Fasten your seatbelts

I was wondering: How long will it take the bankers to convince the bankers' bank (The Creature aka Federal Reserve) that we should consider a federal bailout of the growing mortgage debacle (which the bankers and their Creature created) in the name of the national security.

This debt bucket they keep pumping all this money into has no bottom. What's another Trillion or so in national debt if it is for the People's Good?

All Preparers, I highly suggest you acquire a FRN recycling machine so you can maximize your paper money efficiencies in the future.

Note to reader: Federal Reserve Note..when you look at your paper bills of credit they are IOUS issued by the Federal reserve, not actual money issued by the US Government. The Federal Reserve is owned by foreign banks and major banking interests. When it was set-up, there was a stipulation that the US Government could own none of the stock...it certainly must be in our best interest.)

 

Damn.....i started posting again! I am a troll.

 

More injections. The addict is getting greedy.
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE

Another 7 Billion this afternoon
http://www.breitbart.com/article.php?id=D8R1K2200&show_article=1&catnum=0






The following quotes are from the "Injection Watch" thread at GIM:
http://goldismoney.info/forums/showthread.php?t=166601

<HR style="COLOR: #d1d1e1" SIZE=1>

 

Hedge your bets!!!!!!!!!!!!!!!!!!!!!!!!!!1

This is a classic, classic Clyde-o-rama Article

How To Speak Hedgie

What hedge-fund managers mean when they talk about challenges.

By Daniel Gross Tuesday, Aug. 14, 2007, How to speak hedge fund.

In these days of market volatility, hedge-fund managers and executives at all types of money management firms have been forced to explain why their funds are shutting down, losing money hand over fist, and freezing investors' funds. When they do so, however, they frequently lapse into a strange euphemistic dialect. And so we thought it would be helpful to provide a handy Hedgie-English glossary.

Hedge-Fund Phrase: Challenging
Translation: Run for the hills!

Hedge-fund managers never piss away money. They just face challenges. "We sincerely appreciate your patience and understanding during this challenging period," Jeffrey Larson, founder of Sowood Capital, told investors last month, as he explained why the $3 billion hedge fund, having lost half its capital, was selling off its remaining positions and closing up shop. As two of its large hedge funds that invested in mortgage-backed securities were going down, Bear Stearns CEO James Cayne told investors that "the sub-prime mortgage market has been challenging for a number of months." More recently, Monday's Wall Street Journal quoted giant asset manager Barclays as saying that performance in its 32 Capital Fund had been "challenging."

Hedge-Fund Phrase: Unprecedented, unique circumstances
Translation: Stuff happens. But we had no clue.

Anyone who read the best seller Amazon.com: The Black Swan: The Impact of the Highly Improbable (9781400063512):…@@AMEPARAM@@http://ecx.images-amazon.com/images/I/41cOuN5EclL.@@AMEPARAM@@41cOuN5EclL knows that random geopolitical, financial, and economic events can cause the prices of assets to move in ways that defy history and sophisticated computer models. But it comes as a shock to the brightest minds on Wall Street, especially those who run quantitative-based funds. "Wednesday is the type of day people will remember in quant-land for a very long time," Matthew Rothman, head of quantitative equity strategies for Lehman Brothers told the Wall Street Journal last week. "Events that models only predicted would happen once in 10,000 years happened every day for three days." Strangely, these same models failed to predict the once-in-10,000-year events that roiled the markets in 1997, 1998, 2001, and 2002.

Hedge-Fund Phrase: Market volatility has produced unfair, unrealistic prices.
Translation: The market is efficient only when it works in our favor.

Several money managers blamed their temporary problems on investors' irrational collective behavior. "Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade," said Sentinel Management, which sought to halt redemptions of some of its funds this week. And such conditions make it "virtually impossible to properly price securities or to trade them." Goldman Sachs CFO David Viniar noted that the firm's decision to inject $2 billion into its ailing Global Equity Opportunities fund "reflects our collective belief that the value of this fund is suffering from a market dislocation that does not reflect the fundamental value of the fund's positions." In other words, the losses shown by these funds isn't the fault of the managers, it's the fault of a market that just won't value assets properly. Ironically, you never hear fund managers say that their gains have been unwarrantedly large due to the market's failure to reflect stocks' fundamental value.

