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!! Paulson re-activates secretive support team to prevent markets meltdown !!

 
Inanna of Sumeria
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03/31/2007 07:23 PM
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!! Paulson re-activates secretive support team to prevent markets meltdown !!
Time to hunker down folks. Get your financial house in order, quickly. Safe Havens.

[link to www.telegraph.co.uk]

Monday view: Paulson re-activates secretive support team to prevent markets meltdown

By Ambrose Evans-Pritchard
10/30/06

Monday view: Paulson re-activates secretive support team to prevent markets meltdown Judging by their body language, the US authorities believe the roaring bull market this autumn is just a suckers' rally before the inevitable storm hits.

Hank Paulson, the market-wise Treasury Secretary who built a $700m fortune at Goldman Sachs, is re-activating the 'plunge protection team' (PPT), a shadowy body with powers to support stock index, currency, and credit futures in a crash.

Otherwise known as the working group on financial markets, it was created by Ronald Reagan to prevent a repeat of the Wall Street meltdown in October 1987.

advertisementMr Paulson says the group had been allowed to languish over the boom years. Henceforth, it will have a command centre at the US Treasury that will track global markets and serve as an operations base in the next crisis.

The top brass will meet every six weeks, combining the heads of Treasury, Federal Reserve, Securities and Exchange Commission (SEC), and key exchanges.

Mr Paulson has asked the team to examine "systemic risk posed by hedge funds and derivatives, and the government's ability to respond to a financial crisis".

"We need to be vigilant and make sure we are thinking through all of the various risks and that we are being very careful here. Do we have enough liquidity in the system?" he said, fretting about the secrecy of the world's 8,000 unregulated hedge funds with $1.3trillion at their disposal.

The PPT was once the stuff of dark legends, its existence long denied. But ex-White House strategist George Stephanopoulos admits openly that it was used to support the markets in the Russia/LTCM crisis under Bill Clinton, and almost certainly again after the 9/11 terrorist attacks.

"They have an informal agreement among major banks to come in and start to buy stock if there appears to be a problem," he said.

"In 1998, there was the Long Term Capital crisis, a global currency crisis. At the guidance of the Fed, all of the banks got together and propped up the currency markets. And they have plans in place to consider that if the stock markets start to fall," he said.

The only question is whether it uses taxpayer money to bail out investors directly, or merely co-ordinates action by Wall Street banks as in 1929. The level of moral hazard is subtly different.

Mr Paulson is not the only one preparing for trouble. Days earlier, the SEC said it aims to slash margin requirements for institutions and hedge funds on stocks, options, and futures to as low as 15pc, down from a range of 25pc to 50pc.

The ostensible reason is to lure back hedge funds from London, but it is odd policy to license extra leverage just as the Dow hits an all-time high and the VIX 'fear' index nears an all-time low – signalling a worrying level of risk appetite. The normal practice across the world is to tighten margins to cool over-heated asset markets.

The move is so odd that conspiracy buffs are already accusing SEC chief Chris Cox of juicing the markets to help stop the implosion of the Bush presidency.

As it happens, I used to eat Mexican enchiladas with Mr Cox 20 years ago at a dining club in Washington, where California Reaganauts gathered to plot the defeat of Communism. Die-hard Republican he may be, but I can think of nobody less likely to betray the public trust in such a way.

So one is tempted to ask if Mr Paulson and Mr Cox know something that we do not: whether other hedge funds are in the same sinking boat as Amaranth Advisers and Vega Asset Management, keel-hauled by bets on natural gas and bonds.

Or whether currency traders with record short positions on the Japanese yen and the Swiss franc are about to learn the perils of the Carry Trade, a high-stakes game of chicken where you bet against fundamentals with high leverage to make a quick profit. Everybody knows it will blow up if the dollar goes into free fall.

They had a fright last week when US growth for the third quarter came in at just 1.6pc, and new house prices plummeted 9.7pc year-on-year in the sharpest drop since the property crash of 1981.

The dollar dived from 119.65 to 117.57 yen in a heartbeat. With $2.9trillion of derivatives now trading daily on the currency markets alone – according to the Bank for International Settlements – is this the start of the most vicious short squeeze ever seen?

The futures markets have priced in a 77pc chance of a flawless soft-landing for America's obese economy, now living 7pc of GDP beyond its means off foreign creditors. They are counting on moderating oil prices, and – a contradiction? – another year of torrid world growth. Nice if you can get it.

They have not begun to price in the risk of recession, typically entailing a drop in the S&P 500 stock index of 28pc from peak to trough. Evidently, the equity markets assume the Fed can and will rescue them by slashing rates in time, if necessary.

They should examine a recent report by the New York Fed warning that whenever the yield on 10-year Treasuries has fallen below 3-month yields for a stretch lasting over three months, it has led to each of the six recessions since 1968.

The full crunch hits 12 months later as the delayed effects of monetary tightening feed through, even if the Fed starts easing frantically in the meantime. By then it is too late. "There have been no false signals," it said.

As of last week, the yield curve was inverted by 29 basis points, was continuing to invert further, and had been negative for over three and a half months. If the Fed is right this time, the recession of 2007 is already baked into the pie. Those speculative positions may have to be unwound very fast.

