YIKES! The Sky Is About To Start Falling: CASH Needed By ALL
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bloomberg.com
Roubini Says `Panic' May Force Market Shutdown (Update2)
By Alexis Xydias and Camilla Hall
Oct. 23 (Bloomberg) -- Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.
``We've reached a situation of sheer panic,'' Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. ``There will be massive dumping of assets'' and ``hundreds of hedge funds are going to go bust,'' he said.
Group of Seven policy makers have stopped short of market suspensions to stem the crisis after the U.S. pledged on Oct. 14 to invest about $125 billion in nine banks and the Federal Reserve led a global coordinated move to cut interest rates on Oct. 8. Emmanuel Roman, co-chief executive officer at GLG Partners Inc., said today that as many as 30 percent of hedge funds will close.
``Systemic risk has become bigger and bigger,'' Roubini said at the Hedge 2008 conference. ``We're seeing the beginning of a run on a big chunk of the hedge funds,'' and ``don't be surprised if policy makers need to close down markets for a week or two in coming days,'' he said.
Roubini predicted in July 2006 that the U.S. would enter an economic recession. In February this year, he forecast a ``catastrophic'' financial meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ``sharp drop'' in equities.
Bear, Lehman
The comments preceded the collapse of Bear Stearns & Cos. and Lehman Brothers Holdings Inc. as well as the government seizure of Freddie Mac and Fannie Mae. The Dow Jones Industrial Average, a benchmark for American equities, has lost 37 percent this year, including its biggest daily drop in more than twenty years on Oct. 15.
The Dow average rose 2.5 percent to 8728.73 as of 10:55 a.m. today in New York.
Italian Prime Minister Silvio Berlusconi roiled international markets on Oct. 10, first saying world leaders were discussing shutting down global financial exchanges, and then saying he didn't mean it.
``In a fairly Darwinian manner, many hedge funds will simply disappear,'' Roman said, speaking at the same event as Roubini.
The hedge fund industry is stumbling through its worst year in two decades and posted its biggest monthly drop for a decade in September. Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
`Very Ugly'
``Things are getting very ugly also in the emerging markets,'' Roubini said. ``The usual saying is when the U.S. sneezes, the rest of the world catches a cold. Unfortunately, this time around the U.S. is not just sneezing, it has a severe case of chronic and persistent pneumonia. It's becoming a mess in emerging markets.''
Developing nations' borrowing costs jumped to the highest in six years today as Belarus joined Hungary, Ukraine and Pakistan in seeking a bailout from the International Monetary Fund to help weather frozen money markets and a slump in commodities. Argentina risks defaulting for the second time this decade.
``There are about a dozen emerging markets that are now in severe financial trouble,'' Roubini said. ``Even a small country can have a systemic effect on the global economy,'' he added. ``There is not going to be enough IMF money to support them.''
Roubini, a former senior adviser to the U.S. Treasury Department, earlier this month said that the world's biggest economy will suffer its worst recession in 40 years.
``This is the worst financial crisis in the U.S., Europe and now emerging markets that we've seen in a long time,'' Roubini said. ``Things will get much worse before they get better. I fear the worst is ahead of us.''
To contact the reporters for this story: Alexis Xydias in London at axydias@bloomberg.net; Camilla Hall in London at chall24@bloomberg.net.
Last Updated: October 23, 2008 10:59 EDT
Roubini Says `Panic' May Force Market Shutdown (Update2)
By Alexis Xydias and Camilla Hall
Oct. 23 (Bloomberg) -- Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.
``We've reached a situation of sheer panic,'' Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. ``There will be massive dumping of assets'' and ``hundreds of hedge funds are going to go bust,'' he said.
Group of Seven policy makers have stopped short of market suspensions to stem the crisis after the U.S. pledged on Oct. 14 to invest about $125 billion in nine banks and the Federal Reserve led a global coordinated move to cut interest rates on Oct. 8. Emmanuel Roman, co-chief executive officer at GLG Partners Inc., said today that as many as 30 percent of hedge funds will close.