Hedge-Fund Phrase: Our results were affected by the selling behavior of other firms.
Translation: We made the same dumb trades as everyone else.

"We have been caught in what appears to be a large wave of de-leveraging on the part of quantitative long/short hedge funds,'' James Simons of Renaissance Technologies said in a letter to investors last week, which sought to explain losses in his highly regarded hedge fund. He also noted that the methodology used by his fund was "undoubtedly shared by a number of long/short hedge funds." Goldman Sachs similarly blamed other funds' behavior for its own losses.Of course, the premise of high-end money management is that you don't simply mimic the same investment strategy of 30 other hedge funds. That why Simons was paid $1.7 billion in 2006 (article purchase required).

Hedge-Fund Phrase: We just want to protect investors.
Translation: We just want to cover our butts.

Declining performance frequently leads investors to withdraw their funds, which can, in turn, force hedge funds to sell securities to raise cash. To forestall the ensuing death spiral, funds sometimes lock the door. French bank BNP Paribas last week froze redemptions of three funds that held mortgage-backed securities. BNP said it was limiting the liberté of its investors for the sake of protecting the Gallic virtues of égalité and fraternité. Locking up the funds temporarily is the best way "to protect the interests and ensure the equal treatment of our investors." Sentinel used the classic American trope of aligning the interests of the owners with those of the shareholders. "We don't believe it is in anyone's best interest if a run on Sentinel took place and we were in a forced liquidation mode."

Hedge-Fund Phrase: This isn't a rescue.
Translation: THIS IS TOTALLY A RESCUE!!!!!!!

Goldman Sachs' GEO fund lost 30 percent of its value in a week and was leveraged at a rate of 6-to-1. But to hear Goldman tell it, the cratering of its own fund simply presented an irresistible buying opportunity. "We are investing not because we have to, but because we want to," said Viniar during a conference call. At another point, he noted: "No, let me just clarify. This is not a rescue." And if you believe that, I've got some subprime debt I'd like to sell you.

Send your own entires to the Hedgie-English glossary to moneybox@slate.com

 

Funny stuff

I wonder how they will spin the collapse of the 450 trillion world Derivatives market. Challenging

They are so full of shit. Buying opportunities, Corporate stock buy backs because the stock is a deal.... priceless

 

Global Stocks TANK:

European Stocks Retreat; Deutsche Bank, BNP Paribas, BHP Fall
By Adria Cimino
An index board showing shares traded on the Kospi.


