The money markets, that's who's done it!

The shadow banking beast is barely into week three. This newborn has finished off the last of the standalone investment banks in under 2 weeks.

As Roubini likes to explains until he turns blue in the face, it is because the broker-dealer business model was borrowing short on money markets to lend long to the economy. This structural weakness exposes them to systemic runs on their illiquid assets as their rolling liabilities could not be met.

The money market is the mother of all markets, overnight, short term, long term, repo, the ability to lend money on short terms is what drove these business models. And seized the money markets have.

The money market squeeze started with the spotting of one of the largest money market funds facing so many redemptions that the money came out at 97% of par. There has been a tremendous 'flight to safety' which defined safety as Treasuries and that's it.

Chronicles of the Beast.

Comments

Unknown said…
Whatever. Banks all over have signs up in their lobby advertising money markets at 4% and short term CDs at 5%. While it shows a strong demand for short term capital, it also shows a health return to investors. Show me anywhere (outside of real estate and day trading on commodities you could've made that kind of money in the past 8 years. That's a sign of the healthy dollar. And it's been going that way since before the GSE bailout.
September 25, 2008 at 9:58:00 AM PDT
Post a Comment

Popular posts from this blog

Thug vs Thug: Porsche 1, Hedge Funds: 0

The latest drama is fun. VW became the largest company in the world, in terms of market cap, ahead of EXXON on a little financial market coup d'etat orchestrated by Porsche. Apparently VW stocks was on the way down, I don't know the details but many Hedge Funds (HF) were short the position. Fine. The price goes down. Porsche starts buying the anonymous float (and probably some private too?), but the point is they build a 73% market share without many people noticing. In the US you would need disclosure after 10% or so. Point is, that many HF wake up and realize that their short position is about to lose a lot of money. So what do they do? those idiots? they short cover all together, which means they buy the stock to cover the short. The stock zooms up, by a full multiplier and overtakes EXXON. Porsche makes A KILLING in the process and has robbed the city robbers to the tune of "potentially $30B". Not bad for a days worth of work. PS: hey, psst Porsche! With t
Read more

Love ya 2 PTB!

Jules: I wouldn't go so far as to call a dog filthy but they're definitely dirty. But, a dog's got personality. Personality goes a long way. -- Pulp Fiction Jonathan Schwartz has this wonderful quote about me in a recent interview 15 minutes with the great man : Q:Turning to MySQL, how long do you think it will take before MySQL is fully integrated into Sun? We saw with Red Hat and its JBoss acquisition that this can be a slow, laborious process.... A: First, the personalities involved. Let's just say that integrating Marten Mickos into a company might be easier than assimilating a few of the JBoss personalities. Marten is a joy to work with and will make this integration work. I got to hand it to you Jonathan. You hit the nail on the head. JBoss was full of prima donnas, a lot of them actually; it drove me nuts. My developers were bitching all day long, my executives were even bigger fat cats, my sales guys were testosterone freaks. Even the receptionist had an att
Read more

Madrid Blog--We get sued

Image
...for having children If you are a foreigner and move to Madrid, do not, necessarily expect a warm welcome. Yesterday, we, or rather Don Mark Fleury and Dona Natali Manson ***note to Building Association of Serrrano XX, before you lawyer up, do your research. My husband spells his name "Marc" with a "c." and my first name is spelled "Nathalie;" not to mention that my honest English stone mason forbears would cringe at the misspelling of their last name to confound with that of the notorious 20th century serial killer. received an official communication from the Juzgado de Primera Instancia de Madrid, from one Don Ramiro Blah Blah, President of the Building Association of Serrano XX, a building of exactly 12 units, half of which were owned at one time by his father in law, in which it is alleged 1) "Mark Fleury and Natali Manson" have four children 2) these children own bicycles 3)and roller skates 4) and scooters ( Nathalie comment: nope sorry
Read more