Opening Bell: 10.31.08

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Barclays raises boatload of money in Middle East. (Bloomberg)
Wanting to stay afloat post Lehman (properly pronounced Lay-Man with a long, southern draw, like the Congressman say) Barclays, has decided to tap the Middle East for some Oil money (early reports* have it that this decision may have come after watching Arabian Knights; is it possible that John Varley has a man crush on Ali Ben Ali?). After raising the £11.8 B the company is reportedly valued at £16; Barclays has seen a 61% drop (post infusion) since the beginning of this recent slip.
Japanese fail, bases formerly 'are belong to us' may be returned at pennies on the dollar. (Reuters)
The Japanese, caught up in the emotion of being important again on the world stage, recklessly drove their markets up over the past couple of days just to shamelessly slam them to the floor today. The Nikkei lost 5% today after the BOJ downsized their rate from 0.5% to 0.3%, which according to Reuters means the largest monthly loss they've faced as of yet. Ric Flair would be proud, boys.
The British are losers once again. (Reuters)
The FTSE had a bit of a rough night after BT Group announced it wouldn't make its estimates. On top of the technology issues weaker crude led the Oil companies to losses across the board, one wonders if they're trying to price Q4 now rather than later. Everyone appears to have stayed upbeat however, as the British have eons of losing to look back on I don't think this one will hit them particularly hard.
Government bailout loans to be used for bailout. Not kidding. (WSJ)
This entire article is about how the money that the banking system begged for is going to be used to issue loans (re-establish liquidity), which makes me believe this: they really did think we were lying. You remember that don't you? Back like, I don't know, about 2 months ago when we were jumping up and down waving our hands back and forth yelling "Dear sweet bearded heavenly father give us some money" and the plebeians were crying about whatever poor mid-lander's cry about (I think it had to do with VD or the fact that they can't afford the 3 SUVs they have, I wasn't paying attention)? I think they really did think we just decided that we wanted the money, and being the fans of humiliation and public scorn that we are turned to socialism to get a loan. Makes sense.
We're lapsing into a recession, but the mother of all stories is going to be the inflation chaser. (FT)
The idea that the Federal Government can release a trillion and a half dollars into the Ms, lower the interest rate to nothing (effectively) and be responsible enough to reign it all in before inflation swallows us whole is absolutely absurd. They couldn't get food and water to New Orleans for two full days after Katrina hit and they knew it was coming.
The argument goes like this: with the giant write downs in the credit markets we've seen the effective depletion of cash - it just disappeared - and now we've got to re-introduce liquidity over a term while the mortgages actually become worth something again. When they do become worth something, we've got to figure out how to pull the money back out of the economy so that we don't have a bunch of extra. That's the basics of shoring up a liquidity crunch. Here's what's happened: politicians got involved because they realized there was some power somewhere that they didn't have, and at the very same moment they saw there was a camera involved. The result: we're releasing about 2x as much money as we should be. Let's be frank: the government buying houses for the people is socialist, it doesn't matter how you spin it or what you name it**. More over, and more to topic, it introduces a whole boat load of capital into the money supply that we damn well know you're never going to take out.
And don't think that we haven't noticed that you're swaying monetary policy. The only reason you were given that ability is because we all believed you'd be too inept to use it: the relative inefficiencies of the political market have long been known. You are the vanguards of emotion and the reason that contrarian theories exist. The current system works with the tacit trust of the FED, because well, the FED doesn't actually set interest rates. They (the FED) adjust the amount of money in the system and the banks turn around, compile the available data, sit for a minute and ponder how trustworthy the FED is and whether they're gong to do anything stupid, and then everything is updated. You, Congress, are ruining that harmony. Let's just see what happens when you decide you're the kings of monetary policy.
This isn't ground breaking news. (NYT)
What is of interest however, is that given it's Halloween I would love to see pictures of Cuomo. Not actually pictures of him necessarily (though I wont turn those down) - but if you're out over the weekend and you should see something particularly obscene feel free to send it in with the best caption you can muster to tips (AT) dealbreaker (DOT) com. It doesn't have to Rockwell'ian people, just snap the thing with your blackberry paste a comment on it (I'm pretty good at reading drunkenese), close one eye, focus, and hit send.
--William Richards

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