Aug. 16 (Bloomberg) -- European stocks sank as concern deepened a global credit crunch will sap earnings and erode economic growth.
Deutsche Bank AG, Germany's largest bank, and BNP Paribas SA of France paced declines. BHP Billiton Ltd. and Rio Tinto Group led mining shares lower as metals prices fell.
``Don't jump in now,'' said Andy Lynch, who helps oversee about $11 billion at Schroder Investment Management in London. ``Keep your powder dry. Things will probably get cheaper.''
The Dow Jones Stoxx 600 Index lost 3 percent to 354.40 at 3:51 p.m. in London as all 18 industry groups dropped. The Stoxx 50 retreated 2.6 percent, and the Euro Stoxx 50, a measure for the euro region, slid 2.2 percent.
The Stoxx 600 has declined 11 percent since reaching a 6 1/2-year high on June 1. The last time the measure dropped more than 10 percent in a so-called correction was in May and June of 2006, when expectations of higher interest rates rattled investor confidence.
National indexes sank in all of the 18 western European markets. The U.K.'s FTSE 100 lost 3.3 percent. France's CAC 40 slid 2.7 percent and Germany's DAX fell 1.8 percent.
Asian stocks had their biggest two-day drop in a year and U.S. stocks fell. Emerging-market shares and currencies also slid. The Turkish lira declined to a five-month low per dollar, and South Africa's rand also retreated against the U.S. currency.
The yen rose to its highest since 2006 against the dollar and its highest since March against the euro as the slump in stocks and credit-market turmoil prompted traders to slash so- called carry trades, funded by loans in the Japanese currency.
`Jitters'
Treasuries advanced, pushing two-year yields to the lowest in 22 months. The risk of owning European corporate bonds increased, according to traders of credit-default swaps.
``We don't know yet what could be the medium-term impact of the jitters in the credit market,'' said Karim Bertoni, who helps manage about $24 billion at Banque Syz & Co. in Geneva. ``Will the effect first hit the banks but then also spill over to the economy? The banks would lend less, the credit conditions would be harsher, and all this will reduce the growth rate.''
Deutsche Bank sank 1.3 percent to 92.24 euros. BNP, France's biggest bank, fell 2.5 percent to 75.12 euros. International Personal Finance Plc, a U.K. provider of unsecured cash loans in six overseas countries, plunged 6.8 percent to 177 pence.
Metals Fall
BHP, the world's biggest mining company, decreased 6.5 percent to 1,193 pence and Rio, the third largest, declined 6.4 percent to 2,948 pence.
Copper tumbled more than 5 percent in New York after the government said U.S. housing starts in July fell to a 10-year low. Lead, nickel, tin and zinc dropped on the London Metal Exchange.
U.S. Treasury Secretary Henry Paulson said financial turmoil will ``extract a penalty'' on U.S. growth rates, though the world's biggest economy is strong enough to weather problems without falling into recession, the Wall Street Journal reported, citing an interview.
William Poole, president of the St. Louis Federal Reserve Bank, said yesterday the subprime mortgage rout doesn't threaten U.S. economic growth, and only a ``calamity'' would justify an interest-rate cut now.
Saint-Gobain, Lanxess
Cie. de Saint-Gobain SA slid 2.4 percent to 78.51 euros. JPMorgan, Chase & Co. cut its recommendation on shares of Europe's biggest supplier of building materials to ``neutral'' from ``overweight.''
Lanxess AG retreated 5 percent to 34.42 euros. The German maker of chemicals for rubber products and leather tanning posted a second-quarter loss after it wrote down the value of its Lustran Polymers unit.
Ciba Specialty Chemicals AG dropped 8.3 percent to 63.35 euros. The world's largest maker of colors for plastics said selling prices dropped and costs for oil-based raw materials rose.
Smith & Nephew Plc sank 4.5 percent to 562 pence. The company is recalling some hip-replacement products in the U.K. after regulators found improperly labeled implants that have required patients to have additional treatment.
Akzo Nobel
Akzo Nobel NV fell 6.2 percent to 53.48 euros on concern the company might not get its money from Schering-Plough Corp. for the Organon drugs unit.
``We have no issue delivering cash to Akzo at the closing,'' Schering-Plough spokesman Steve Galpin said today by telephone. ``Schering-Plough has a committed bridge loan for the 11 billion- euro purchase price and has just successfully completed a $4 billion equity offering.''
Hermes International SCA, the maker of Birkin handbags, gained as much as 4.2 percent on speculation LVMH Moet Hennessy Louis Vuitton SA, the world's largest luxury-goods maker, will make an offer.
``The stock is spiking on rumors that LVMH would bid for the company,'' said Marie-Caroline Messager, senior equities manager at Fimat in Paris.
A spokeswoman at Hermes, who declined to be identified, said the company had no comment to make about the speculation. No-one was immediately available for comment at LVMH.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net .






BEN SEND MORE CASH..NOW OPEN THE DISCOUNT WINDOW ! -- CRAMER

Last Updated: August 16, 2007 11:14 EDT

 

<!-- headline start --> <table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td colspan="2"></td> </tr> <tr> <td colspan="2"></td> </tr> <tr> <td style="font-size: 20px; font-weight: bold;" valign="top" width="99%">Fed adds $17 bln to US banking system to ease credit woes</td> <td rowspan="3" align="right" valign="top"></td> </tr> <tr> <td colspan="2"></td> </tr> <tr> <td valign="top" width="99%">Aug 16 10:11 AM US/Eastern
</td> </tr> <tr> <td colspan="2"></td> </tr> </tbody></table> <!-- date/author end --><!-- article start --> The Federal Reserve flexed its financial muscle again Thursday, injecting 17 billion dollars into the US banking system to ease a credit crunch triggered by fears over the ailing mortgage market. The central bank has pumped a total 88 billion dollars into the financial markets in the past week to stop the country's banking system from gumming up.
The Fed injected the 17 billion dollars in two separate operations consisting of an initial tranche of five billion dollars rapidly followed by a much larger infusion of 12 billion dollars.
The Fed has been forced to act as banks, mortgage lenders and other financing firms have tightened lending standards amid what some mortgage executives have called a credit crisis.
The credit crunch is making it harder for mortgage lenders and private equity firms, which often use debt to fund buyout deals, to borrow fresh cash.
A housing slump and a sharp rise in property foreclosures have forced dozens of mortgage lenders out of business in recent months.
The Fed pumped five billion dollars before US stock markets opened for trading and an additional 12 billion dollars shortly after Wall Street opened on a weaker note.
The stock markets have been roiled in the past week by the problems sweeping the mortgage sector.
The central bank's latest interventions were executed by the Federal Reserve Bank of New York and its team of specialist traders acting on the behalf of the Washington-based Fed.
The Fed regularly intervenes in the banking system, but it has been forced to significantly step up its actions in the past week as credit has tightened and investors have fled risky investments.
Under this process, the central bank typically buys securities from commercial banks under an arrangement which obliges the banks to repurchase the securities back from the Fed at a later date.
The arrangement temporarily boosts the flows of cash pumping through the financial system.

