Japan Stock Market Falling off A Cliff

This is the article I was talking about. Maybe this is just an internal thing.

http://www.freerepublic.com/focus/f-news/2099263/posts

BTW the brits have approved an 85.5 billion bailout.

Old Europe looks all red at the open

fyi...

cnbc.com has been carrying the Asia and Europe feeds for free recently

Russian Market closed til Friday.....oops

Ironic timing. I hope you and everyone over there is ok.

You said :

US$1,140,000,000,000,000 in OTC Derivatives! Where exactly is this huge amount of fortune physically located? This huge amount is actually nothing but some digits stored on some 3.5 inch hard drives within some computers somewhere on Wall Street. That, my friend, is the precise definition of a black hole, a giant mass stored within a tiny space.

What do these digits represent?

Tokyo Hit by Magnitude-4.6 Quake; No Damage Reported (Update1)

By Aaron Sheldrick

Oct. 8 (Bloomberg) — A magnitude 4.6 earthquake shook Tokyo and the areas around the Japanese capital at about 3:12 p.m. local time today. There were no immediate reports of damage or injuries.

The temblor struck 37 kilometers (23 miles) east of Tokyo at a depth of 80 kilometers, according to the Japan Meteorological Agency. It said there was no threat of a tsunami. The U.S. Geological Survey said the quake had a magnitude of 5 and hit at a depth of 36 kilometers.

Japan, which experiences about 20 percent of the world’s earthquakes annually, lies in a zone where four tectonic plates, the Pacific, Philippine, North American and Eurasian, meet and occasionally shift. About 140,000 people died in a 7.9-magnitude quake that hit Tokyo in September 1923.

To contact the reporter on this story: Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.

http://www.bloomberg.com/apps/news?pid=20601101&sid=ao38CRMndMgM&refer=japan

"BTW the brits have approved an 85.5 billion bailout."

Brits approved "partial bank nationalization".

yitbos

He is right. Read the update. Nothing new there. BUT it was STUPID to say it. Now they have to do political acrobatics to ‘splain it. JUST PLAIN DUMB!!!!

Pelosi’s approval ratings are almost identical to Bush’s right now. So both parties are sharing in the JOY of our economic downturn!?

Obama may be a different story. I hope not.

It’s more than the debate and the bailout. It’s more like Japan’s export markets drying up.

A rate cut does nothing when the person who wants to borrow can’t pay back the loan.

What you are witnessing s a deflationary spiral. At some point it will stop, but I’d say there’s a long way yet to go. Study up on the Law of Mean Reversion.

http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.weblog

Don’t blame it all on us - the rest of the world participated fully and completely. We didn’t blow the commodity bubble alone, or the housing boom in Australia, or...I could go on.

Each actor bears their own part of the blame.

Yes. It’s the lies and the manipulation that are part of the cause of this.

http://market-ticker.denninger.net/archives/601-CONgress-Wake-Up-NOW.html

CONgress: Wake Up NOW

I repeat: It is time for Congress to lock up the children in their playpen and allow the adults to have a discussion with them regarding solutions to the economic problems we face.

If CONgress fails to do so, you will see The DOW at 5,000 and the S&P 500 at 500 within the next 12-24 months.

Guaranteed.

This morning Bernanke’s Fed “decided” to essentially enter the realm of unsecured lending through the creation of a “SPV” (a “SIV”, or as I and others have called it, a “SIeVe”) that will buy 3-month commercial paper.

While they claim that these borrowings are “secured”, the fact remains that in essence they are not, protests to the contrary notwithstanding.

Read that new alphabet soup description carefully, and pay special attention to the rating requirements. It is narrowly targeted - perhaps so narrowly as to permit a very small number of firms to roll their commercial paper.

Academia, including most particularly Bernanke, posits that one must “increase liquidity” into a seizure in the markets such as we have now, lest we have a Depression.

The failure of this so-called economic “theory” is that it fails to recognize the root cause of the problem and therefore misses the forest for the trees. It is akin to trying to put out a forest fire by peeing on it and has precisely the same end result.

In point of fact we are now running out of names for Bernanke’s “liquidity facilities”; TAF/PDCF/TSLF/TARP/ABCPMMMF and now this new SPV (does it have a name yet?)

