Oct 7. Still closed.
–As gov’t deadlock continues, stock futures this Monday morning are approaching last week’s lows. But complacency has its own inertia, as this line from the WSJ demonstrates: “As they sift through the Washington mess, some money managers think it could be a blessing. Any stock selloff, they say, would be a buying opportunity.” In other words, the Fed MUST continue to provide liquidity. Even though the banking system has a record low loan to deposit ratio, as does the velocity of money. I’m not so sure it all stays the same…the current model seems to be running on fumes… Reuters reports “World Bank cuts China, East Asia growth forecasts”
–Treasuries are modestly higher, but haven’t quite reversed Friday’s sell off. BAML report notes that, “In late July 2011 Treasury GC [gen’l collateral] rates rose by nearly 30bp and MBS repo increased by 35bp as the “X” date approached, though this was exacerbated by heavy money fund outflows.” In euro$’s there has been some buying of puts on EDZ3 contract, likely related. If the week progresses without a negotiating breakthrough, near euro$ calendar spreads will probably see new lows.
–This doesn’t have anything to do with the markets, but I find it interesting: The US launched raids in Libya and Somalia to eliminate terrorist targets, the latter partly in response to the shopping mall massacre. It’s hard (for me) to understand the benefit of being involved in Somalia. The target group is al-Shabaab. What I find surprising is the tie to Minnesota. It’s been reported that some Somalis (very small numbers, reportedly 20 or so) have been returning from MN to join and train with this group. (According to one article I read, of 100k Somailis in the US, 32k live in MN, the land of 10000 lakes). The incongruity of the US deploying logistical military missions in foreign lands while closing national monuments during the shutdown and having to monitor domestic threats makes me think a lot more about what “essential gov’t services” are. Crazy world.