``Systemic risk has become bigger and bigger,'' Roubini said at the Hedge 2008 conference. ``We're seeing the beginning of a run on a big chunk of the hedge funds,'' and ``don't be surprised if policy makers need to close down markets for a week or two in coming days,'' he said.
Roubini predicted in July 2006 that the U.S. would enter an economic recession. In February this year, he forecast a ``catastrophic'' financial meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ``sharp drop'' in equities.
Bear, Lehman
The comments preceded the collapse of Bear Stearns & Cos. and Lehman Brothers Holdings Inc. as well as the government seizure of Freddie Mac and Fannie Mae. The Dow Jones Industrial Average, a benchmark for American equities, has lost 37 percent this year, including its biggest daily drop in more than twenty years on Oct. 15.
The Dow average rose 2.5 percent to 8728.73 as of 10:55 a.m. today in New York.
Italian Prime Minister Silvio Berlusconi roiled international markets on Oct. 10, first saying world leaders were discussing shutting down global financial exchanges, and then saying he didn't mean it.
``In a fairly Darwinian manner, many hedge funds will simply disappear,'' Roman said, speaking at the same event as Roubini.
The hedge fund industry is stumbling through its worst year in two decades and posted its biggest monthly drop for a decade in September. Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
`Very Ugly'
``Things are getting very ugly also in the emerging markets,'' Roubini said. ``The usual saying is when the U.S. sneezes, the rest of the world catches a cold. Unfortunately, this time around the U.S. is not just sneezing, it has a severe case of chronic and persistent pneumonia. It's becoming a mess in emerging markets.''
Developing nations' borrowing costs jumped to the highest in six years today as Belarus joined Hungary, Ukraine and Pakistan in seeking a bailout from the International Monetary Fund to help weather frozen money markets and a slump in commodities. Argentina risks defaulting for the second time this decade.
``There are about a dozen emerging markets that are now in severe financial trouble,'' Roubini said. ``Even a small country can have a systemic effect on the global economy,'' he added. ``There is not going to be enough IMF money to support them.''
Roubini, a former senior adviser to the U.S. Treasury Department, earlier this month said that the world's biggest economy will suffer its worst recession in 40 years.
``This is the worst financial crisis in the U.S., Europe and now emerging markets that we've seen in a long time,'' Roubini said. ``Things will get much worse before they get better. I fear the worst is ahead of us.''
To contact the reporters for this story: Alexis Xydias in London at axydias@bloomberg.net; Camilla Hall in London at chall24@bloomberg.net.
Last Updated: October 23, 2008 10:59 EDT
Folks Who Bite Get Bitten. Folks Who Don't Bite Get Eaten.
0
Comments
I really thought back in '01 that this was going to come crashing down in '09, primarily because the Fed always paints a rosy picture in election years, even though it would become apparent to many by '07-'08.
Fasten your seatbelt, keep some cash on hand. We're all in this boat together.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
San Diego, CA
<< <i>This could be BLACK FRIDAY with Asia down 10%! >>
Gold is doing ok in New York today after getting pounded overseas. Hey, it's behaving like cash!
roadrunner
<< <i>Roubini has consistently been on the outer fringe of the doomsdayer deflationists for a few years now. I'm sort of surprised that this one extreme of the spectrum is now being given some thoughtful consideration.
roadrunner >>
Even a broken clock is right two times a day, this might be that time.
But for the record, I don't agree with him but who knows.
San Diego, CA
Are actual stock certificates trading at higher levels than the market prices for the stock shares?
Keep that in mind as we go.
I knew it would happen.
San Diego, CA
<< <i>Physical precious metals have fallen dramaticlly, but are trading at higher levels for the actual physical metals. >>
You're sounding lke Yogi Berra...........
J/K
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
I'm not sure who makes the call.