 

Thanks Ben, we needed that!

 

So. The mortgage holders go bankrupt because the mortgagee can't, or won't pay. So who then holds the mortgage? (Answer is suspected to be me and thee.) And so, me and thee then get to foreclose? Now, THAT conjures an image of National Guardsmen activated to evict citizens that were caught up in a market crash that was not of their making, and turn the structures over to say, FEMA. Then, one might assume, FEMA will let the former mortgagee occupy the same buildings according to family size and needs. Very curious --.
Oh, yes. We cynically note as an aside, the size of the extended families of illegals.

 

THE MELTDOWN
By Doug Casey

Over the last few weeks we’ve experienced extreme volatility, and fear, in the financial markets. The event itself wasn’t unexpected around here. After all, we’re on record as expecting to see the Greater Depression materialize in the years to come. Maybe even starting now.

But just because something is inevitable doesn’t mean it’s imminent. Some of you may be asking "OK, Casey, but what makes you think that a depression is inevitable – forget about imminent?" A proper answer to that would take a couple of chapters, and this isn’t the forum for that. Besides, I’ve done that in my book Crisis Investing for the Rest of the 90’s. Unfortunately, the book has been off the shelves for some years. If you have a copy, go over it, and see if the reasoning seems sound.

In essence, however, an economic depression is a period of time when most people’s standard of living drops significantly. More exactly, it’s a period of time when distortions and misallocations of capital – caused by government intervention in the economy, particularly by currency inflation – are liquidated. Inflation sends false signals to both businessmen and consumers; it makes consumers think they’re richer than they really are, so they spend more. Businessmen gear up to meet this artificially created demand, by hiring more workers and building more facilities. Currency inflation, in its early stages, gives the appearance of prosperity. It also tends to lower interest rates simply because interest is the price of money, and when you expand the supply of anything, its price tends to fall; so everybody tends to save less and borrow more. Later, however, rates rise, because people won’t lend without compensation for the currency’s depreciation. The process causes a phenomenon called the business cycle. A phony boom can cause a very real depression.

The long boom we’ve had since the bottom of the last cycle in 1982 – a time that was characterized by high unemployment, lots of bankruptcies, high interest rates, and a low stock market – has lasted 25 years. It could have ended badly a number of times along the way, such as 1987, 1993, or 2000. Each time the government propped the house of cards up higher by injecting more currency into the system. It’s analogous to someone driving a high-performance car on a mountain road with a stuck throttle. The driver can mash on the brakes, slowing it from 50 to 30. The car charges to 80, but this time the fading brakes can only bring it down to 60. After a couple of cycles, it’s going 140. And Ben Bernanke is no Michael Schumacher. Perhaps he can navigate the road. But the chances are better, at this point, that the economy will go off a cliff.

So, if we’re going to have a depression, what should you do about it? Our advice here has always emphasized owning a lot of gold. That’s because it’s the only financial asset that’s not somebody else’s liability. That’s important whether the depression is deflationary or inflationary in nature. Deflationary depressions are characterized by lots of bankruptcies and defaults; the only assets you can count on are those in your own possession, like cash or gold. Currency becomes more valuable because so much is wiped out in defaults. But gold is the ultimate form of cash. Inflationary depressions, however, wipe out the currency itself, which loses value rapidly, because the government creates so much more. Gold profits from this process.