The truth is that this crisis occurred under Greenspan and Bernanke’s watch precisely because these two “gentlemen”, along with our Treasury Secretary Paulson and other government officials, presided over the granting of credit to people who could not pay it back.

The false premise these folks all proceed from is that credit is equivalent to money.

It is not.

Credit spends like money but it is not money. It is in fact debt and comes with the millstone of interest, which must be repaid along with the principal.

The commercial paper market for non-financial, non-asset-backed entities has not frozen. Nor will it. Those firms have not abused the market and thus have nothing to fear.

It is in fact those firms that have abused this market that have problems, just as occurred with municipalities with “auction-rate” securities.

Borrowing short-term (to lower the coupon required) for long-term requirements is fundamentally unsound. When you do so you place the very life of the entity that does so at risk.

If I am an aircraft manufacturer and require two years to build an airplane, to borrow for less than a two year term in order to fund completion of that airplane for delivery to the customer is idiotic. Yes, doing so means I pay less in interest, but it also means that at any time if the market perceives my firm to be “unsafe” I risk instantaneous bankruptcy of the enterprise.

This is just one more example of how “levering up” has gotten so out of hand, and why we are in this mess in the first place. This particular form of idiocy is not limited to one firm - in fact, it is common across huge parts of the S&P 500 and even many smaller firms, along with state and local governments. It was and is intellectually bankrupt and those who engaged in this behavior should be run out of town on a rail.

“More liquidity” will not solve the problem no matter the form. This has now been proven correct through more than a year’s “grand experiment” by Bernanke and friends.

The credit markets, along with consumers and banks, are literally choking on all the liquidity being shoved down their throats. It has done exactly nothing to address the problem and won’t because:

* Banks and other financial institutions have been repeatedly proven liars in terms of their financial strength and balance sheets. Pick a financial institution and you will find that almost without exception they have claimed “exposure” to bad debt that is a tiny fraction of what is later shown to be accurate. Nobody can fairly evaluate a firm’s financial strength so long as this continues; ergo, nobody can have a reasonable degree of trust to lend to such an institution. In addition even settled black-letter law in some regards has been shown to be wantonly (and perhaps feloniously) ignored; Lehman, as an example, is alleged to have transferred segregated customer funds and securities to a Cayman Islands subsidiary shortly before it went under, effectively locking up funds and securities that are supposed to be safe from a bankruptcy proceeding.
* Consumers are tapped out. The House-cum-ATM machine is empty and cannot be refilled. Consumers will retrench severely, even though they have had to be dragged kicking and screaming into that mode. Nearly 18 months ago I detected the trend in the consumer credit data. This recession cannot resolve until the over-leveraged state of the consumer is rectified. That requires that the bad debt be defaulted and thus cleared. Consumers are more than 2/3rds of the economy.
* It is not possible to reflate the credit bubble. We must deal with the reality that the bad debt in the economy - no matter who holds it - must be defaulted.
* There is no “liquidity trap” into which to fall; we are already in the hole as there is no more capacity to borrow; we have exceeded the maximum safe amount of lending that can be accommodated in the economy. When one is in a hole, the first rule is to stop digging.

Remember, we were told repeatedly that Bernanke’s Fed and Treasury’s actions would prevent a recession. We were told that the TAF would free up bank lending. We were told that the TSLF and PDCF would prevent more blowups in investment banks after Bear Stearns yet Lehman blew up and the two remaining IBs (after the essentially-forced merger of Merrill) were forced to reorganize as commercial banks to prevent their own implosion.

None of these claims and predictions has proven out.

As this crisis has deepened instead of forcing the liars into the open and shining the bright light of truth upon them, along with arresting and prosecuting the fraudsters, we have instead seen yet more obfuscation and falsehood both explicitly condoned and even perpetrated by the government.

Bernanke’s thesis has been proven incorrect.

It is time for Americans to demand that the children, Ivory Tower Savants and those with clear conflicts of interest who are trying to game Congress and regulators to strip hundreds of billions of taxpayer dollars for their own enrichment be locked in their playpen beyond both sight and hearing while adults are admitted to the sacred halls of Congress.

