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Today's Market WrapUp 12.17.2007 Mon Tue Wed Thu Fri Kirby Archive Where the
Bones Are Buried This past weekend I was reading a snippet of the Privateer; a brilliantly prescient newsletter that was re-iterating the words of financial journalist Ambrose Evans-Pritchard in describing the unprecedented and coordinated Central Bank actions last week, “Never before have the central banks of North America, Europe, and Britain acted together as such a unified phalanx, but never before have transatlantic credit markets seized up with such violent effect.” The folks at the Privateer went on to add, Behind Closed Doors – Frankfurt Explodes In Rage: “The European Central Bank [ECB] is a full-scale participant in the desperate global attempt to get the western world’s banking and financial system restarted. In Frankfurt, the officials are seething at the enormous scale of borrowing by British banks at the European Central Bank’s window, calling much of it “central bank arbitrage”. The main British banks are doing this because it is cheaper and easier to borrow from the ECB’s window than it is for them to borrow in the London Libor market or in any other market. But in the process of borrowing from the ECB, the British banks cause the ECB to create new volumes of Euro currency vastly beyond the Eurozone’s own needs. That inflates the Euro.” For those of you who might be wondering why – apart from the well publicized troubles of British bank, Northern Rock, British banks are such heavy “borrowers”; look at the U.S. Treasury’s latest TIC report and take special note of the obscene build in U.K. holdings of U.S. Treasury Securities:
The latest TIC report clearly shows the degree to which the U.K. banks have been bulking up on U.S. “financial paper” [200+ billion build in U.S. holdings from Sept. 06 – Sept. 07]. This is highly suggestive that British banks took down a disproportionate amount of “now toxic and illiquid U.S. paper” and that the most recent “bail-out” plan hatched by the Central Bank community last week was most likely primarily aimed at these same British banks who are now “scrambling” to find the cheapest and most anonymous sources to finance their “now apparent” BLUNDER. While the latest rescue package announced last week by the Central Banking community exhibits a veneer of co-operation and cohesion – it is more than apparent that a great deal of finger-pointing and the “blame game” is occurring in earnest, buried out-of-sight for the time being. Today’s Market * Of note this morning: Oct. 07 TIC data was released by the U.S. Treasury. U.K. holdings increased – again, by an additional 30 billion to 295.6 billion in aggregate. Overseas equities began the week on a negative note with Japan’s Nikkei Index falling 264 points to 15,249. North American markets didn’t fare much better with the DOW off 172.60 to 13,162.20, the NASDAQ down 61.28 to 2,574.46 and the S & P giving up 22.05 to end the day at 1,445.90. NYMEX crude oil futures fell .55 to finish the day at 90.72 per barrel. Interest rates were approximately 10 basis points easier across the curve with the benchmark 5 yr. bond ending the day at 3.53% while the 10 yr. bond finished at 4.15%. On foreign exchange markets the U.S. Dollar Index finished the day down .07 at 77.37. Precious metals ended the day mixed with COMEX gold futures ahead by 1.40 to 795.30 per ounce while COMEX silver futures were unchanged at 13.86 per ounce. The XAU Index fell 6.64 to 159.16 while the HUI Index dropped 11.96 to 374.91. On tap for tomorrow, at 8:30 a.m. November Housing Starts data is due – expected 1170K vs. prior 1229K. Also at 8:30 a.m. November Building Permits data is due – expected 1180K vs. prior 1170K. Wishing you all a pleasant evening! Rob Kirby Copyright © 2007 All rights reserved. Contact
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