A couple of stories caught my eye this morning. First, with Asian and European markets in complete freefall this morning, it's clear that this weekend's efforts failed miserably. European futures were up sharply last night. That fell apart as the bailout for one of Germany's largest mortgage banks, Hypo Real Estate, fell apart as well. A new deal was crafted at the last hour, but that shocked the Euro markets enough to turn a 4% futures gain into a 5-6% loss. The EU economy is coming unglued this morning.
LIBOR numbers are still bad, bad, bad. The 3 month rate fell 4 basis points, but the overnight rate shot up 37 basis points and that's enough to prove that the bailout is doing nothing at this point to unlock credit markets. The US response this morning? The Fed wants to create a centralized marketplace for credit default swaps. Surely that's part of a solution, but with stock markets dropping at the rate of 5% or more a day, it's not going to have an immediate impact at all.
Things are bad, folks. We're deep into a worldwide death spiral here and nothing seems able to lift the markets out of it. US futures are down about 2.5% so far this morning. This will most likely be the day the Dow falls under 10,000 and that's going to be a pretty nasty psychological blow.
Keep in mind that the last recession we had knocked the Dow all the way down to under 7,500 on this month six years ago.
We've got a long way to fall still.
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