, it has vastly complicated the fire-fighting efforts of Washington."
Here's an A-O Report "translation" of that statement: The Illuminists in Europe are deliberately sabatoging any attempts to a rescue. They're going through the motions of pretending. Of course, they deliberately want a collapse.
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Financial Trader Warns
20% Market Drop Coming?
CNBC's "Mad Money" show host, Jim Cramer is warning that the stock market may drop another 20% of hits current value.
Cramer emphatically urged any investor who has money they may need in the next five years tied to stocks to pull their dough out.
While the animated Cramer is known for telling investors the best prospects for earning money on the stock market, he’s now saying retreat is the best position in the face of some of the worst financial news in decades. The bank lending default crisis that put financial firms around the country on the brink of collapse could bring “as much as a 20 percent decrease in the stock market,” Cramer predicted.
He noted that the world’s markets are nosing downward in the face of the U.S. fiscal trauma.
“One thing is certain — they are, in Europe, behind us,” Cramer told Curry. “We’ve experienced more pain than they have, we are surprised at their pain, we didn’t know how bad off they were.” More details, LINK HERE.
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Europe Panics on Monday!
UK Down 7%
Paris Down 9%
Russia Crash/closes at -20%
Market Recap of Monday action
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Tuesday Developments:
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EU Ministers Fail To Agree
On Coordinating Help
European finance ministers failed to agree on steps to shore up the banking system hours after their countries' leaders pledged to do whatever was needed to restore confidence.
There appeared to be little support for suggestions from France and Italy that Europe create a U.S.-style bank rescue fund at yesterday's monthly meeting of euro-area finance ministers in Luxembourg.
Italian Prime Minister Silvio Berlusconi and French Finance Minister Christine Lagarde both have suggested a plan modeled after the $700 billion U.S. fund approved by Congress last week. The ministers in Luxembourg failed to reach consensus on anything beyond a reiteration of a promise by heads of state to protect bank deposits.
``We all agreed that we want to do all we can to avoid financial institutions of systemic importance failing,'' Luxembourg Finance Minister Jean-Claude Juncker said after the meeting. ``We reinforced arrangements concerning deposit protection.''
Officials in countries across Europe, mostly acting unilaterally, are rushing to rescue banks on the brink of collapse as the global credit squeeze bears down on the continent. Europe's Dow Jones Stoxx 600 Index had its steepest decline in two decades yesterday and the euro fell below $1.35 against the dollar for the first time in more than a year.
``One country's solution is another country's problem,'' Swedish Finance Minister Anders Borg told reporters in Luxembourg today. ``We need to push for common solution'' on deposits.
`Going Their Own Way'
``As far as I can tell, everyone's going their own way,'' said Peter Dixon, an economist at Commerzbank AG in London. ``They can give blanket guarantees. They're almost meaningless, because depositors weren't going to lose money anyway. But it does take some of the heat out of the system.''
Before yesterday's meeting, European Union leaders pledged to protect depositors from losing their savings to bolster confidence as share prices tumbled.
EU countries ``will take whatever measures are necessary to maintain the stability of the financial system,'' the 27 EU member countries said in a joint statement that was released by Berlusconi's office. ``We will continue to take the necessary measures to protect the system so that individual depositors in our countries' banks do not suffer any loss of money.''
That statement followed earlier pledges by German Chancellor Angela Merkel and French President Nicolas Sarkozy to guarantee savings accounts.
More Details -- LINK HERE to Bloomberg Coverage.
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Europe Scrambles To Avoid
Banking Collapse
(Note use of term "Chaos")
Governments scrambled for emergency measures to protect savers, shore up confidence in banks and shield them from a potentially catastrophic cash exodus on Tuesday amid more panic on global stock markets.
CHAOS on plunging markets and alarm that people might besiege banks to withdraw their money forced EU ministers into special sesssion in Luxembourg to find unity and possibly agree on a bank deposit guarantee of 100,000 euros (135,000 dollars).
More details, LINK HERE.
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Russia & Brazil Mkts Crumble
Commodity Prices Crashing
The entire complex of commodities and emerging market stocks, bonds, and currencies is now in free-fall as the economic crisis spreads like brushfire, threatening to draw every corner of the globe into the vortex of recession.
Oil, grains, and industrial metals all crumbled as the week began despite the passage of the Paulson bail-out plan in Washington and dramatic moves by European governments to shore up their banking systems, compounding the steepest commodity crash in over half a century.
The big exception yesterday was gold, which surged $34 to $864 an ounce on safe-haven buying as the markets came face to face with the unsettling reality that the euro is no healthier than the dollar, and perhaps sicker.
The euro’s dramatic slide over the past two weeks has for the first time exposed the instability of the twin-pillar system holding up global finance.
Hans Redeker, currency chief at BNP Paribas, said investors fear that no one is in charge of Europe’s monetary union. “Who is Mr Europe? What is his telephone number? There is no such thing. We have a cancer eating at the system because even healthy companies cannot roll over their debts, yet the politicians still don’t understand the risk,” he said.
The sudden shift in commodity sentiment has led to a massive withdrawal of funds from frontier markets, triggering stock market routs across Latin America, Asia, and Eastern Europe. The MSCI index of emerging markets fell 11pc yesterday in its worst day ever.
Russia suspended trading after Moscow’s Micex index crashed 19pc in its biggest one-day drop since the 1998 default. The state-controlled VTB bank fell 25pc.
“Traders are just sitting there staring at the screens and going, 'Wow’,” said Ron Smith, a strategist at Alfa Bank.
Brazil shut the Sao Paulo exchange after the Bovespa index crashed 15pc in panic trading, led by flight from the resource giants Vale and Petroleo Brasileiro. Mexico’s Bolsa was off 7pc; India’s Sensex was off 6pc.
There are fears that Russia could slip into a downward spiral if oil drops to $50 a barrel, which is now the lower end of Merrill Lynch’s forecast.
Moscow has become addicted to the oil bonanza, ratcheting up spending so quickly that it may now need prices to stay above $90 to fund spending plans. Veteran analysts say they have seen this movie before.
Russia's bold military moves and the Kremlin's shifting foreign policy towards a more combative stance has been anchored by Kremlins plans for massive military modernization programs. Russia is seeking to build the world's biggest and most powerful navy and air force along with a powerful army. Those plans were based upon escalating oil and natural gas prices of which Russia has an abundance.
WIth sliding commodity prices retreating in the face of what may be a severe global depression, there is a growing doubt that Russia could finance such amibitious military plans. Russia may think its rich, but as commodity prices deteriorate, so too will Russia's military upgrade plans.
For more details on the world markets and commodity prices - LINK HERE.
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US Marets Plunge Tuesday
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Dow off Another 500
-1,400 Points Off In 5 Days
Stocks rose at the session’s opening but soon began to fall, and the selling intensified during the afternoon, even after Ben S. Bernanke, the chairman of the Federal Reserve, all but pledged to cut interest rates by the end of the month. The Dow Jones industrial average plunged 508 points, or 5.1 percent, extending a slide of months that has erased a third of its value in a year. In the last five trading days alone, the Dow has lost 1,400 points. Full details, from NYT - LINK HERE.
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Worst Drops Since 1937!
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British Bank Mayhem
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