The most important short-term problem that got us here was the refusal of the gang of 20 to borrow at the current Fed funds rate.
Today Feds did an emergency 75 bps cut. We need to watch the reaction. Will the banks borrow at 3.50% or not? I they will I will start to take some profit on my shorts. If not – just watch out, the only market hope up to now was that Feds will cut. So the Feds did, and now there is no hope out there, only reality
Update: the banks came only with $5 bln of bids with treasury collateral at the highest rate of 1.85%. This is well below the rate of 3.5%, so effectively we had no rate cut today. It doesn’t matter what’s the rate if nobody borrows. They are refusing to take money, Feds can’t push the string. I’m not covering any shorts
Update2: Juan Carlos Arroyo Calderon said:
I think you all just witnessed blackmail.
These assholes could have sold off in an orderly way, but they decided to trigger a crisis to get what they wanted with a lower rate cut.
That’s my story, and I’m sticking to it
It’s possible. I think the only problem is that there are 20 banks and it would take a lot of winking to form a gang against Feds