...
Anonymous Coward
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03/31/2007 07:43 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
old news October 2006
Eagle # 1
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03/31/2007 08:06 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
212513 ... YES, BUT .... The situation has worsened for housing, the dollar, OIL and China to STOP 'dealing in MORE American securities'. Iran into Euros, NOT dollars, Russia into rubles, NOT dollars, Japan ready to use other than dollars for oil, if 'requested'.

The noose is tightening; just a few last dying kicks and the world may even refuse to bury the 'body'.

Depression is RIGHT around the cornor. ONE good shove and this paper tiger will fold like a house of cards.

More PAPER assets anyone ? You can always burn them in the winter time. Got PMs ? No ? I didn't think so.

Eagle
Inanna of Sumeria (OP)

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03/31/2007 08:07 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
old news October 2006
 Quoting: Anonymous Coward 212513


Actually, it is very timely. If you read the article, it notes at the bottom...

---
The full crunch hits 12 months later as the delayed effects of monetary tightening feed through, even if the Fed starts easing frantically in the meantime. By then it is too late. "There have been no false signals," it said.
---

Which means, activated in Oct 06, we are in April 07, that is 6 months in, and 6 months out to due point. Perfect timing, as the Recession is gaining footing as we speak.

The PPT flooded the coufers with cash immediately after the Feb decline in the Market to keep it going for a bit longer.

Spring is 'hit time'. All variables will converge, geo-politically, economically, and contagion secures its foot hold.
Eagle # 1
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03/31/2007 08:23 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
GOOD point Ianna !

AND, as I said in gold/silver/markets thread by Paladin, in another mounth it will be TOO LATE for the Fed to lower rates DRASTICALLY ( 1 - 1 1/2 % ) as they WILL have missed the spring housing market AND triggered MORE defaults/closings on an already flooded housing market. A SERIOUS rate cut in March might have saved it all; but the BANKSTERS are TOO greedy for those high rates and the increases due on the ARMs !

I would love to see the banksters being paid off in nearly worthless dollars.
Oh, yes. I forgot; they control the crooked politicians as well as the Fed, so 'new laws/money is always a way out, they think !

Got gold/silver ?

Eagle
Inanna of Sumeria (OP)

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03/31/2007 08:42 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
GOOD point Ianna !

AND, as I said in gold/silver/markets thread by Paladin, in another mounth it will be TOO LATE for the Fed to lower rates DRASTICALLY ( 1 - 1 1/2 % ) as they WILL have missed the spring housing market AND triggered MORE defaults/closings on an already flooded housing market. A SERIOUS rate cut in March might have saved it all; but the BANKSTERS are TOO greedy for those high rates and the increases due on the ARMs !

I would love to see the banksters being paid off in nearly worthless dollars.

Oh, yes. I forgot; they control the crooked politicians as well as the Fed, so 'new laws/money is always a way out, they think !

Got gold/silver ?

Eagle
 Quoting: Eagle # 1 216802


Hi Eagle! We wouldn't want GLP'rs to be asleep at wheel and become complacent.
Anonymous Coward
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03/31/2007 09:15 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
212513 ... YES, BUT .... The situation has worsened for housing, the dollar, OIL and China to STOP 'dealing in MORE American securities'. Iran into Euros, NOT dollars, Russia into rubles, NOT dollars, Japan ready to use other than dollars for oil, if 'requested'.

The noose is tightening; just a few last dying kicks and the world may even refuse to bury the 'body'.

Depression is RIGHT around the cornor. ONE good shove and this paper tiger will fold like a house of cards.

More PAPER assets anyone ? You can always burn them in the winter time. Got PMs ? No ? I didn't think so.

Eagle
 Quoting: Eagle # 1 216802


Oh yes, Eagle. totally in agreement, just pointing out that this article is not just hot off the press...
Anonymous Coward
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03/31/2007 09:56 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
bump
Anonymous Coward
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03/31/2007 10:06 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
Paulson re-activates secretive support team

Sheesh, and here I've thought that the team has been activated for decades.
Anonymous Coward
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03/31/2007 10:21 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
great time to start another war!!

say easter weekend??
Anonymous Coward
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03/31/2007 10:39 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
The PPT will plug any crashes, as they've been doing since 1988. If a retreat does occur, it'll be orderly.

Nothing to see here.
Inanna of Sumeria (OP)

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03/31/2007 10:51 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
The PPT will plug any crashes, as they've been doing since 1988. If a retreat does occur, it'll be orderly.

Nothing to see here.

 Quoting: Anonymous Coward 211823


Not this time.

87', 91', the markets were not globally integrated, as they are now. One sneezes, the next blows the nose, so on and so forth.

The variables and convergence of trends today are light years different. I imagine you haven't filled up the gas tank recently, bought a gallon of milk, or bought a loaf of bread.
Inanna of Sumeria (OP)

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03/31/2007 10:54 PM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
great time to start another war!!

say easter weekend??
 Quoting: Anonymous Coward 203965


fyi, April 17th is New Moon.
Anonymous Coward
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04/01/2007 12:02 AM
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Re: !! Paulson re-activates secretive support team to prevent markets meltdown !!
Your an idiot human if;

You gave your money to the share market.
Depend on this financial lie of a world to have a life.
Just bought a house with a 30-50 mortgage.

I have NO sympathy for any idiot relying on this financial lie to be "better" than the person next to them.

Money, what a pile of shit.