We must come together as a nation to put forward a sensible set of policies that will:

* Force into the open the bad actors, fraudsters and liars, dealing with them in accordance with the law and allowing the credit markets to clear.
* Place into force regulations and legal strictures that will prevent this sort of game-playing from happening in the future.

As I have repeatedly said, there are multiple plans out there to do this. I happen to like what I have proposed as “The Genesis Plan”, but I’m not married to who proposes it or who takes credit for it - only that all three of the underlying causes are remedied. The rest is, in my view, a detail of implementation and not the underlying requirement.

We CAN clear the markets. To date, they have not cleared because our government and regulatory agencies have steadfastly refused to force the bad actors into the open, to force reduction of leverage, and to force an end to the game of “financial pick-pocket” that was intentionally constructed via off-exchange CDS “contracts.”

All three of these decisions are intentional. They have been made by Henry Paulson and Ben Bernanke, along with Congress.

Never mind the SEC which censored a highly-critical report of its intentional inaction in the Bear Stearns debacle:

“Oct. 7 (Bloomberg) — U.S. Securities and Exchange Commission Chairman Christopher Cox’s regulators stood by as shrinking capital ratios and growing subprime holdings led to the collapse of Bear Stearns Cos., according to an unedited version of a study by the agency’s inspector general.”

These decisions have been made because without permitting the outright fraud that is embodied in the crooked practices of the last twenty years there isn’t nearly as much profit in being a banker. If you are “limited” to making the spread on performing loans and can’t gear up more than 12:1 then your gross margins are, by necessity, limited to 30-50% - it is simply impossible to do better as the natural limit of spreads across an entire portfolio of risk is in the 3-5% range; nobody in their right mind will pay more on a risk-adjusted basis.

If these decisions are not reversed in the immediate future we will have an economic Depression, because that outcome will be the only way for the market to clear - forcible exposition of the fraudsters and deleveraging via bankruptcy instead of via law and regulation.

Either way the bad actors will go down. The difference is what impact we will suffer as Americans.

Our choices are now limited to a deep and prolonged recession, in which those individuals and firms that took on too much debt go bankrupt, but those who were prudent are able to maintain their standard of living and prosper, or continued attempts to pump more debt into a market that is already super-saturated, resulting in the eventual bankruptcy of the United States Government, default on the federal debt and, ultimately, a hyperinflationary depression that brings with it a high risk of the failure of our political system, not just overlevered firms and consumers.

For an example of how law and regulation can work and does result in tangible benefit, look at the settlement of the Countrywide lawsuit yesterday. This will result in tangible benefits to 400,000 homeowners who were harmed by alleged fraudulent loan practices:

“``Countrywide must now bail out homeowners it recklessly misled into mortgages doomed to fail,’’ Connecticut Attorney General Richard Blumenthal said today in a statement.”

If you’re wondering how we appropriately punish those who offended during the previous five years and provide restitution to those who were harmed, there’s your template.

Demand that Congress implement it, along with the other portions of The Genesis Plan (or something similar) and the markets will clear.

Until that approach is adopted we will continue to push on a string, Americans will continue to lose their jobs, and your wealth will continue to be destroyed in the stock and credit markets.

“US$1,140,000,000,000,000 in OTC Derivatives! Where exactly is this huge amount of fortune physically located?”

The figure you note is notional amount. The notional amount of a derivative is nothing more than a plug number against which the payments under the derivative are determined via a payoff formula. The actual credit risk is about 1-3% of the notional, typically (the amount owed by one party to another in accordance with the payoff formula). You should take the time to understand something before commenting public.

Sorry, your sympathy is misplaced. Asia and Europe bankers participated materially in all this. They were not innocent victims.

Yen is being repatriated.

"What you are witnessing s a deflationary spiral."

Cash is king? For how long?

yitbos

As an economy totally dependent on exports, that’s not a good thing.

"Borrowing short-term (to lower the coupon required) for long-term requirements is fundamentally unsound."

Hmm. When did the 10 yr treasury become the benchmark instead of the 30 yr? Clinton, I know.

yitbos