The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game.
By Jon Markman
Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.
One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years, he seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.
I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the
laughter. So I tried again. "Second inning?" More laughter. "First?"
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy. MSN Money
Tuesday, September 25, 2007
The Derivatives Market Has No Clothes
When it comes to derivatives, there haven't been many truly knowledgeable experts who've been willing to lift the veil on a world where rocket scientists often compete to see who can fleece the most investors for the largest amount of money using a kind of incomprehensible, three-card Monte mathematics.
Fortunately, I came across this eye-opening article from MSN Money's Jon Markman, "Are We Headed for an Epic Bear Market?" which reveals more than a few ugly truths about new age finance and what it all means for financial markets and the economy going forward.
The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game. FINANCIAL ARMAGEDDON.
Fortunately, I came across this eye-opening article from MSN Money's Jon Markman, "Are We Headed for an Epic Bear Market?" which reveals more than a few ugly truths about new age finance and what it all means for financial markets and the economy going forward.
The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game. FINANCIAL ARMAGEDDON.
Private Equity Isn't Wearing Any Clothes, Either
A few days ago, in "The Derivatives Market Has No Clothes," I noted a report by MSN Money's Jon Markman featuring insights from Satyajit Das, one of the world's leading experts on credit derivatives. The article more-or-less confirmed what I and a few others already knew: in many respects, the multi-trillion-dollar over-the-counter derivatives market is little more than houses of cards.
Well, maybe it's in the stars, or may it's just coincidence, but a post today by one of my favorite bloggers, Yves Smith, who publishes the Naked Capitalism blog, has helped to illuminate the dubious underpinnings of another dangerous smoke-and-mirrors operation that has captivated stock traders and the financial press in recent years: the private equity industry. As Smith surmises in "Nursing Home Cost Cuts: A Private Equity Microcosm?" much of this talk about creating value out of dollops of debt and large helpings of hubris seems to have been just that: talk. Unfortunately, it has also had some potentially deadly consequences. Financial Armageddon.
Well, maybe it's in the stars, or may it's just coincidence, but a post today by one of my favorite bloggers, Yves Smith, who publishes the Naked Capitalism blog, has helped to illuminate the dubious underpinnings of another dangerous smoke-and-mirrors operation that has captivated stock traders and the financial press in recent years: the private equity industry. As Smith surmises in "Nursing Home Cost Cuts: A Private Equity Microcosm?" much of this talk about creating value out of dollops of debt and large helpings of hubris seems to have been just that: talk. Unfortunately, it has also had some potentially deadly consequences. Financial Armageddon.
Class is in session: Death spiral financing
Death spiral financing is a process where convertible financing used to fund primarily small cap companies can be used against it in the marketplace to cause the company’s stock to fall dramatically and can lead to the company’s ultimate downfall.
Many small companies rely on selling convertible debt to large private investors (see Private investment in public equity) to fund their operations and growth. This convertible debt, often convertible preferred stock or convertible debentures, can be converted to the common stock of the issuing company often at steep discounts to the market value of the common stock. Under the typical “death spiral” scenario the holder of the convertible debt initially shorts the issuer’s common stock which often causes the stock price to decline at which time the debt holder converts some of the convertible debt to common shares with which he then covers his short position. The debt holder continues to sell short and cover with converted stock which along with selling by other shareholders alarmed by the falling price continually weakens the share price making the shares unattractive to new investors and can severely limit the company’s ability to obtain new financing if the need arises.
An important characteristic of this kind of convertible debt is that it often carries conditions like a quarterly or semi-annual reset of the conversion price to keep the conversion price more or less close to the actual stock price. But a lower conversion price also increases the number of shares that a bond holder gets in exchange for one bond, increasing the dilution of existing shareholders. A lower price reset can also force investors that have set up a long CB/short stock position to sell more stock ("adjust the delta"), creating a vicious circle, hence the nickname death spiral.
From Wikipedia, the free encyclopedia
Many small companies rely on selling convertible debt to large private investors (see Private investment in public equity) to fund their operations and growth. This convertible debt, often convertible preferred stock or convertible debentures, can be converted to the common stock of the issuing company often at steep discounts to the market value of the common stock. Under the typical “death spiral” scenario the holder of the convertible debt initially shorts the issuer’s common stock which often causes the stock price to decline at which time the debt holder converts some of the convertible debt to common shares with which he then covers his short position. The debt holder continues to sell short and cover with converted stock which along with selling by other shareholders alarmed by the falling price continually weakens the share price making the shares unattractive to new investors and can severely limit the company’s ability to obtain new financing if the need arises.