Is this the start of something big and nasty? It’s impossible to say. But the slap the markets have administered upside the back of everyone’s head should alert them to the possibility. You want lots of gold. Limited debt. International diversification. And some situations – like our recommended gold stocks – that present some real speculative upside.

The ultimate cause of all the problems we’re facing is government, with its taxes, regulations, inflation. And wars, pogroms, confiscations, persecutions, and myriad other stupidities. But most people are more concerned today about the proximate cause of the recent unpleasantness.

The Proximate Cause

The genesis of the current crisis is subprime mortgages. For well over a decade, lenders have been making mortgage loans available to literally anybody with a pulse who wanted to own a house. Several times, in the mid-‘90s, I expressed astonishment at the fact lenders were loaning over 100% of the appraised value of a house. Even back then, it seemed that was the top of the housing bubble. But what do you know? It hadn’t even turned on the turbos… just going to show how hard it is sometimes to pick an actual top.

This leads to one of the more interesting distortions arising from a really big credit-driven boom. You know the old saying: If you owe a banker a little money and can’t pay, you’re in trouble. But if you owe a lot of money, he’s in trouble. That’s exactly what’s happened here. All those new homeowners are already having trouble paying their mortgages. As rates go up, their ranks will swell since they’re almost all on floating-rate mortgages. Higher rates and more distress sales will take housing prices lower. Which, in turn, will encourage more people to leave their keys in the mailbox and walk away.

On the other side of the trade are all the funds and institutions that bought the paper. They’ll eventually recover some percentage of their money, after the houses in question have gone into foreclosure and are taken over by new owners. The ones who will really be hurt are the hedge funds, which have become so popular in recent years. Hedge funds are investment pools, available only to sophisticated investors, which are essentially unregulated and can invest in anything, long or short.

And, most important, in any amount of debt. In fact, what many appear to have been doing in recent years is borrowing money cheaply (perhaps paying 1% in yen), and then using the proceeds to buy high-yielding paper (like subprime mortgages yielding perhaps 8%). A million dollars of capital invested at 8% would impress nobody; a million dollars, plus another 9 million borrowed at 1%, however, would yield 64%. This was essentially what Long Term Capital Management was doing when it blew up in 1998. What’s happening today is a repetition of that misadventure, except on a much larger scale: it is said that some large percentage of the estimated 9,000 hedge funds in existence now control over a trillion dollars in debt. The future of those funds is very much in doubt.

The government will probably come up with some moronic and counterproductive scheme to keep people who can’t afford their houses – and should be renting, which is a much better bargain today – in them. That will also serve to save the investors’ bacon. What it will also do is add to already massive burden on taxpayers. And it will acutely accelerate the destruction of the currency. As an aside, it will also give the SEC an entrée to regulate hedge funds, which will serve no useful purpose.

What you’re really asking yourself, however, in view of the specialty of our flagship publication, the International Speculator, is: "What about our mining stocks?"

Mining Stocks

These, as you well know, are probably the most volatile securities on the planet. And you’ve just had a demonstration of how volatility can go both ways. Many have gone up by a factor of 10, or more, since the current bull market started in 2000. But on August 16th alone, the average stock went down about 10%. I’d say most stocks are off 40% from their previous highs. Many are asking themselves if the bull market is over. I’d say, almost certainly not. This is for several reasons:

1. We’re still in the Wall of Worry stage of the market. The Stealth stage ended in 2003, and the Mania stage hasn’t yet begun. The bulls and the bears are still fighting. Retrenchments like this happen. Bull markets naturally try to take as few investors along as possible; it simply wouldn’t do if everybody could make a living in the market. Who’d do the real work? But the market will continue to climb the Wall of Worry in my view. And we will have a Mania.

2. The public is still out of the gold market. I promise you that every market top I’ve witnessed in my life was accompanied by cocktail party chatter about the asset class in question. I have yet to have any indication the public has a clue that gold and other resources even exist. If this is a market top, it’s unique.

3. Extraneous factors, not fundamentals, caused the sell-off. In other words, gold went down simply because there was a bid for it, and sellers needed dollars to meet their obligations. All the other metals were in the same position. Hedge funds appear to have owned a lot of metals, simply because they offer a lot of leverage. And the stocks, which are always illiquid, were showing their usual leverage.

