I expect this morning the President’s Working Group on Markets (a/k/a/ ‘The Plunge Protection Team’) has been up & at-’em early in order to hold the futures where they were when I looked as I started writing – holding a dozen , or so, points over the psychologically important 8,000 level.
It’s pretty safe to assume that we won’t copy the 22.68% drop of the Dow Industrials experienced then. Oh, not that there’s not plenty of fear and trepidation out there. Nope. Just that circuit breakers will click in and let everyone go out for beers long before that.
Level 1 Halt A 1,100-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later unless there is a level 2 halt.
Level 2 Halt A 2,200-point drop in the DJIA before 1:00 p.m. will halt trading for two hours; for one hour if between 1:00 p.m. and 2:00 p.m.; and for the remainder of the day if at 2:00 p.m. or later.
Level 3 Halt A 3,350-point drop will halt trading for the remainder of the day regardless of when the decline occurs.
Background: Circuit-breakers are calculated quarterly. The percentage levels were first implemented in April 1998 and are adjusted on the first trading day of each quarter. In 2008, those dates are Jan. 2, April 1, July 1 and Oct. 1.
So Black Monday? Likely not. On the other hand, the numbers piling in from around the world certainly argue for a nice dark Gray Monday.
Take Japan, please. The market there crashed to a fresh 26-year low. I want you to recall that at the end of the 1980’s, Japan’s Nikkei was up around 40,000. Overnight it finished down a further 6.4%^ to close at 7,162.90. Most of the G-7 countries are muttering things about the volatility of the Japanese Yen which has been plagued with unwinding of the Yen carry trade.
How much of the pending blow-up of the world’s economic system can be laid at the feet of the hedge trade will be a chapter or two in history book to come. However, it was ‘pie simple’ to set up a hedge fund almost anywhere in the world, borrow money from Japan at next to zero percent interest and then turn around and deploy the money for a greater return elsewhere. It was about as close to printing money for the Big Players as you’d find. Until it stops working, of course, and then global markets go into a state described by a new word I shared with Peoplenomics readers Sunday: crediac arrest. That’s where your business pressure drops due to a system trade imbalance and credit dries up almost instantly.
What’s not being addressed by the TV Talkies and Money Honeys is a question too obvious to be worthy of prime time (so we’ll ask anyway): “What happens when global interest rates go to zero?
Think about it. Oil this morning is down under $62 a barrel. The International Monetary Fund is turning on the printing presses for Ukraine and Hungary. Not to be out printed, South Korea’s central banksters decided to lower their rates by a whopping 3/4’s of a point. While their bank boss says no impact is expected on the won, I can only say “Won-na bet?”
What the bankers are universally missing is that we have globally passed the inflection point where People – regular humans like you and me…ok, you then… are looking for something more meaningful than the chance to work our asses off for 40+ years and then have collapsing paper steal our life savings before we can buy that big motor home and go collect a few dreams and scenes – which in the end is the best any of us get to exit Life with…
Then there’s Ambrose Evans-Pritchard of the UK’s Telegraph, who’s been one of the better thinkers covering this mess. he figures “Europe on the brink of currency meltdown”. Last one standing is the game maybe?
Pravda has a curious headline today: “China may save the world from crisis and minimize USA’s financial supremacy.”
Not that it matters to the so-called “leaders” we send to Washington: Although they may bemoan the drops in Congressional retirement plans, fact of the matter is those plans are backed by the full faith and credit of ‘Uncle’ so unlike your plan, which may be run by a faceless pension board, they don’t have to worry about having their life’s work cremated in real-time on CNBC or Bloomberg like everyone else. Are we in the wrong business?
Maybe I should set up an economic consultancy and stop working on marketing and P&L consulting…maybe that would qualify me to head up the not really “Federal” Reserve. Did you see how John Crudele did a fine roast of Alan Green-spin’s testimony in Washington last week? Fine read…
So as I look at the Asian losses overnight where the biggest loser was the Hong Kong Hang Seng, down almost 12 3/4’s percent, or the European markets where Vienna’s ATX is down more than 8% at press time,
I go back to my late childhood/early adulthood when I worked as a transmitter engineer at a semi-famous R&B radio station and there’s the old T-Bone Walker hit rolling n near the mental noise floor: “They call it Stormy Monday (But Tuesday’s just as bad…)”
A much cooler ohrwurm than Mary Poppins’ for sure…
Catching up with the predictive linguistics work out of Half Past Human, we noticed that market sage Nouriel Roubini says “I fear the worst is yet to come…” in a Times Online article. Quick: Feign a look of shock and anguish…but deep down inside, you knew it.
Not having a time machine, most media won’t tell you that a) yes, the week long (or longer) shutdown of markets is possible before November 14th. And, when it stops the purpose will probably be something like installing ‘financial firewalls’ so that those ‘notional values’ in Derivative Land’ won’t become real losses here in Human Land. And that once started up again, things will go along seemingly OK and then meltdown again…Jan-March kinda timeframe for melt #2 as I read it.
But just pretend it’s all a complete surprise when it comes along; look all flustered and go along with the crowd. We don’t want to draw too much attention to our activities here…even though there are no laws about hanging out with people who own time machines – yet. And don’t let on about your stored food and ammo…
We’ll label this one “Gray Monday!” and we should be good to go. But, like the man said, don’t be surprised none if “Tuesday’s just as bad.”