An important characteristic of this kind of convertible debt is that it often carries conditions like a quarterly or semi-annual reset of the conversion price to keep the conversion price more or less close to the actual stock price. But a lower conversion price also increases the number of shares that a bond holder gets in exchange for one bond, increasing the dilution of existing shareholders. A lower price reset can also force investors that have set up a long CB/short stock position to sell more stock ("adjust the delta"), creating a vicious circle, hence the nickname death spiral.
From Wikipedia, the free encyclopedia
If you want a Subprime Bailout, do it Properly!
Axel Merk, September 5, 2007
The administration’s plan to bail out homeowners with adjustable rate mortgages (ARMs) may make them slaves of their homes. We propose an alternative that we believe better serves both homeowners and the marketplace. MERK
The administration’s plan to bail out homeowners with adjustable rate mortgages (ARMs) may make them slaves of their homes. We propose an alternative that we believe better serves both homeowners and the marketplace. MERK
The Federal Reserve’s interest rate cut does not help Americans
Axel Merk, September 25, 2007
In our assessment, the Federal Reserve’s (Fed’s) interest rate cut was wrong. Forget about the “moral hazard” of whether the cut would plant the seeds for further bubbles. Lowering interest rates is wrong because it will do few any good, but cause many a lot of harm.
As the most imminent result, the U.S. dollar has accelerated its decline versus hard currencies. When a country’s central bank cuts interest rates, it is rare that the currency reacts in textbook fashion and declines more than a token amount versus other currencies; that’s because, amongst others, lower interest rates may boost growth and make the currency more attractive for investments. Not so this time with the Fed’s cut: lower interest rates are unlikely to boost economic growth. The reason? The markets are facing a valuation problem, not a liquidity problem. MERK
In our assessment, the Federal Reserve’s (Fed’s) interest rate cut was wrong. Forget about the “moral hazard” of whether the cut would plant the seeds for further bubbles. Lowering interest rates is wrong because it will do few any good, but cause many a lot of harm.
As the most imminent result, the U.S. dollar has accelerated its decline versus hard currencies. When a country’s central bank cuts interest rates, it is rare that the currency reacts in textbook fashion and declines more than a token amount versus other currencies; that’s because, amongst others, lower interest rates may boost growth and make the currency more attractive for investments. Not so this time with the Fed’s cut: lower interest rates are unlikely to boost economic growth. The reason? The markets are facing a valuation problem, not a liquidity problem. MERK
The days of no verification, no downpayment and low credit scores are past
Sept. 25 (Bloomberg) -- Lennar Corp., the largest U.S. homebuilder, reported the biggest quarterly loss in its 53-year history after $848 million of costs to write down the value of real estate.
The third-quarter net loss was $513.9 million, or $3.25 a share, exceeding the most pessimistic estimates from analysts and suggesting the worst housing market in 16 years shows no signs of stabilizing. Revenue at Miami-based Lennar fell 44 percent to $2.34 billion, the lowest in more than three years. BLOOMBERG
The third-quarter net loss was $513.9 million, or $3.25 a share, exceeding the most pessimistic estimates from analysts and suggesting the worst housing market in 16 years shows no signs of stabilizing. Revenue at Miami-based Lennar fell 44 percent to $2.34 billion, the lowest in more than three years. BLOOMBERG
Sunday, September 23, 2007
That light at the end of the tunnel...
New York City Housing Bubble has a great link which you can find here involving Peter Schiff, President of Euro Pacific Capital and Terri Campbell, Managing Director of Eastern Investment Advisors regarding the Fed rate cut and the future of the economy, specifically, the severity of the coming recession and it's duration. It runs 3:50 and it's a must watch, not only for Mr. Schiff's analysis of what did the housing market in, but what's in store for the next couple o' years. I wish I could say benignly that the glass is half empty and suffering the affects of evaporation, but man, not only is half empty, but it was engineered wrong with leakage at most important part: it's base. As Mr. Schiff points out, money was too easy to acquire, mortagages were made based upon the flimsiest "documentation" and then these loans were sold to the most gullible, when in fact that they should rejected them, prima facie (Asian Markets, Hedge Funds, Countrywide anyone?) As a Commercial Real Estate Appraiser here in lovely New York City, we're beginning to see a slow down in the market, both in the construction field and the purchase market. Williamsburg, Greenpoint, Park Slope and even Bushwick and Bed-Stuy(!) were hot markets earlier this year, but sales activity is starting to slow. An analysis done by New York magazine, lists the 'nabes that are in danger. Hop on over when you get a chance. Lastly, check out the Financial Times and there analysis of the dollar's weakness. Look, the Canadians have caught up with us, how bad is that?
