First, a quick news scan:

My regular readers should remember my warnings on the currency trade risks (Japan's Hirano can testify), and interest rate derivative concentrations (let's see what happens to the counterparty daisy chain if Dubai defaults): "The Next Step in the Bank Implosion Cycle???". As excerpted:

Even more alarming is some of the largest banks in the world, and some of the most respected (and disrespected) banks are heavily leveraged into this trade one way or the other. The alleged swap hedges that these guys allegedly have will be put to the test, and put to the test relatively soon. As I have alleged in previous posts (As the markets climb on top of one big, incestuous pool of concentrated risk... ), you cannot truly hedge multi-billion risks in a closed circle of only 4 counterparties, all of whom are in the same businesses taking the same risks.

Click to expand!


Published in BoomBustBlog
Friday, 24 October 2008 02:00

It's every nation for themselves, now

First the US bankers threw as much garbage at the world as they could lift, with the US ratings agencies throwing perfume on the trash mid-flight to manage the "stank". Then the Irish guaranteed their bank deposits to an unheard of limit, basically giving the middle finger to the other European banking authorities (you see, money flowed to the "perceived safety of government backed bank funds from an already weakened UK and EU banking system), and now OPEC is cutting product in an effort to elevate oil prices amid a guaranteed global recession. Another "eff you" to the world.

Most people don't realize that in the grand scheme of things, oil has not really went down in price. It is exactly where it was in the summer of 2007 when I first contemplated the contracts. The OPEC nations have went on a "subprime like" debt driven spending binge, and need the petrodollars to keep flowing to support the facade that they are trying to build.

Published in BoomBustBlog