My Diary 310 --- CP Market, Suicided Toy Maker and US

Just a recap to today's money market events and global markets’ responses……

Generally, every where drops average 3-5 % on the equity side as a consequence of deepened credit concerns.

Basically what happened was there lacks liquidity for Commercial Paper, which is always viewed as cash equivalent; although this time the CP is named ABCP (Asset-backed Commercial Paper). But at the end of day, this is cash and the only difference is now investment banks have found a “smart” way to play around ABCP just like they play with Sub-prime and CDO.  What a financial engineered world and how greedy for those bankers.

The first response to me is that investors now can't even trust the safest and most liquid market, Money Market. Then this is not only a cash problem but also hurting the market confidence. Investors will become so nervous that they will start to dump anything they feel unsecured. At the meantime, leveraged investors will be forced to make liquidation in order to meet their redemption requests. And because of lack of credit / liquidity providers in this type of market usually, asset prices will tend to drop as you are difficult to find an interested buyer at a reasonable price. Now if the cycle turns into effect, things will go even ugly. I was actually glad to see NIBC was bought out by Kaupthing ( at least asset still has some value). But I saw a few more hedge funds claimed they fallen into troubles.

My first suggestion is to sell / trim your international positions when you see next recovery. Keep cash if you don’t want to be the only liquidity provider to the market… :)

Second comment is look at those “big mouths” Fed officers and US politicians. Why can’t they even see what happened under their nose. They are only able to bla…bla….bla.. about China’s currency, human right etc etc…. At the mean time, they allow those Americans without earnings and down-payments to buy big houses and live a comfortable world. They allow their investment bank friends to package these garbage loans and sell to investors in the rest of the world. They allow Wal mart do nothing but only squeeze China’s manufacturers to absorb rising labor costs, environment costs so that to keep US consumers buying cheap. In turn, they forced the owner of Metai, a toy manufacturer, commit suicide yesterday. Don’t forget he also has a family…

Now, do we need to ask Wal Mart to pay more, or simply require all Chinese OEMs to stop providing so claimed “poisoned toy” in US standards? Hopefully, this year the suffered (from Housing market and high inflation) US consumers can afford to buy their kids a US DOMESTICALLY manufactured TOY for Christmas.  Now… should Washington cheer up….Yes .maybe not

I am really reluctant to see the Sub prime issues deepened and Fed cut and US Dollar collapse as an investment professional and the likely consequence of putting US and even China into deflation status…However this is maybe the one way to help American know that they can’t survive without others.

God bless Chinese manufacturers!