Once in a lifetime

Once in a lifetime

The Times: Wall Street Halts Futures Trading to Stem Panic Sell-Off

Stock markets across the world cracked yesterday, forcing Wall Street to suspend trading on a key futures contract to stem panic-selling while Moscow shut for business altogether. Sharp losses in New York, London, Europe and the Far East raised the spectre that governments may be forced to impose emergency holidays to avert a meltdown across world stock markets. Before Wall Street opened yesterday, American regulators suspended all trading of Dow Jones futures contracts, which had plunged.
Such contracts allow traders to bet on the future direction of the Dow Jones index. The plunge had triggered an automatic circuit breaker, which halts trading to prevent a market sliding into freefall. Nouriel Roubini, Professor of Economics at New York University, said his prediction earlier this week that markets would have to be shut down is already coming true.

`This is the worst financial crisis in the U.S., Europe and now emerging markets that we’ve seen in a long time,” Roubini said. `Things will get much worse before they get better. I fear the worst is ahead of us.”

1 Comment

  1. admin 9 years ago

    The total of all of the various Fed & Treasury packages is likely to exceed $3 Trillion! This number does not include the stimulus package earlier this year, or any future stimulus/rebate or deficit fiscal policy designed to further “stimulate” the economy.

    At the moment, the U.S. $ is still rising against every currency (except the Yen) and commodity. The Dollar Index has risen 20% in 6 months. That means that, for dollar investors, asset prices on the other side of the trade have fallen by a similar margin (all else being equal).

    Can the U.S. $ continue to rise in the face of all of this money creation by the Federal Reserve? After all, the US$ rise was caused by a shortage of $’s in the system, not increased productivity, interest rate policy, or Federal or Trade surpluses. (None of these measures would argue well for a strengthening dollar). It then follows that as the Federal Reserve and the U.S. Treasury remove the artificial shortage of US$’s in the system that the “price” of US$’s would fall.

    This is not to say that the Yen and the US$ cannot continue to rise fora period of time. They can. But when the carry trade has been unwound, and the excess leverage has been liquidated, the reversal will likely be swift, sure, and brutal.

    Hindsight is always 20/20. While we fully saw the near collapse of banking system, we certainly wish we had seen the US$ squeeze in advance. We did not (nor did anybody else, or it would not have happened so abruptly). But that was then, and this is now. The time to have bought US$’s (or sold assets in exchange for US$’s) was 8 weeks ago. And maybe there are a couple weeks left for that trade. But it is “long in the tooth”.

    We believe that certain commodities are at bargain prices, prices we will look back on and say “that was sooooo obvious…” in terms of Fall 2008 US$’s. As they say in the commodity markets: “The cure for low prices are low prices”. The price of Oil, Gold, and especially Silver have gotten below the costs of producing the marginal barrel or ounce. The incentive for the energy exploration and production industry to find and produce Tar Sands, Deep Water, Coal to Liquids, etc… has been destroyed. We believe this will lead to SIGNIFICANT oil shortages in 2010 – 2012. (Supply destruction will exceed demand destruction in our opinion.)


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