Indicators Mixed

• The yield on 3 month treasuries declined sharply to 0.42% from 0.48%.

It was 0.48 yesterday and slightly getting worse. Usually the 3 month trades below the target Fed Funds rate by around 25 bps, so this is too low with the Fed funds rate at 1.0%. It should increase closer to the target rate.

• Libor declined again today.Three-month U.S. dollar slid 0.16 point to 3.03 percent from 3.1925.

U know i will be happy when libor comes below 3. Nice challange.

• The TED spread 2.60, down from 2.70.

Slightly better also today. But im still waiting to move below 2.

• USD-JPY currencies up to 98.5100.

Same with yesterday. It will be nice if currency up over 100.

• Nonfinancial A2/P2 spread is at a new record ! Up to 4.72 from 4.69.

Its about commercial paper rates and outstanding. The risk of default for lower quality paper increases because of a recession.This spread increases too. If we can say that credit crisis is over,this spread would decline. But its still increasing.

• VIX down to 59.89.

Best data. This is still way too high, but significantly below the peak of 80.6. If volatility decreases, markets would calm down.

- Today Libor and VIX down, but 3 months treasuries yield down too. TED and A2/P2 spread still too high. But FED buys commercial papers thats why A2/P2 spread is at a record high. If we think like this, there is some progress on credit crisis.

What a Dilemma

The Fed released the weekly balance sheet report. The Fed reported that the Commercial Paper Funding Facility LLC holds $145.7 billion in 16 to 90 day commercial paper.

The Federal Reserve bought commercial paper valued at $145.7 billion in the first days of the program aimed at backstopping the market, indicating the central bank is generating most of this week's record gains in short-term corporate borrowing.

The central bank extended $144.8 billion of loans as of yesterday to a unit that paid $143.9 billion for the debt, the Fed's weekly balance-sheet report said today.

The main question is ; How could Fed get all these funds ? ( All of bailout plan )
The answer is ; by citizens.

American economy grows with consumption expenditures. So can u see the dilemma ?

Lets Check Indicators Today

• The yield on 3 month treasuries declined sharply to 0.48% from 0.60%.

The 3 month yield is still some improvement from the worst of the credit crisis. It was close to zero couple days ago. So this is worse data.

• Libor declined today.Three-month U.S. dollar Libor fell to 3.1925%.

This is good data. I am still waiting for Libor comes to below 3.

• The TED spread 2.70, down from 2.82.

Slightly better but still too high. I will be happy the spread move back down at least 2.0.

• USD-JPY currencies up to 98.6650.

Seems good. Dollar needs to get strengthen versus Yen. It means investors are still interested in carry-trade.

• Nonfinancial A2/P2 spread is at a record ! Up to 4.69 from 4.55.

Its about commercial paper rates and outstanding. The risk of default for lower quality paper increases because of a recession.This spread increases too. If we can say that credit crisis is over,this spread would decline.

After these indicators change, i cant say that things going well. Still problem on economy and volatility still too high. We need to follow and see.

Final Countdown

And the result ;

The U.S. economy, weakened by the worst consumer spending in 28 years, contracted last summer, beginning a slump that some fear could turn into a deep recession.

The gross domestic product, the broadest measure of the nation's economy, fell to an annual rate of 0.3% in the period. That compared with a 2.8% growth rate in the second quarter, when economic stimulus checks and strong exports spurred by a weak dollar resulted in solid growth that vanished in the latest reading.

The slump in growth last quarter was the biggest since the third quarter of 2001. The economy contracted at a 0.2 percent pace in the last three months of 2007.

And personal consumption expenditures (PCE) declined -3.1% (annualized). This is the first decline in consumer spending since 1991. Private investment declined -1.9%

The decline wasn't quite as bad as forecasts. But still frightening. U.S economy got big sign of a recession.

What a Record

Exxon Mobil set a quarterly profit record for a U.S. company, surging past analyst estimates. Exxon said its third-quarter net profit was $14.83 billion, or $2.86 per share, up from $9.41 billion, or $1.70, a year earlier. That profit included $1.45 billion in special items.

The company said its revenue totaled $137.7 billion in the third quarter.

Analysts had expected Exxon to report a 40% jump in earnings to $2.38 per share, or net income of $12.2 billion, and a 28% surge in revenues to $131.13 billion.

The company's earnings were buoyed by oil prices, which reached record highs in the quarter before declining. Oil prices were trading at $140.97 a barrel at the beginning of the third quarter, and had fallen to $100.64 at the end.

After touching a record above $147 a barrel in July, crude prices tumbled nearly $60 as demand for fuel grew. Exxon Mobil has dropped 27 percent this year in New York stock trading,.

UK House Prices Decline

One bad news here today. The main problem of credit crisis-house prices decline-still keep going. U.K. house prices dropped by the most in at least 17 years. The average cost of a home fell 14.6 percent from a year earlier.

U.K. policy makers are trying to ease strains in credit markets. Consumer borrowing rose at the slowest pace and mortgage approvals stayed close to the lowest in at least nine years, Bank of England figures show.

