Bloody blood bath!!!!

Stock markets tanked with Dow slumping about 777.7 points about 7%, the BIGGEST single day loss ever, after the dumb politicians(Republicans) rejected the $700Bn bailout proposal.. Personally, I didnt see this coming, neither did my boss, nor did anyone in my opinion.. The market has priced in an approval of the bill, and the rejection came in as a BIG surprise for everyone. Today's loss wiped out about $1.2 Tn in market value, the first more-than-1Tn loss ever!!!

My view, the congress had done a stupid thing by voting the bill down.. Rather thinking with a rationale, hey politicized the whole issue. Republicans, especially, wanted to disaccociate themselves from Bush administration and do not want to take any blame if the bailout fails. They do not realize the fact that the wallstreet that is being rescued is not the same as what it used to be at the beginging of teh year. High bonuses to executives are no longer a norm.. Ibanking is no longer the buzz word.. failure of more than 5 BIG Ibanks did prove the fact that no bank is too big to fail.. Also, the politicians, I guess have no clue of the gravity of the situation.. They still percieve this as a bailut plan, where as, I [ersonally believe that this is a market stabilization plan. Though 700Bn is not an amount that would save the world from going under, but atleast it would give some sort of breathing space for investors, banks.. and if the plan should fail, it would a softlanding as opposed to what we have witnessed today.. A freaking blood bath across the global markets..

To give an understanding of the situation, here are some data points..
TED Spreads, which is the difference between three-month LIBOR (the London Inter Bank Offered Rate which is in euro dollars, also called The Euro Dollar Spread, thus TED) and three-month US Treasury bills. Three-month LIBOR is basically what banks charge each other to borrow money. Many mortgages and investments are based on various periods of LIBOR. Look at the chart below. Typically the TED spread is 50 basis points (0.50%) or less. When it spikes up, it is evidence of distress in the financial markets. The last time the TED spread was as high as it is now was right before the market crash of 1987.



Next chart is the amount of Tier 1 commercial paper issued. This is the life blood of the business world. This is how many large and medium-sized businesses finance their day-to-day operations. The total amount of commercial paper issued is down about 15% from a year ago, with half of that drop coming in the last few weeks.




And, this is just the tip.. corporate bond spreads, CDS spreads paint a similatr grim picture.. If only the politicians understood the consequences of what they have done...

But, well,, I have every reason to be happy again, at this very moment, for personal reasons though.. :)