4. Governments all over the world are pumping hundreds of billions into the system. They’re doing that to ward off a credit collapse, and will almost certainly succeed. But all that extra purchasing media means higher inflation and brings us closer to the day that the foreign holders of $6 trillion will step up to the cashier and ask for their money back. The attention of the markets will soon shift to gold.


My guess, therefore, is that the ugliness for the mining stocks won’t last long. I don’t have any prediction about exactly when the golds will come back. But I think that by year-end, they’ll be heading strongly back toward new highs. I will say this: you want gold stocks, not copper, nickel, lead, zinc, or even silver. Gold is the cheapest asset out there. Uranium remains my second favorite.

We saw the meltdown of the subprime market coming. And correctly anticipated the government’s response. But we didn’t, I think, adequately clock how ugly it would be for the juniors. Why not? The fact is that once you sell, you tend not to buy back in. And trading is a sucker’s game; the odds are greatly tilted against you by the bid/ask spreads, commissions and, most importantly, your own emotions. So we only like to sell when we think a particular company is going in the wrong direction.

Recall the recent tech boom. There were numerous brutal sell-offs on the way to the ultimate top in March 2000. We’ll have other sell-offs in this market as well on the way to the top.

Rest assured, we’re anxious to give an all-out sell on all these resource stocks. At that point, we hope to have found a market sector that’s as cheap as they were back in 2000. But that’s not yet, and probably not for a couple of years.

Hang tough. Buy more of the best of the best.

 

<table border="0" cellpadding="0" cellspacing="0" width="100%"><tbody><tr><td style="font-size: 20px; font-weight: bold;" valign="top" width="99%">Fed injects 17.25 billion dollars into market</td> <td rowspan="3" align="right" valign="top"></td> </tr> <tr> <td colspan="2"></td> </tr> <tr> <td valign="top" width="99%">Aug 23 10:20 AM US/Eastern
</td> </tr> <tr> <td colspan="2"></td> </tr> </tbody></table> <!-- date/author end --><!-- article start --> The US Federal Reserve injected 17.25 billion dollars into the financial system in three actions Thursday, the latest in a series of moves designed to ease a credit squeeze in global markets. The Federal Reserve Bank of New York, which handles the overnight repurchase agreements for the Fed, announced the actions on its website.
A first injection of seven billion dollars at 8:30 am (1230 GMT) was followed by another of the same amount at 9:40 am and a third of 3.25 billion at 9:55 am.
The latest injections brought the total to 120.5 billion dollars added to money markets in repurchase agreements in the past two weeks.
Central banks began a series of major cash infusions on August 9 to ease tightening credit due to a crisis in the US high-risk subprime mortgage sector. (Who is paying for this injection? The US Tax payer, maybe?)
The US central bank on Friday unexpectedly slashed its discount rate to commercial banks to 5.75 percent from 6.25 percent to ease lending between banks.

 

Poole Says Only `Calamity' Would Justify Rate Cut Now (Update2) By Anthony Massucci and Kathleen Hays (I guess a Calamaity happened last week, Clyde)




