Coordinated Rate Cut Move By The Central Bankers
As I said as my closing line to my blog yesterday, if only we could get the EU to cooperate with the global financial crisis that we are going through. This morning as I write this (7:00 AM EST), the U.S., Canada, Britain and the EU cut rates 50 bp in a coordinated move to loosen the flow of credit around the world.
This came on the heels of close to double digit drops in the stock markets in Asia (10%+ in some and close to 20% in some of the Russian stocks), and close to double digit drops in the European markets. The announcement sparked an immediate rally in Europe with those markets moving into positive territory, and in US stock market futures that had been down large and are now up large.
The TED Spread is currently at 3.75% which is still not a very good number, and the VIX which closed at 53.68 should drop a decent amount, at least at the open.
For the rest of the story, please visit The Commercial Mortgage and Political Hotline at http://commercialmortgagehotline.blogspot.com
The Commercial Paper Market
The Fed came in this morning and said that they would create a facility which would buy short-term, high quality and unsecured highly rated debt in a step which will hopefully grease some of the wheels in this critically important market that has has been stagnant.
Liquidity and Volatility Indicators
As an indication of the fact that the market s like this move, the TED Spread has narrowed to as low as 3.29 and is now at 3.46. Still high, but an improvement in this indicator of credit market liquidity.
Another interesting point is that the VIX, while still high at 49.51, is down 2.54 in the face of the stock market being down 200. This would indicate an easing in volatility, also a positive sign.
The Fed Speaks
Finally, Federal Reserve Chief Bernanke signaled in a speech that the Fed is ready to potentially lower rates in response to the weakness in our economy, and stray away from the focus that they have had on fighting inflation.
"Continued efforts to stabilize the financial markets are essential," he said. "The Federal Reserve will continue to use the tools at its disposal to improve market functioning and liquidity," he added.
While as always these moves are not a panacea, they are without question a positive first step in what are no doubt going to be many steps.
Now if we could only get the EU to follow along.
Monday, October 6, 2008
What Inning Is The Financial (Mortgage) Crisis In?
Nicasio Baseball Scoreboard
Originally uploaded by ed100
Over the past months I have been watching both the prognosticators and experts giving their opinion on the financial crisis, and when we would be coming out of it. The typical opinion some months back was that we were in the late innings of this "game", and that the light would soon be seen at the end of the tunnel.
Still more were positive that we might test the stock market lows set earlier in the year, but hold it and move higher. No recession here is what they said. The U.S. economy is just too resilient.
I have also watched government officials who have been tasked with making the policy that would set this economic and financial ship back on course, these ivory tower academics that at the end of the day were in over their heads because the solutions that work in a college classroom may not work in real life.
Monday, October 6, 2008
The stock market is down 700+, the VIX is close to 60, and I figurured that this would be a great time to reprint an article from a blog that I read every day, The Mortgage Cicerone. The article refers to belt tightening practices and the ways of running your business, particularly in bad times.
I came up out of my bomb shelter to write it.
The information, if you are not already thinking in this direction, is some good food for thought, and a lot of it can be applied to many industries, not just mortgage.
To read the article, please visit The Commercial Mortgage and Political Hotline at http://commercialmortgagehotline.blogspot.com
Market Update: Things are not looking great post Bill passage. I have a funny feeling in the pit of my stomach.
VIX: Not yet open. Closed Friday at 45.14, and speculate we will see 50+ today.
The Ted Spread: 3.89 this morning, up from Friday (higher is not better)
Overseas stock markets are down fairly large, and S&P futures are down large.
"In A System Designed For Plain Vailla, Like Trying To Push A Chocolate Sundae Through Its' Gears"
To see the rest of the story, please go to http://commercialmortgagehotline.blogspot.com .
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