Things are very quiet financially. The markets are closed. The traders and brokers did not have a happy Friday and are not anticipating a good Monday. Baring a catastrophic gaff Obama will be re-elected comfortably.
The Senate will have a Democratic majority. The House will need work.
The International Herald Tribune has the Europe story:
Aris Messinis/Agence France-Presse — Getty Images
One indication of the effects of the economic crisis: people waiting for donated food in Athens.
Divisions are rising to the surface as neo-Nazis clash with leftists and
immigrants, lawmakers become mired in scandals and tensions increase
between the haves and have-nots.
Spain’s Premier Hopes to Avoid Electoral Setback on Austerity and Separatism
By RAPHAEL MINDER
Regional elections in Galicia and the Basque Country are considered
critical bellwethers of public attitudes toward Spanish government
policy.
Russia Stages Missile Test, With Putin Taking the Helm
By ELLEN BARRY
President Vladimir V. Putin oversaw what the Kremlin described as the
largest nuclear command exercise in Russia’s recent history, launching
unarmed strategic and cruise missiles from the air, the sea and the
ground.
Reported Golden Dawn Sightings Rattle Queens
By ALAN FEUER and DANIELLA SILVA
Reported sightings in Astoria, Queens, of Golden Dawn, the
ultranationalist group based in Athens, have stirred indignation among
Greek-American residents.
These are not news.
The Telegraph is trying to promote a mistaken oppinion.
Paul Krugman is engaging in an academic squabble.
Here is a war story from finance:
http://brucekrasting.com/how-i-caused-the-1987-crash/
How I Caused the 1987 Crash
"I got a chuckle from the biz blogs and TV yesterday with the rehash of the 1987 stock crash. Twenty-five years is a very long time. I’d forgotten most of the events of that day.
I was at Drexel, and at that time, Drexel was a powerhouse. The firm had plenty of capital and huge capacity to borrow money to fund positions. Money was rolling in; risk taking was encouraged. I was working with a small group of people on one of the screwier sub-sets of the high yield bond market. It was referred to as LDC debt (Less Developed Country debt). These were the busted bank loans of all of the countries in South America.
You might wonder why anyone would spend time mucking around with the debts of Brazil, Mexico, Argentina and Chile. Actually, it was a great business. We were coining money. The key to our (and others) success was the ability to make a price on illiquid assets. If some regional bank needed to sell $25Mn of Brazilian debt, we would make a bid on the phone. If a company were in need of some Mexican debt that would be used in a debt for equity transaction, we would offer the paper to the buyer, even though we did not own it.
My old days of currency trading came in handy as some of the paper we traded was denominated in currencies other than the dollar . The fact that I had a “license” to trade currencies gave me the opportunity to speculate pretty freely, and I/we did. The shop that I worked in was no different than any other on Wall Street. We had a “book” of positions. Some were outright specs, others were hedges against commitments we had made. To hold this book together, we required equity (cash).
The Crash of 1987 happened on a Monday. But the crash really started the week before. The S&P tanked 9% on the week, Friday was a particularly bad day. The big move in stocks set things in motion over a very nervous weekend. I got the call from the controller’s office on Saturday. It went like this:
Controller:
Hi, Sorry to bother you, but we have some issues with our bank lenders (It was Bankers Trust that first pulled the plug on street liquidity).
They are nervous, and want to cut back our funding lines. You are using
a fair bit of capital in your trading book. Can you tell me what all
this money is being used for?
BK:
Sure.
We have a matched book of longs and shorts on the prop trading side. We
also have some open currency positions. We have an inventory of hedges
against open client positions. We also have some naked longs.
Controller:
Ah, can you be more specific?
BK:
Sure.
We are long Brazil, Mexico and Chile; we are short Ecuador, Peru and
Venezuela. We are naked short the USDHK$ and have $60Mn of Cuban bonds
in inventory.
Controller:
You’re shitting me. What is that junk? Is any of this liquid? Can you sell this book of crap?
BK:
I might be able to run things down a bit. How much time do I have?
Controller:
Close half by Monday night.
Sunday night October 19, at the opening in Tokyo the HK$ position was closed off (at a loss of course). I got up at 2am and started the calls to London where there was a market for LDC paper. I was hitting bids on anything I could. The prices for the long assets were getting clobbered. There was no liquidity in the markets I was short. It was about minimizing losses and cutting a book. There was no finesse about it.