Saturday, September 22, 2007
So Good I Had To Post The Whole Thing
Hat Tip to NYC Housing Bubble for the original link.
SuddenDebt has amazing analysis on why the Fed cut the interest rate 50 basis points on Tuesday. Seems there's more than just hedge funds and real estate problems on the horizon...
The Real Reason For The Fed's 50 Basis Point Cut
Occam's Rule: Sometimes the truth is so simple that even as it stares us in the face we are blind to it.
The Federal Reserve cut its Fed Funds benchmark rate by 50 bp to 4.75%, more than most analysts' expectations. Already there have been trillions of pixels written to explain why, but none that I have seen follow the time-honored Occam or KISS principle (Keep It Simple, Stupid). Here is a chart that explains the FRB's move; for the non-professional there is an explanation after it.
The chart above shows the interbank money market yield curve for US dollars, from overnight (O/N) out to 12 months. These are the rates that banks charge each other to borrow for the period specified. When you hear LIBOR mentioned (London InterBank Offered Rate), these are the rates they refer to. The money market is by far the most important in the world, the very foundation upon which banking and finance rest, because it provides the day-to-day financing that keeps the wheels of finance and commerce spinning. It is normally a very mundane and boring market, a sort of meat and potatoes process that just works day in and day out. Think of it as finance's equivalent of the electrical power plant, i.e. it is taken for granted - until something goes wrong. Any trouble in the money market is immediately transmitted via the banks to the bond and stock markets and then quickly out to the "real" economy. So what does the above chart tell us?
On September 12 the money market was truly ugly, with a big "hump" in the cost of money from 1 month out to 6 months. The spread in interest rates between 3 months and O/N was almost exactly 50 bp. The reason was that Asset Backed Commercial Paper (ABCP) that typically came due in 30-90 days was not being rolled over and everyone was scrambling for money to replace it. This is also why the ECB was constantly pumping huge amounts of money into the system: it was bailing out the banks' SIVs that could not find any money to replace their ABCPs (I wrote elsewhere that the ECB was doing the Fed's laundry - this is the reason). At a borrowing cost of 5.70-5.80% against assets that yielded maybe 5.50% and leveraged 10-20x, various SIVs and other borrow short - lend long players were bleeding money like crazy. The situation was indeed critical and the cost of money had to be brought down sharply or the banks would have to sell collateral (CDOs, CLOs, etc.) in a depressed market and write huge losses in their books - If they could find a buyer, that is. So the cost of money was brought down. Clearly 25 bp would not have done the trick - just look at the chart - and so the Fed cut 50 bp. It's as simple as that. Nothing to do with the economy, jobs, retail sales or the cost of peanut butter in Peoria. Ain't the truth fun? So now what? As you can see from the blue line, the "hump" is still there but it is much smaller. The banks have been given some breathing room and can keep those CDOs, CLOs, etc on their books more comfortably. But - there is always a but - the mass of ABCP and ABCP-type financing has now shifted to the O/N market, i.e. it rolls daily because lenders do not trust them and want to be able to pull their money out ASAP. This type of financing from one day to the next is very dangerous: if there is another credit crisis like we saw two weeks ago, such lenders will demand their money all at once, in the same day.
To draw a parallel, say everyone has to drive to work every day but gas stations only provide each customer with enough gas for just one round trip. It is easy to imagine what will happen if gas runs short...Let me say one final thing: most people are not fools. If bankers and politicians try to instill a false sense of confidence by claiming things are different than what everyone knows, they lose credibility. Do it too much and people get really worried and think: defense (i.e. I want my money NOW). Most people know houses are too expensive, most people know there is way too much debt and just about everyone knows that financier pay at a billion dollars a year isn't sustainable. SuddenDebt
SuddenDebt has amazing analysis on why the Fed cut the interest rate 50 basis points on Tuesday. Seems there's more than just hedge funds and real estate problems on the horizon...
The Real Reason For The Fed's 50 Basis Point Cut
Occam's Rule: Sometimes the truth is so simple that even as it stares us in the face we are blind to it.