Aug. 16 (Bloomberg) -- William Poole, president of the St. Louis Federal Reserve Bank, said the subprime mortgage rout doesn't threaten U.S. economic growth, and only a ``calamity'' would justify an interest-rate cut now.
Poole, who confers regularly with regional business contacts and votes on rates at the Fed this year, said in an interview yesterday that ``no one has called up and said the sky is falling.'' The best course is for officials to assess economic figures, including the August jobs report, when they next convene on Sept. 18, he added.
The comments suggest a reduction at or before the September meeting isn't the certainty that futures traders assume. Reports this week showed increases in retail sales and industrial production in July, while exports surged the prior month. Economists predict that revised government figures will show growth in the second quarter exceeded 4 percent.
``It's premature to say this upset in the market is changing the course of the economy in any fundamental way,'' Poole, 70, said in the interview at the bank's St. Louis headquarters. ``If the Federal Reserve were to act when it turns out there is no impact, then clearly the market would say these guys really don't have the intelligence they need to have a policy actually based on solid evidence.''
His comments were the first by a Fed official since the U.S. central bank joined counterparts in Europe and Asia to inject emergency funds after a surge in money-market rates. The Fed has added $71 billion of reserves in the past five trading days.
Trader Bets
The yield on the September federal funds futures contract on the Chicago Board of Trade was 4.925 percent at 9:45 a.m. in New York, indicating at least a quarter-point reduction in the Fed's target rate. The benchmark two-year Treasury note yields 4.22 percent, the furthest below the central bank's benchmark since 2001, when policy makers were lowering rates.
Goldman Sachs Group Inc. economists said in a report yesterday that ``expectations are rife in financial markets that the Federal Open Market Committee is on the verge of an emergency easing in monetary policy.'' Ed McKelvey, the firm's senior U.S. economist in New York, wrote that the absence of any rate cut suggests Poole's comments reflect ``the balance of opinion within the central bank.''
Housing `Adjustment'
Poole made his remarks after the Standard & Poor's 500 Index dropped for a third day, erasing all of this year's gains. The S&P 500's 6.1 percent retreat since Aug. 8 was the biggest five- day loss since Oct. 9, 2002. The index is down 0.3 percent today, at 1,402.76 today.
Poole acknowledged that the credit-market turmoil will ``stretch out'' the ``adjustment'' in the housing industry. He said he couldn't predict how long the downturn will last.
He also conceded that speculation Countrywide Financial Corp., the biggest U.S. home lender, may go bankrupt shows the mortgage crisis is deeper than previously thought. There is ``a sort of credit crunch'' in place affecting housing and some types of corporate paper, he said.
``The issue to me is whether it spread into business fixed investment or consumption,'' Poole said. ``I don't see evidence that that is taking place.''
The upheaval in credit markets was caused by deepening losses on securities backed by U.S. subprime mortgages. BNP Paribas SA, France's biggest bank, shocked investors Aug. 9 when it halted withdrawals from three funds just a week after its chief executive officer said the lender wasn't at risk.
`Real Economy'
``I don't see any impact as yet on the real economy or on the inflation rate,'' Poole said. ``Obviously, there could be an impact, but we have to rely on some real evidence.''
The argument that expansions would endure the market fallout was echoed by other policy makers around the world.
``I'm convinced these markets' movements should not durably hurt our economies' growth, which is robust,'' French President Nicolas Sarkozy told German Chancellor Angela Merkel in a letter written yesterday and released today.
U.S. Treasury Secretary Henry Paulson said the turmoil will ``extract a penalty'' on U.S. growth rates, though the world's biggest economy is strong enough to avoid a recession, the Wall Street Journal reported, citing an interview.
The FOMC said in its Aug. 7 statement that while risks to growth had increased, inflation remained the predominant concern.
Crisis of Confidence
Three days later, the central bank rushed to contain a crisis of confidence in markets, pledging to inject funds ``as necessary'' to steer the federal funds rate toward the 5.25 percent target.
``There's no way the Fed is going to reduce interest rates before the meeting,'' said former Fed Governor Lyle Gramley, now senior economic adviser at Stanford Group Co. in Washington. ``Bill is just being realistic.''
Poole rebutted comments from some Fed watchers that the central bank may be out of touch. The criticism followed comments the St. Louis Fed leader made to reporters on July 31 that the slump in stocks was ``a typical market upset.''
``We're very much in touch with the markets,'' Poole said yesterday. ``We will supply more cash as necessary'' to meet short-term demand for funds, he added.
Poole said he didn't regret that the Aug. 7 statement retained a bias against inflation. He also said that while consumer price gains are ``moving in the right direction,'' the ``job is not done.''
Inflation has slowed for four straight months under the Fed's preferred gauge, which excludes food and energy costs. (??what?) The core personal consumption expenditures price index rose 1.9 percent in June after a revised 2 percent gain in May, the Commerce Department said July 31.
Poole, who plans to retire next year, is a former economics professor at Brown University in Providence, Rhode Island.
To contact the reporters on this story: Anthony Massucci in St. Louis at amassucc@bloomberg.net ; Scott Lanman in Washington at slanman@bloomberg.net

 

Is China quietly dumping US Treasuries?


