Friday, August 10, 2007
We're Back!!!!!! Sorry!!!!!!
Firstly a big sorry for the huge delay in the posts. We bascially got shut down by Blogger because they thought this was a spam blog! Despite assurances we were up and running it never turned out to be true. I am told that all is now well again and it seems to be finally.
Anyway, where do I start? Since the last posting back in July the SPX was at 1553! It is now languishing at 1,453.09. Yesterday alone the SPX dropped 44.40 points. I so wanted to get a play on that Friday but was foiled by a large move down that day which continued to keep moving down that week.
What is causing all these worries? It's called the credit crunch. Simply put banks are concerned that their debt exposure (subprime and otherwise) is too much and they are not going to get paid back their loans!! This means they will be lending less money. The bull run last year was on the back of mergers and acquisitions news which was being driven by private equity funds. Now that these funds are not able to borrow the money from the banks for these deals the deals are beginning to stop. Anything negative relating to credit and subprime is causing these markets to move as daily we are hearing about hedge funds invested in this sector being wiped out.
On Thursday, news that French bank BNP Paribas halted withdrawals from three of its funds created turmoil for U.S. markets yesterday. To me traders aren’t sure who to believe when it comes to problems in the credit market. Just a week ago, the CEO of BNP Paribas stated that the company’s exposure to U.S. subprime problems was “absolutely negligible.” This raises concerns about prior comments from Fed leaders just the other day stating subprime issues would not spread!!
News yesterday that the European Central Bank have injected $130 billion into money markets and that the Fed injected $24 billion has also lifted concerns about how strong the economy really is. Last time they did this (in 2000) there was a recession. I will be providing some more detail on the crisis over the next few days.
So how does this affect us. Well as you are aware we have no play on so at the minute we can watch this chaos in comfort!!! You never sell a spread into a seriously declining market and this market has done nothing but seriously decline since 20 July!!
I wanted to get something on, if even just the calls to eliminate downside risk, but given the wild moves I think we might have missed the boat for August.
Lets see what happens today.
Until next time.
Anyway, where do I start? Since the last posting back in July the SPX was at 1553! It is now languishing at 1,453.09. Yesterday alone the SPX dropped 44.40 points. I so wanted to get a play on that Friday but was foiled by a large move down that day which continued to keep moving down that week.
What is causing all these worries? It's called the credit crunch. Simply put banks are concerned that their debt exposure (subprime and otherwise) is too much and they are not going to get paid back their loans!! This means they will be lending less money. The bull run last year was on the back of mergers and acquisitions news which was being driven by private equity funds. Now that these funds are not able to borrow the money from the banks for these deals the deals are beginning to stop. Anything negative relating to credit and subprime is causing these markets to move as daily we are hearing about hedge funds invested in this sector being wiped out.
On Thursday, news that French bank BNP Paribas halted withdrawals from three of its funds created turmoil for U.S. markets yesterday. To me traders aren’t sure who to believe when it comes to problems in the credit market. Just a week ago, the CEO of BNP Paribas stated that the company’s exposure to U.S. subprime problems was “absolutely negligible.” This raises concerns about prior comments from Fed leaders just the other day stating subprime issues would not spread!!
News yesterday that the European Central Bank have injected $130 billion into money markets and that the Fed injected $24 billion has also lifted concerns about how strong the economy really is. Last time they did this (in 2000) there was a recession. I will be providing some more detail on the crisis over the next few days.
So how does this affect us. Well as you are aware we have no play on so at the minute we can watch this chaos in comfort!!! You never sell a spread into a seriously declining market and this market has done nothing but seriously decline since 20 July!!
I wanted to get something on, if even just the calls to eliminate downside risk, but given the wild moves I think we might have missed the boat for August.
Lets see what happens today.
Until next time.
# posted by Paul @ 6:16 AM 
