350 Is The Upper Limit "If humanity wishes to preserve a planet similar to that on which civilization developed and to which life on earth is adapted... CO2 will need to be reduced from its current 385 ppm to at most 350 ppm." Jim Hansen, NASA
Image by Barrybar via FlickrYet Another Market To Watch
In my RSS feeds this afternoon I came across a great piece over at denninger.net. There are 3 parts to the article, each worthy of a posting in itself.
Anyway, in the last section of the article, I came across this quote, which really perked my interest(emphasis NOT mine):
The Treasury TIPS auction today was a disaster. The market is sending Treasury and Congress a very strong warning that you both better cut this crap out or the Treasury market may dislocate, ending the party for America entirely.
If you want to know where that nasty selloff came from in the market late this afternoon, you just found the reason.
We now sit right on the precipice of a critical break of technical levels in the market – if they fracture (and they must be expected to do so, possibly as early as the overnight hours and/or tomorrow morning) the expected move is 2,000 – 3,000 points on the DOW – straight down.
Well, after that I certainly wanted to know what TIPS was! So off to Google I went, where I found the latest addition to my reading schedule, a guy named John Jansen who publishes Across The Curve (HIGHLY recommended. As you’ll see, he explains things). Here is part of what he had to say about today’s bond markets(emphasis mine):
The interesting outcome in the Treasury market today was the result of the auction of $6 billion 4 year 6 month TIPS. For the uninitiated that stands for Treasury Inflation Protected Securities. The auction was rather sloppy as the auction tail was 14 basis points. (In bond market jargon the tail is the distance from the level at which bonds were trading on a when issued basis immediately prior to the auction, to where the Treasury was able to complete the sale. That long tail represents a lack of interest from clients and dealers who would normally underwrite the security.)
The average yield was 3.27 percent which means that the new bond yields more than the nominal 5 year note. The so called breakeven spread is the spread at which inflation would need to average for the holder of the TIPS to breakeven with the nominal bond and it generally predicts a positive rate of inflation.
In this case, the TIPS is yielding above the nominal bond by about 70 basis points in which case the market is saying that it thinks that inflation will average negative 0.7 percent per year for the next 4 ½ years.
There are some forecasters who have extrapolated from the drop in oil prices that cumulative inflation for the last 3 months of this year could be as much as -3.0 percent.
For those of us too afraid to make the leap:
Saying NEGATIVE inflation is the same thing as saying DEFLATION.
Look for the rest of the week to just get worse.
(UPDATE Tues5:30am: Except, evidently, for the little bump we might get on Tuesday… Asian and European stocks are doing generally well.
Let’s hope the same for the US.)
Thanks to EarthFirst for pointing us to this video. From their site, quoting the NYT:
For a 13-month stretch starting in March 2005, three environmentalists working for the Chesapeake Climate Action Network were listed in a Maryland State Police data base as being “suspected of involvement in terrorism.” The description went on to note that the police had “no evidence whatsoever of any involvement in violent crime,” and the listing, and possible tracking, did not continue. But the activists — not surprisingly — were not happy to hear about this when they received letters from the state police earlier this month informing them of the situation.
This is exactly the sort of thing we should expect nowadays in America. We let the Department of Homeland Security be created. We let the so-called Patriot Act be passed and then extended. We let the Congress literally gut our FISA protections.
We have no recourse in matters such as these. And with the economy getting worse, I am certain we’ll see more of these types of stories emerging.
I am Jon, and I am certainly on a list somewhere… and I couldn’t care less.
This post will be updated throughout the day.
Last Update posted @ 4:15pm Eastern US TimeImage via Wikipedia
If you’re reading this before about 5pm Eastern US time, you might want to check back later. I’ll be updating this through the night, with the final update after the NYSE closes Monday afternoon, unless it gets boring.
You can click on the little stock icon beside each of the markets to see the current status.(Sometime during the night these stopped working, but the links work. Hopefully the icons will work again this morning.)
All Ordinaries Fall On Opening
Australia’s All Ordinary Index dropped nearly 2% at the opening of trade on Monday, recovering to about a 1.5% loss after a half hour, and then beginning the slide again. Currently (35 minutes into trading) it’s down 1.96% and looks to be gaining some negative momentum. UPDATE: Finished down only 1.6%. Trading was volatile, but the margin of loss was held to the initial drops this morning at the open.
Japan and Korea
I’m sure they’ll appreciate me sticking them together.
In Tokyo, the NIKKEI225 opened at a 26 year low before dragging itself temporarily positive again. They will have a hard time today staying positive… UPDATE: Finished the day setting new lows and losing more than 6%, much of it in a fierce sell-off the last hour of trading.
In Korea, the KOSPI Composite opened lower, then followed the Japanese lead and headed higher. Hopefully they’ll keep their lead. UPDATE: Finished with a slight gain of just under one percent!
Midnight Update
As of midnight here in the eastern US, all the major Asian markets are trading at a loss except the NIKKEI 225 Index, which is showing fierce opposition against declines. In an apparent run on banking stocks, the Japanese government issued statements in an attempt to halt the rout:
A flurry of comments from top lawmakers came as investors dumped banking stocks on expectations they need fresh capital to offset losses in their stock portfolios.
The Nikkei average hit a 26-year low just before Prime Minister Taro Aso said the government will expand its bank bailout scheme and strengthen regulations on short-selling of stocks.
[...]
Underlining concerns about the banks, the economics minister on Sunday call for the country’s bank bailout scheme to be increased several-fold to nearly $110 billon.
“The government will have to do something for banks,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
“The problem here is that the stock market has fallen, it has nothing to do with derivatives or anything like that. As stocks have dropped, banks are faced with rising paper losses.”
(Well, all I can say is that if it weren’t for the ‘derivatives or anything like that’, none of us would be in this mess.
So… Ogawa-san, you are a little off the mark there at best.)
Leading the general fall is Jakarta Composite, down now by more than 6%,UPDATE: Jakarta holding steady most of the day at around 7% loss, still an hour to go. and Taiwan Weighted which is down more than 5.5%.UPDATE: Finished down 4.65%.
The Hang Seng Index is off by more than 4% and steadily dropping.UPDATE: Finished the day down just over 12%
European Markets Stumble
All the numbers are red, if that’s any indication.
The FTSE 100, a bellweather market for the US, is trading down about 3% at 4am here.
After a see-saw day that looked, for the most part, like it was going to end on a positive note, afternoon selling brought the DJIA to close nearly 2.5% lower. All the other Dow Jones indices closed lower as well.
I’ll be surprised if the sell-off stops there… lots of news coming out this week in addition to the expected Fed rate cut. So far, those cuts have just added fuel to the fire that is this crash.
Image by Barrybar via FlickrYet Another Market To Watch
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