By Ambrose Evans-Pritchard
Last Updated: 12:25am BST 06/09/2007

<!--NO VIEW-->
A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable.
<table><tbody><tr><td>China threatens `nuclear option' of dollar sales
Data released by the New York Federal Reserve shows that foreign central banks have cut their stash of US Treasuries by $48bn since late July, with falls of $32bn in the last two weeks alone.
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"This comes as a big surprise and it is definitely worrying," said Hans Redeker, currency chief at BNP Paribas.
"We won't know if China is behind this until the Treasury releases its TIC data in November, but what it does show is that world central banks are in a hurry to get out of the US. They don't seem to be switching into other currencies, so it is possible they are moving into gold instead. Gold is now gaining momentum across all currencies and has broken through resistance at 500 euros," he said.
While the greenback has been resilient over recent weeks - even regaining something of a 'safe-haven' role as banks scrambled to buy the currency to cover dollar debts - most experts believe that America's $850bn current account deficit will eventually cause the dollar to resume its relentless slide.
David Powell, an economist at IDEAglobal in New York, pointed the finger at Beijing as the main suspect in the sudden bond flight this summer.
In a client note entitled "Has China started to dump US Treasuries?", he said the sales appear to coincide with early moves by Beijing to launch its new $300bn sovereign wealth fund.
The scheme is part of the government's plan to diversify it $1,340bn reserves from bonds (mostly in the US) to a broader portfolio of investments and a better yield.
If so, the switch comes at a very delicate time, just as tempers flair on both sides of the Pacific over China's policy of holding down yuan by currency intervention. A bill in Congress calls for punitive tariff sanctions of 27.5pc against Chinese imports, and there has been a growing outcry over contaminated pet food and lead-tainted toys.
Two top advisers to the Chinese government gave strong hints in August that Beijing should use its estimated $900bn holdings of US Treasuries and agency bonds as a "bargaining chip", words taken as an implicit threat to trigger as US bond crash if provoked.
The Chinese government has since put out an official statement clarifying that it has no intention in taking such an irresponsible step, which would in any case backfire by devaluing China's remaining holding.
Mr Powell said the switch out of Treasuires was a purely commercial decision. "If if turns out that the Chinese are behind this, it is merely an attempt to increase returns on investment. It has nothing to do with settling protectionist scores," he said.
Any evidence that China was pulling out would risk setting off an unstoppable stampede, which is why such a policy would never be announced. It holds the world's biggest pool of resrves, followed by Japan.
Robin Bhar, a metals analyst at UBS, said there was little evidence yet that Asian central banks were switching heavily into gold. Most of the recent buying of gold has been on the COMEX futures markets, the playground of hedge funds.
Central banks tend to buy their bullion in London at the AM and PM fixings, leaving a footprint that is visible to experts. They seem to have been largely absent from the market so far.
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The Hangover begins...
Banks Failing Worldwide

Here we go. . . .


Published Monday, 1 October 2007 12:49 PM EDT
Citigroup announces sixty percent drop in third quarter profits

Nations largest Bank reports $3 Billion quarterly loss

Citigroup Inc. estimated Monday that its third-quarter profit will drop 60 percent, as the nation's largest bank took losses of more than $3 billion after writing down securities backed by underperforming mortgages and loans tied to corporate buyouts.

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Published Monday, 1 October 2007 12:55 PM EDT
UBS WARNS OF BIG LOSSES

SWISS BANK BLAMES U.S. HOUSING CRISIS

Swiss banking giant UBS warned Monday that the crisis in the US housing market had cost it around 4.0 billion Swiss francs, as it announced a major management shakeup and plans to cut 1,500 jobs.

Switzerland's leading bank said it foresaw asset write-downs of around 4.0 billion Swiss francs (3.4 billion dollars, 2.4 billion euros) from its investment banking arm's fixed income, rates and currencies division.

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Published Monday, 1 October 2007 13:00 PM EDT
DEUTSCH BANK REPORTS 31% DROP IN PROFIT

GERMAN BANK BLAMES U.S. HOUSING CRISIS

Merrill Lynch & Co. cut its third- quarter earnings estimate for Deutsche Bank AG by 31 percent, the third reduction in a month, citing writedowns on leveraged loans and losses on fixed-income sales and trading..

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Published Monday, 1 October 2007 13:13 PM EDT
NORTHERN ROCK BANK STOCK PLUNGES 20%

BRITISH BANK MAY BE BROKEN UP AND SOLD

he Rock's financial performance would plummet from a £298 million pre-tax profit next year into a £120 million loss. He said pressure on margins would most likely continue and that there was little room for effective cost-cutting.

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