Deutsche Bank 3Q Profit

Deutsche Bank posted a 73% drop in net profit in the third quarter, beating analysts' expectations of a loss. It reported write-downs of another $1.5 billion on mortgage-backed securities. Analysts had predicted a loss. But Deutsche Bank in terms of assets, earned $528.7 million in the July-September period, compared with 1.6 billion euros a year earlier.

The bank said its pretax income also slid lower to 93 million euros ($118.7 million) from last year's 1.4 billion euros.

The bank's revenue came in at 4.4 billion euros ($5.62 billion), hampered by the 1.2 billion euros ($1.5 billion) in write-downs at its corporate banking and securities unit.

The revenue figure was down 14 percent from last year's 5.1 billion euros. Last year's figure included 2.2 billion euros in write-downs.

As results were boosted by a reclassification of assets under new European Union accounting rules and a tax benefit.

After this unexpected profit report, DB shares up 13.74%-3.48 EUR right now. Price is 28.78 EUR in Frankfurt.

At least earnings were better than feared and the use of new accounting rules helping good way.

GM-Chrysler Talks

Just read report from Reuters : Major issues resolved in GM-Chrysler talks-sources

General Motors and Cerberus Capital have resolved the major issues in a proposed GM-Chrysler merger but the final form of any deal will depend on the financing and government support available. As GM seeks some $10 billion in U.S. government aid to support the deal, Chrysler owner Cerberus is in its own set of intense discussions with banks to refinance $9 billion of Chrysler debt ...

GM will be the number one auto-maker again. Toyota has passed GM while ago.

GM sold 2.11 million vehicles in the [third] quarter. That pushed GM, until recently the world's largest auto maker by sales, further behind Toyota Motor Corp., which last week reported third-quarter global sales of 2.24 million vehicles.

GM shares up 9.56% today $6.84 after big fall. There is YtY chart of GM and u can see that shares slumped. There was some speculation about bankruptcy request by GM and markets went down.

Rate Cut will Help ?

I don't think so. I think bonds think so too. U.S. Treasurys rose today ahead of an anticipated rate cut by the Fed, as investors worried that the government's intervention may not be enough to stave off a recession.

Fed cuts its key funds rate by a half percentage point to 1%. Real funds rate is negative in U.S.

Treasurys usually sell off when rate cuts are expected, as they tend to be inflationary. But commodity prices moving down so pressure is decreasing about inflation.

Of course we cant be sure how bonds are going to react to the Fed decision. The yield on the 3-month bill fell to 0.68% from 0.74% yesterday. 10-year note rose 2/32 to 101-12/32, and its yield fell to 3.83% from 3.84. Bond prices and yields move in opposite directions.

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The yield on the 3-month Treasury bill is closely watched as an immediate reading on investor confidence. Investors and money-market funds shuffle money into and out of the 3-month bill frequently, as they assess risk in the rest of the marketplace. A higher yield indicates that investors are slightly more optimistic. Thats why 3 months yield is my indicator of credit crisis.


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Another indicator, the TED spread, measures the difference between the 3-month Libor and the 3-month Treasury bill, and is a key indicator of risk. The higher the spread, the less willing investors are to take risks.

Fed cuts rate today but i dont think it will help markets. But im gonna follow these indicators about confidince and risks for investors.

Oil Rebounds

The dollar fell the most since 1998 against the currencies of six major U.S. trading partners as economists forecast that the Federal Reserve will cut the target lending rate by a half-percentage point today.

So weak dollar and global market stocks rebound help lift oil prices. The price of oil pushed higher today as rising stock prices overseas tempered concerns about waning demand and the dollar retreated from recent highs.

Crude oil for December delivery climbed as much as $6.18, or 9.9 percent, to $68.91 a barrel on the NYMXE. So today energy shares help gain markets. Massey, Consol and Peabody energy shares up nearly 13 percent for now.

Lets See My Indicators : Credit Crisis

• The yield on three-months treasuries : It was 1.62% a month ago. Right now its 0.60%. Down 20%. Traders may think about rates. Thats why its going down.

• USD-JPY currencies : 97.63 right now. The yen rose 0.4 percent to 97.63 per dollar from 98.03 yesterday, when it fell 5.4 percent, its biggest decline in more than three decades. Seems not bad.

• The TED spread : 2.79 now. This is still way too high, but significantly below the peak of 4.63 on Oct 10th.

• VIX : 67.94 right now. Its still high but below the record value of 80.6

Indicators mostly unchanged. So i can't say that sun will shine soon.

LIBOR Declines Today

The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell 5 basis points today to 3.42 percent, its 13th straight decline, according to the British Bankers' Association.

Bloomberg reports this news but TED spread has increased because of 3-months treasusary yield has declined. 10 year treasury yield 3.82% right now. I see traders' expecting that Fed might cut the Fed Funds rate by 75 bps today.

I see oil prices rebound after 17-months low and VIX up to 69.77 right now. Dow is unstable today and waiting for Fed rate decision.

Its time to wait and see...