[Eli]

This is a huge deal.

Bloomberg

A consortium of European banks was going to bailout this company but now they are running for the hills.

This company blowing up would be on par with Lehman blowing up and would set off further explosions in the CDS market. If the German gov. comes in and takes over it would set off those CDS.


European Banks by the way are in even worse shape than US banks, they used even more leverage. Also they are multinational and they are bigger than the Governments of Europe.

[TreebeardsUncle]

What impact will that Have on the DOW? How much lower is it likely to go. Am thinking it will reach a long-term minimum of around 9700 by the end of the month and then stabilize and begin to recover by Christmas.
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[Eli]

Well it should cause a good amount of panic in Europe, that will spread to the markets in the US.

It will negate any positive affect that Paulson who had have gotten from the bailout.

Libor will lock up further and Bank intra lending will get worse not better compounding the problems in the credit markets.

I am not sure how low the stock market will go, all I know is that you do not want to be in it right now. The next step down is a market crash. I sold all my remaining oil longs on Friday before the vote, (this is not financial advice).

Remember the bailout was sold as a cure for what is wrong, and it is a ton of money that is being thrown at this problem. When massive solutions don't even help, panic sets in and really rightly so.

[dorlomin]

It might create a flood of money from the UK to Germany as the Germans have guarenteed all bank deposits in responce to this. It is likely to hit UK financials for a few days while people work out what is going on and also likely to harm the value of the Euro.

It will really reinforce the flight to safety round the world.

[Eli]

People in the UK are already pulling money and investing in Irish banks. The Irish were the first to guarantee all deposits.


Look for oil to collapse further, dollar will continue to strengthen Gold will also continue to fall.

[threadbear]

People in the UK are already pulling money and investing in Irish banks. The Irish were the first to guarantee all deposits.


Look for oil to collapse further, dollar will continue to strengthen Gold will also continue to fall.

When there is uncertainty and chaos, gold does well. I wouldn't count on the dollar continuing to benefit from chaos. That play may be overdone.

[Eli]

That is generally true, but the money flows of the world players is not going into gold right now. I think the small investors and individuals are chasing gold but not the major banks and the large investors. And the big boys took advantage of gold as it went up as part of the general commodity boom, they are more than happy to sell now in exchange for cash.

Everyone is chasing dollars, and they are in short supply even in the midst of all this liquidity injection. The Banks are hoarding dollars and are desperate for more.

I am talking immediate short term, like Monday if I am wrong I will say so.

[Gebari]

I thought they already rescued them... well, that's thrown a spanner in the works. This is a big institution whose collapse would have serious widespread effects. It looked like Europe escaped the worst of the credit crisis but obviously not, in ways its even worse than in the United States. The entire EU's economy is even bigger than the US too, remember..

Iceland looks on the edge of collapse, Ireland is screwed, banks are falling like dominoes here in Britain it's now hitting the continent. Also EU leaders have ruled out the possibility of a US style bailout package. I don't think anything can stop this mess now, the only question is how far will it go down...could be pretty damn low is my intuition.

Does anyone else have a really bad feeling about next week?

[Eli]

I thought they already rescued them... well, that's thrown a spanner in the works. This is a big institution whose collapse would have serious widespread effects. It looked like Europe escaped the worst of the credit crisis but obviously not, in ways its even worse than in the United States. The entire EU's economy is even bigger than the US too, remember..

Iceland looks on the edge of collapse, Ireland is screwed, banks are falling like dominoes here in Britain it's now hitting the continent. Also EU leaders have ruled out the possibility of a US style bailout package. I don't think anything can stop this mess now, the only question is how far will it go down...could be pretty damn low is my intuition.

Does anyone else have a really bad feeling about next week?

Yup that is why it is so bad. Nothing like a failed rescue to cause a real panic.

Gebari, do understand the CDS market? That is critical at this point and helps explain why so many people high up in the financial world are scared out of their ever lovin minds. Truly, everyday people are not as afraid as they should be.

[firefly]

Stok market in America is going to break it's face.

[Dan1195]

Seems to be many indications that Monday will be a critical day. First full trading day after the passing of the bailout. (i.e. will LIBOR rates drop and credit markets unfreeze a bit, even if only temporary?) Plus that batch of CDS settlements. Now we have this mess in Europe and the dispute between Citi and Wells Fargo over Wachovia.

[americandream]

This is a huge deal.

Bloomberg

A consortium of European banks was going to bailout this company but now they are running for the hills.

This company blowing up would be on par with Lehman blowing up and would set off further explosions in the CDS market. If the German gov. comes in and takes over it would set off those CDS.


European Banks by the way are in even worse shape than US banks, they used even more leverage. Also they are multinational and they are bigger than the Governments of Europe.

Told ya so! All this nonsense about this being an American problem This is a global problem people-all governements are scamming us, it's just that America was more honest about it's ponzi scheme. Frickin Euros acted as if they were ever so clean. Blah!

[americandream]

People in the UK are already pulling money and investing in Irish banks. The Irish were the first to guarantee all deposits.


Look for oil to collapse further, dollar will continue to strengthen Gold will also continue to fall.

When there is uncertainty and chaos, gold does well. I wouldn't count on the dollar continuing to benefit from chaos. That play may be overdone.

Those dollars are needed to cover the costs of those bad loans and hold up reserve requirements. As long as those bad debts float around in limboland, I suspect no one is parting with their dollars. The global banking sector will have to be socialised at some stage to hold the whole rotting carcass up. So next time you see some rich dude driving his fancy car, remember your hard work financed his lifestyle.

[Snowrunner]

After the guaranteeing of the deposits in Ireland the banks in Germany probably wanted something similar (and got it).

This will be interesting. I am sure when Merkel forced an election three years back she didn't expect to suddenly have to fight these kinds of fires, it will be a true test on how much of a leader she is.

[BigTex]

Falling stock market, falling gold and stable long term treasury rates have not been sustainable for more than a few months historically. When none of these asset classes are doing well, typically one breaks out into a huge long term bull market. The last time we saw something like we are seeing now was 1982, and stocks and long term treasuries subsequently broke out into 25 year bull markets.

This time, I am pretty sure that stocks are not on the verge of a huge bull market, and I don't know how much more propellant long term treasuries can possibly have from here.

That leaves gold.

[roccman]

Does anyone else have a really bad feeling about next week?

It's coming up roses...ask Pops.

Nothing to worry about...small bump in the road.

Really...leave your money in your bank, pay all your bills on time, and take a vacation at least twice a year.

[pup55]

long-term minimum of around 9700

Benjamin Graham, instructor of Warren Buffett and guru of "value investing" said that the historical long term PE of the DJIA is 7:1. Anything over that is, as he put it, "water" (although since he did his writing in the 50's it probably did not occur to him that water would at one point be more valuable and expensive than many other substances).

So, with a current Dow 30 PE of about 16:1 the market can still go down about 60% and be correctly valued, from a historical standpoint.