The Federal Reserve cut its Fed Funds benchmark rate by 50 bp to 4.75%, more than most analysts' expectations. Already there have been trillions of pixels written to explain why, but none that I have seen follow the time-honored Occam or KISS principle (Keep It Simple, Stupid). Here is a chart that explains the FRB's move; for the non-professional there is an explanation after it.
The chart above shows the interbank money market yield curve for US dollars, from overnight (O/N) out to 12 months. These are the rates that banks charge each other to borrow for the period specified. When you hear LIBOR mentioned (London InterBank Offered Rate), these are the rates they refer to. The money market is by far the most important in the world, the very foundation upon which banking and finance rest, because it provides the day-to-day financing that keeps the wheels of finance and commerce spinning. It is normally a very mundane and boring market, a sort of meat and potatoes process that just works day in and day out. Think of it as finance's equivalent of the electrical power plant, i.e. it is taken for granted - until something goes wrong. Any trouble in the money market is immediately transmitted via the banks to the bond and stock markets and then quickly out to the "real" economy. So what does the above chart tell us?On September 12 the money market was truly ugly, with a big "hump" in the cost of money from 1 month out to 6 months. The spread in interest rates between 3 months and O/N was almost exactly 50 bp. The reason was that Asset Backed Commercial Paper (ABCP) that typically came due in 30-90 days was not being rolled over and everyone was scrambling for money to replace it. This is also why the ECB was constantly pumping huge amounts of money into the system: it was bailing out the banks' SIVs that could not find any money to replace their ABCPs (I wrote elsewhere that the ECB was doing the Fed's laundry - this is the reason). At a borrowing cost of 5.70-5.80% against assets that yielded maybe 5.50% and leveraged 10-20x, various SIVs and other borrow short - lend long players were bleeding money like crazy. The situation was indeed critical and the cost of money had to be brought down sharply or the banks would have to sell collateral (CDOs, CLOs, etc.) in a depressed market and write huge losses in their books - If they could find a buyer, that is. So the cost of money was brought down. Clearly 25 bp would not have done the trick - just look at the chart - and so the Fed cut 50 bp. It's as simple as that. Nothing to do with the economy, jobs, retail sales or the cost of peanut butter in Peoria. Ain't the truth fun? So now what? As you can see from the blue line, the "hump" is still there but it is much smaller. The banks have been given some breathing room and can keep those CDOs, CLOs, etc on their books more comfortably. But - there is always a but - the mass of ABCP and ABCP-type financing has now shifted to the O/N market, i.e. it rolls daily because lenders do not trust them and want to be able to pull their money out ASAP. This type of financing from one day to the next is very dangerous: if there is another credit crisis like we saw two weeks ago, such lenders will demand their money all at once, in the same day.
To draw a parallel, say everyone has to drive to work every day but gas stations only provide each customer with enough gas for just one round trip. It is easy to imagine what will happen if gas runs short...Let me say one final thing: most people are not fools. If bankers and politicians try to instill a false sense of confidence by claiming things are different than what everyone knows, they lose credibility. Do it too much and people get really worried and think: defense (i.e. I want my money NOW). Most people know houses are too expensive, most people know there is way too much debt and just about everyone knows that financier pay at a billion dollars a year isn't sustainable. SuddenDebt
Thursday, September 20, 2007
Subprime Borrowers to Lose Homes at Record Pace as Rates Rise
Sept. 19 (Bloomberg) -- As many as half of the 450,000 subprime borrowers whose mortgage payments increase in the next three months may lose their homes because they can't sell, refinance or qualify for help from the U.S. government.
``Short of the cavalry riding in over the hill, a lot of these people are just stuck,'' said Christopher Cagan, director of research and analytics at Santa Ana, California-based First American CoreLogic, the risk management unit of the biggest U.S. title insurer. BLOOMBERG
``Short of the cavalry riding in over the hill, a lot of these people are just stuck,'' said Christopher Cagan, director of research and analytics at Santa Ana, California-based First American CoreLogic, the risk management unit of the biggest U.S. title insurer. BLOOMBERG
Toll Brothers CEO sees downturn worse than 1980s
NEW YORK, Sept 18 (Reuters) - Toll Brothers Inc (TOL.N: Quote, Profile, Research) Chief Executive Robert Toll said on Tuesday the Federal Reserve's rate cut may signal that the economy is worse than previously thought and likely doesn't indicate the U.S. housing market has hit bottom.
Earlier Tuesday, the Federal Reserve slashed the key federal funds rate by a half-percentage point, the first cut in the rate in more than four years.