Has the DOW ever fallen 1100 in one day?
Scott
Correction made.
Yogi, huh? I meant what I said, but I didn't say what I meant, because I didn't know what I was saying when I said it.
I knew it would happen.
<< <i>CBS radio reported that if the DOW falls more than 1100 by 2 pm, they will shut down the NYSE.
I'm not sure who makes the call.
Has the DOW ever fallen 1100 in one day?
Scott >>
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October 24, 2008
As stocks drop, NYSE offers refresher on 'circuit-breakers'
By JAIKUMAR VIJAYAN, IDG
Fears that the major U.S. financial markets would follow other markets as they dropped on Friday prompted the New York Stock Exchange (NYSE) to highlight rules about market-wide trading halts that kick in when indices plummet below certain pre-defined levels.
Those "circuit breaker" levels are designed to reduce market volatility by forcing a pause in trading activity for certain periods of time. The NYSE posted a note on its Web site explaining the rules following what it said were questions about how circuit-breakers work. Circuit breakers to stem futures trading kicked in before the markets opened in New York on Friday after markets elsewhere in the world fell sharply.
The NYSE ended the day off by more than 300 points; The technology-laden NASDAQ shed 51 points. Neither was anywhere near as large as the sharp sell-off late last month.
Basically, circuit breakers are used to cut off automated trading program connections between large brokerage houses and the computers on the NYSE trading floor for varying lengths of time, depending in the severity of the decline and the time of the day it happens, according to the exchange's Invest FAQ.
Larger brokerage houses "have their computers directly connected to the trading floor on the stock exchanges, and hence can program their computers to place direct huge buy/sell orders that are executed in a blink," the FAQ said. "This automated connection allows them to short-cut the individual investors who must go thru the brokers and the specialists on the stock exchange."
Because of the speed with which trades can take place -- in microseconds -- circuit breakers are aimed at slowing a market crash.
In an indication of how worried traders were Friday morning, the NYSE took the unusual step of posting a statement on its blog confirming that trading would begin as usual at 9:30 a.m. EDT. The move was aimed at addressing widespread rumors about the exchange being closed or delayed.
NYSE introduced circuit breakers to halt trading during periods of "extraordinary volatility" like that seen in recent weeks. The rules detail how far the Dow Jones Industrial Average must drop for the trading halts to kick in. The trigger points are set at 10%, 20% and 30% of the value of the DJIA -rounded off to the nearest 50 at the beginning of each calendar quarter. The DJIA had an average value of 11,000 at the beginning of the fourth quarter.
Under the NYSE circuit breaker rules, if the value had dropped by 10%, or 1,100 points, at any time before 2 p.m. Friday, an automatic trading halt of one hour would have taken place, according to a NYSE description of how the breaks would work.
If the Dow were to drop by that amount between 2 p.m. and 2: 30 p.m., trading would be halted for 30 minutes. There would be no trading halt if the drop occurred later than that.
A 20% decline would mean a two-hour trading halt if it occurred before 1 p.m., a one-hour halt if it took place between 1 p.m. and 2 p.m. and a market closure if it happened after that. A 30% decline, which for this quarter would be a 3,350-point drop, would trigger an automatic halt to all trading for the day regardless of when it occurred.
The current trigger levels were set in April 1998.
The only time the triggers were pulled was in October 1997, when the Dow dropped by 350 points shortly after 2:30 p.m. That drop led to a 30-minute trading halt, but the market was later closed after the Dow continued its plunge and dropped another 550 points shortly after trading resumed that day.
That plunge and a brief one the next day were caused by economic turmoil in Asia and concerns over how it would affect the earnings of U.S. companies according to an analysis by the Division of Market Regulation of the U.S. Securities and Exchange Commission.
Copyright 2008 IDG. All Rights Reserved.
Biggest Point Loss
1. Sept. 29, 2008
Close: 10,365.45
Net loss: 777.68
Percentage change: -6.98