Thursday, September 18, 2008

Fear and trembling update

Things are pretty scary out there. The VIX index is up close to recent highs. The news is uniformly bad. Gold is up from $750 to just over $900 in the space of a week. Yields on 3-mo. T-bills are just about zero. Very difficult to know how this will work out, but this sort of action can't go on much longer.

Update: The VIX briefly rose above 100 in the Oct. '87 stock market crash. That marked the bottom.


CDLIC said...

Another move by the Fed in an attempt to reduce "Fear and trembling" has increased my fear and trembling. And that move was the Fed's agreeing on SWAPS today at 3 am (9-18-08) with the EC, Switzerland, England and Japan (may have been others) of [I believe] $180B. The $180B will then be lent to the banks in these countries to shore them up.

Scott: Why is the Fed doing this when I have read that Japan, for instance, has over $1T in reserve?

Anytime the bureaucrats/politicians get involved in attepting to 'solve'anything, my fear and trembling moves higher on the CDLIC fear and trembling scale.


Scott Grannis said...

These swaps mainly provide liquidity. They don't add money to the system, since they are all sterilized through other offsetting actions. This is a necessary function of central banks at times like these.