Bill Cara: Daily Report for Mon, Oct 06, 2008

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October 6, 2008

Daily Report for Mon, Oct 06, 2008

Humungous Bank & Broker is on a feeding frenzy this morning, eliminating the worst of them and picking over the pieces, leaving governments around the world – like Germany and Denmark today and the US, Ireland and Belgium recently and the UK before that -- to pick up the garbage.

I figured this would happen when I watched the sell-off in NY on Friday afternoon. As soon as the $700 billion US Congress relief bill was on its way to full approval, the banks pulled the plug on credit markets, sending LIBOR soaring.

The US House of Representatives voted in support of the Wall Street bail-out package. As the vote began at 1:00pm, Europe’s equity market gains of +1.5% across the board had been locked in, but the US equity markets started to plunge, down -4.0% in the final three hours of trading.

Was this a message from Humungous Bank & Broker that the Paulson Package was not a Wall St bail-out after all? You betcha. Deceitful stuff, this. And when Europe opens well down on Monday, will that be a message from HB&B that they want the same bail-out from the governments there? You betcha.

Interventionists are now in full control of the global equity market. Paulson has won. The banks have won. The people’s representatives caved in and the people can take a hike for all the banks care at this point.

As LIBOR soars this morning, the share prices of the weakest banks are falling into a black hole. The healthiest of the global mega-banks will decide what assets they want to buy. Citigroup and Wells Fargo, for instance, spent the weekend in court to decide who would get to eat the Wachovia carcass.

You see, you can lead a bank to LIBOR, but you cannot force the animal to lend; certainly not when predator is looking for prey. That’s what this crisis is about.

Amid the seized up credit market at 8:25am ET today, the $USD was almost flat on the day, losing -0.10% from 80.55 to 80.47. The Euro also dropped (-0.27% to 137.93) and the Yen (-0.01% to 95.02) and the Cdn Loonie (-0.31% to 92.52). The only gainer was the British Pound, up +0.62% to 177.55.

Crude Oil ($WTIC down from 93.88 on Friday am to 90.00 at 8:30am ET, with an earlier low of 88.89) has been forced down because the banks are pulling loans.

$GOLD futures are up from 833.20 on Friday morning to 857.5 at 8:30am ET. These contracts are soaring because those traders who are not in debt to bankers are hedging this crisis with purchases of gold. Also, traders cannot buy the physicals because the banks have literally stopped selling, which is an indication prices are going higher.

Precious metals spot prices at 8:33am ET (vs 8:38am prices on Friday) for gold, palladium, platinum and silver were 856.58 (838.75), 199 (199), 987 (956), and 11.28 (11.16) respectively. Prices started to lift at about 5:30am ET this morning.

Overnight, the Asia-Pacific equity markets closed sharply lower: All-Ords of Australia (-3.36% to 4544.7), Shanghai Composite (-5.23% to 2173.7), Hong Kong (-4.97% to 16803.8), India Sensex 30 (-5.78% to 11801.7) and Japan’s Nikkei 225 (-4.25% to 10473.1).

In Europe at 8:30am ET, the French CAC (-5.3%), German (-5.3%) and UK FTSE 100 (-2.9%) plunged after getting trapped by Friday afternoon’s sell-off in NY, caught unawares of the refusal of banks to lend to one another. DJIA futures are down -200 to 10164.

The banks are in control of the equity market by way of their shutting down the credit market and calling in loans this weekend. This gridlock will be relieved when even more governments decide to put up more of the taxpayer’s treasury for bail-outs that will help a few mega-banks evolve from the current mess. Therefore, in my Community Chat later today, I will provide the names of a few stocks from my latest 36 candidate Accumulation List.