All hell breakin' loose today

The credit markets of the world are signalling severe distress. The overnight LIBOR rate (off which all credit instruments are relatively priced) yesterday shot to an incredible 6.5%:
Overnight Dollar Libor Rate, September 2007 to September 2008
Today the yield on US T-bills plunged to the lowest levels since at least 1954 as global funds piled into US Treasuries for relative shelter from the global storm. (This means that those already holding US T-Bills made money today.)
People who are shocked at the run back to the US dollar are not apparently aware of the relative risk in other emerging economies around the world. Russia, with its stock market now down 65%, today closed its exchange, suspending trading indefinitely. Also see Meltdown in Moscow.
China's stock market is down more than 70%. And every other world market has done horribly too. So much for the new economy. So much for international “deworsification”. Terror has officially gone global. And so it should.
We live in a global economy which was happily coupled during the credit-juiced super-expansion from 2002-2007. Those who hoped the downturn could be “decoupled” have learned the truth about global markets the hard way. Having watched this train a' coming for many months now, my only surprise was how relatively well and long North American stock markets have held up to date. Yes I do mean they have held up relatively well. I know they are all down more than 20%, but as credit markets are suggesting, the extent of the down channel here is probably quite a but more. Presently we are watching to see if the 10,000 mark for the Dow and the TSX may prove some support. Time will tell.
Today the VIX spiked to a new high of 38. But it is likely to hit 45 at true capitulation, some point ahead. The recent “belief” that asset prices are wildly over-valued is finally taking its toll. Finally we are getting on with the long over due “adjustment.” This will be healthy in the end.
Remember that surviving to the end and having cash ready to go down the road for buys are the number one goals here. It is not too late to defend your capital.
None of this was unpredictable, or impossile to see. Don't believe the investment sales world when it tells you that everyone has been taken unaware. I am just very sorry for all the people who are losing big chunks of their savings again.

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5 Responses to All hell breakin' loose today

  1. Anonymous says:

    Hi Danielle, you've noted the movement toward the US dollar, but of course you might know what gold did today, smile…
    is that a one day wonder or a reversal to climb aboard the gold train ?

  2. Anonymous says:

    My Morgan Stanley broker called me after the market closed and want me to cash out a treasury and put into a money market fund or cd. I said no thanks..
    I'm up about 6k on just today's gold/silver jump. As always to ask oneself, is this rise just a bump up or the steady climb?

  3. Anonymous says:

    Hi Danielle
    It is refreshing to have someone tell it like it is.
    The “buy and hold” really is a dumb idea.
    I still have some equities in my portfolio.
    Are you saying that it is still not too late to sell and purchase back later at a lower price?
    I will be watching your interview on BNN.
    All the best and keep up the good work of keeping us (the small investor) informed.

  4. Anonymous says:

    It is too early to tell. Today's gold spike was big for sure, but the volume was moderate and one day cannot reverse the downtrend established now over the past several months. I will post more on this soon. D

  5. Anonymous says:

    I cannot tell you the future. But I think this will get worse for a while yet. I would not want any of my capital in risk assets at present. Let it make a bottom without you. There will be plenty of time to get back in after the coast clears a bit. D

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