"I would have done a quarter instead of a half because it signals we're in deep doodoo," Robert Toll said, speaking at the Credit Suisse Homebuilder Conference. REUTERS
Earlier Tuesday, the Federal Reserve slashed the key federal funds rate by a half-percentage point, the first cut in the rate in more than four years.
"I would have done a quarter instead of a half because it signals we're in deep doodoo," Robert Toll said, speaking at the Credit Suisse Homebuilder Conference. REUTERS
US expert warns of fresh shocks
Fresh economic shocks on the scale of the current credit squeeze will occur if US house prices continue to fall, one of the country’s leading housing experts warned on Wednesday.
Robert Shiller, a Yale university economist, told a US congressional panel that he feared “the collapse of home prices might turn out to be the most severe since the Great Depression”. FINANCIAL TIMES
Robert Shiller, a Yale university economist, told a US congressional panel that he feared “the collapse of home prices might turn out to be the most severe since the Great Depression”. FINANCIAL TIMES
Goldman Net Rises 79 Percent, Lifted by Mortgage
Sept. 20 (Bloomberg) -- Goldman Sachs Group Inc. reported the third-best profit in its 138-year history after betting against the mortgage bonds that triggered the credit-market rout and damaged earnings at Lehman Brothers Holdings Inc. and Bear Stearns Cos.
The world's largest securities firm said net income rose 79 percent in the third quarter to $2.85 billion, or $6.13 a share, from $1.59 billion, or $3.26, a year earlier. Goldman shares rose as earnings beat the $4.35-a-share average estimate of 18 analysts surveyed by Bloomberg, the seventh straight quarter that the New York-based company has surpassed expectations. BLOOMBERG
The world's largest securities firm said net income rose 79 percent in the third quarter to $2.85 billion, or $6.13 a share, from $1.59 billion, or $3.26, a year earlier. Goldman shares rose as earnings beat the $4.35-a-share average estimate of 18 analysts surveyed by Bloomberg, the seventh straight quarter that the New York-based company has surpassed expectations. BLOOMBERG
Bear Stearns Net Drops Most in Decade on Credit Rout
Sept. 20 (Bloomberg) -- Bear Stearns Cos., the securities firm hit the hardest by the collapse of the subprime mortgage market, reported its biggest profit decline in more than a decade. The shares rose after the company said the worst is over.
Third-quarter net income dropped 61 percent to $171 million, or $1.16 a share, in the three months ended Aug. 31 from $438 million, or $3.02, a year earlier, the New York-based firm said today in a statement. Profit fell short of analysts' estimates. BLOOMBERG
Third-quarter net income dropped 61 percent to $171 million, or $1.16 a share, in the three months ended Aug. 31 from $438 million, or $3.02, a year earlier, the New York-based firm said today in a statement. Profit fell short of analysts' estimates. BLOOMBERG
Oil Hovers Above $82 on Worries of Supply Crunch
Oil hovered around $82 a barrel on Thursday as sinking U.S. crude inventories and the threat of a storm gathering near Florida increased worries of a winter supply crunch in the world's top consumer.
Oil has traded above $80 for the past week but OPEC officials and oil analysts say the lofty price is unsustainable. CNBC
Oil has traded above $80 for the past week but OPEC officials and oil analysts say the lofty price is unsustainable. CNBC
Wednesday, September 19, 2007
In the Beginning...
Yeah, yeah, yeah, I know "not another real estate bubble blog!". Right...and not so, right. Unlike other blogs out there that rail on and on about what's wrong, we will attempt to show you what's right and how to take advantage of it.
This blog is written by an Appraiser (me) who is actively involved in Real Estate Valuation and who has his eye on the day to day movement of the market and all that influences it.
Of course, that means (cue in dramatic music)...the Stock Market (cue out dramatic music). We (me, myself & I) will also be looking at how what happens on Wall Street influences Real Estate and vice versa.
And on a special note, I chose to launch today (at like THREE in the morning) because it's my son Malaki's 8th birthday. And if you're wondering, his name is pronounced Mal-uh-kie, just like Malachi, the last book of the Old Testament. Here's to you kid...
Yeah, yeah, yeah, I know "not another real estate bubble blog!". Right...and not so, right. Unlike other blogs out there that rail on and on about what's wrong, we will attempt to show you what's right and how to take advantage of it.
This blog is written by an Appraiser (me) who is actively involved in Real Estate Valuation and who has his eye on the day to day movement of the market and all that influences it.