Of course I was not alone in those early morning hours. Hundreds of players from NYC were on the phone hitting bids on all sorts of squirrely assets. The folks who make markets in London were never dopes. When their phones lit up with Americans looking to lighten up, they voted with their feet. Bids for everything dropped like a stone. By eight o’clock in NY everyone knew that wholesale liquidations were going on, and that stocks were going to get beat to a pulp when the market opened up.
I think I stood all of that day. The phones rang and rang. Both buy and sell side clients were panicked. Most were sellers; the buyers went on strike. Prices were dropping without any trading taking place. The brokers were all, “offered without the bid”. It was next to impossible to get trades off.
Some where’s around 2pm NY time, the Cuban paper got sold (more losses). There was not much more that could be done. So I sat down and watched the Reuters screen and the Dow tape for the rest of the day. I’d had next to no sleep, drank a ton of coffee and smoked too many cigarettes. I’d sweated all day, and stank. I left before the 4pm close.
To me, there are today many similarities to the market conditions that triggered the 87 crash. These two ring a bell:
In 87 I bet on Cuban paper. The rumor at the time was that Castro was sick. The thinking was that when he died, the bonds would increase in value. I’d bought the bonds at around 5 cents on the dollar. Exactly the same bet, for the same reason, is being made today:
The Hong Kong dollar was pegged to the USD in 1983. Four years later guys like me were betting that the central bank could not hold the peg. Money was flowing into Hong Kong; the central bank was forced to intervene in the market to keep the lid on the HK$. This same trade is popular today:
The most important comparison has not yet shown up yet in 2012. In 1987, over the course of a weekend (and many panicky phone calls), market liquidity and the ability to finance off-the-run assets dried up. It started at the bottom of the rung of asset quality, by the end of the day it had spread to the most liquid stocks.
On Thursday, October 15, 1987, the farthest thing from my mind was a squeeze on the equity capital I was using to support a book of business. If anything, I was (everyone was) being encouraged to put more money to work. That vaporized in hours. It was one giant “risk off” event.
There were no external factors of significance that led to the 87 crash. The market did itself in on that day. All it took was a few calls that said, “I want you to cut back at open”.
The repo markets that fund the zillions of assets (good and bad) in 2012 are exponentially larger and more complex than in 1987. If anything, that market is more vulnerable today to the call that says, “Cut it back”.
Note:
Of course I didn’t really start the 87 crash. I was a small cog in a
very big wheel. There were thousands of folks who were scrambling on
that day.
On Monday night, 10/19/87 the Fed (Greenspan) called the heads of the
big banks and told them to open the spigots. The Repo markets were
flush with cash on Tuesday morning.
From my perspective, it was much ado about nothing."
My youngest brother is visiting. He will be go tomorrow evening.
I have figured out how to do a preliminary search at the U.S. P.T.O.
I will have to read the patent code before I invest. I have had bad advice in the past. The best action is to simply make the thing and cream the market.
Then ride the learning curve and have another idea. There is a year grace from first publication to patent application. That may have changed.
I do not have a patent attorney at this time.
I have no intention of using credit any time soon.
A bank debit card is enough.
I know a salon can be expensive.
Balance skill against price.
Feeling pampered is not the object.
Self confidence is the goal.
An unsecured loan is even more punitive than a credit card balance.
I am just not interested in criminal records.
You will tell me what I need to know.
I try to live without faith in the supernatural.
An agnostic atheism is the best descriptor I have found for my faith.
Spirits come in bottles. I can buy them for cash.
If you want to believe I can't stop you and won't try.
Health insurance and liability insurance are all I need at this time.
When I have an insurable risk I will buy insurance.
Social Security pays a survivor's benefit.
A language is an expression of a culture. That is what makes translation so difficult. The real-time translation at the U.N. is a true feat.
The White Queen in Through the Looking Glass promised "Jam every other day. Jam yesterday and jam tomorrow. Never jam today."
Auto Insurance Varies in cost by record and location.
When I know more I can find out more. It is paid for the time being.
A perk of the job.
I have a cash pad I can draw on. No loan required.
Debt slavery is not fun.
I will not object to paying less for a computer of your choice.
I will certainly consider supplemental health insurance.
Whole life insurance is probably a bad deal for me. Insurable risk is not yet.
Lasik is not my choice. I am used to spectacles. They work for me.
I have very little confidence in alarm systems. An able occupant works best.
I hear alarms regularly. They always signal an empty house.
The police charge for false alarms here.
I want to know more mathematics. Dyslexia makes the drill unbearable.
The University of Phoenix is not the institution I would choose.
I have low confidence in it.
enough for tonight.
.
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