Of course, that means (cue in dramatic music)...the Stock Market (cue out dramatic music). We (me, myself & I) will also be looking at how what happens on Wall Street influences Real Estate and vice versa.
And on a special note, I chose to launch today (at like THREE in the morning) because it's my son Malaki's 8th birthday. And if you're wondering, his name is pronounced Mal-uh-kie, just like Malachi, the last book of the Old Testament. Here's to you kid...
THE BUBBLE GOES UP...
August Foreclosure Filings Rise 115% from Year Ago
U.S. foreclosure filings rose 36% in August from July and 115% from a year ago, hit by declines in once-hot housing markets such as California, Nevada and Florida, according to a report released Tuesday.
RealtyTrac's U.S. Foreclosure Market Report found the number of foreclosure filings in August -- default notices, auction sale notices and bank repossessions -- was 243,947, the highest since it began its monthly report in January 2005, just months before the housing boom peaked.
That translates into one foreclosure filing in August for every 510 households, also a high for the RealtyTrac report. CNBC
August Foreclosure Filings Rise 115% from Year Ago
U.S. foreclosure filings rose 36% in August from July and 115% from a year ago, hit by declines in once-hot housing markets such as California, Nevada and Florida, according to a report released Tuesday.
RealtyTrac's U.S. Foreclosure Market Report found the number of foreclosure filings in August -- default notices, auction sale notices and bank repossessions -- was 243,947, the highest since it began its monthly report in January 2005, just months before the housing boom peaked.
That translates into one foreclosure filing in August for every 510 households, also a high for the RealtyTrac report. CNBC
THE BUBBLE GOES DOWN...
Bernanke Cuts on Slump `Potential,' Adopting Greenspan Approach
Sept. 19 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke adopted the approach of his predecessor Alan Greenspan, reducing interest rates to pre-empt an economic slump rather than waiting for one to occur.
The Fed yesterday lowered its benchmark interest rate by half a percentage point, surprising most economists and spurring the biggest rally in U.S. stocks since 2003. Policy makers said they based their decision on the ``potential'' for the sell-off in credit markets to hobble economic growth. BLOOMBERG
THE BUBBLE GOES UP...
Crude futures climb past $82 to uncharted territory
SAN FRANCISCO (MarketWatch) -- Crude-oil futures moved further into uncharted territory late Tuesday afternoon by topping $82 a barrel in electronic trading, buoyed by ongoing concerns over potential storm risks in the Gulf of Mexico, expectations for fall in U.S. supplies and bets that the Federal Reserve's decision to cut interest rates will help boost energy demand.
"With a typical disturbance that could become a Gulf hurricane, a full half-point drop in the Fed's target rate and concern that there will be another drop in gasoline stocks tomorrow, crude had no way to go but up," said James Williams, an economist at WTRG Economics. MARKET WATCH
Crude futures climb past $82 to uncharted territory
SAN FRANCISCO (MarketWatch) -- Crude-oil futures moved further into uncharted territory late Tuesday afternoon by topping $82 a barrel in electronic trading, buoyed by ongoing concerns over potential storm risks in the Gulf of Mexico, expectations for fall in U.S. supplies and bets that the Federal Reserve's decision to cut interest rates will help boost energy demand.
"With a typical disturbance that could become a Gulf hurricane, a full half-point drop in the Fed's target rate and concern that there will be another drop in gasoline stocks tomorrow, crude had no way to go but up," said James Williams, an economist at WTRG Economics. MARKET WATCH
THE BUBBLE GOES DOWN...
Asian Stocks Rally on U.S. Rate Cuts, Financials Surge
Asian markets continued to rally into the afternoon session Wednesday after the U.S. Federal Reserve slashed two key interest rates -- the benchmark fed fund rate and the discount rate -- by 50 basis points each.
The hefty move was a bold bid to shield the world's biggest economy from a housing slump and financial turbulence, raising hopes that Asia's largest export market will be able to ride out turmoil in the credit market. CNBC
Asian Stocks Rally on U.S. Rate Cuts, Financials Surge
Asian markets continued to rally into the afternoon session Wednesday after the U.S. Federal Reserve slashed two key interest rates -- the benchmark fed fund rate and the discount rate -- by 50 basis points each.
The hefty move was a bold bid to shield the world's biggest economy from a housing slump and financial turbulence, raising hopes that Asia's largest export market will be able to ride out turmoil in the credit market. CNBC
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