Another Dow(n) Day on Wall Street

Crossposted from The Stars Hollow Gazette

Yes, I know the financial markets are only peripherally connected to the actual economy and the Dow is a poor indicator even of that but it’s sometimes amusing to watch the numbers at the big casino.

Thursday is jobless day and once again the number of newly unemployed is over 400,000 with an upward revision of last week’s much better number so that they are now even worse than this week.  Green shoots, Recovery Summer don’t you know.

But these titans are not so much worried about that as they are once again about Greece.

Greek Bond Yields Climb to Record High on Speculation Bailout Will Fail

By Emma Charlton and Keith Jenkins, Bloomberg News

Aug 25, 2011 10:49 AM ET

Greek bonds slumped, with 10-year yields rising for an eighth day to a euro-era record, amid concern Finland’s demands for loan collateral jeopardize Greece’s second bailout package and may trigger a default.

…

“Markets are doubting whether the second bailout package will ever be ratified by all the euro-region member states,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “There’s not much that can worsen the situation from where we are now.”

Greek 10-year bond yields rose 49 basis points to 18.38 at 3:44 p.m. in London, after climbing as high as 18.55 percent.

…

The two-year yield jumped 185 basis points to 45.88 percent, extending a 5.6 percentage point increase over the past two days. It earlier reached a euro-era record 45.91 percent.

The cost of credit-default swaps insuring Greek debt rose three basis points today to 2,253 basis points, the highest in more than a month, according to CMA.

Greek Default Fears Rise

By RIVA FROYMOVICH And MARK BROWN, The Wall Street Journal

AUGUST 25, 2011, 11:33 A.M. ET

BRUSSELS-Euro-zone policy makers appeared nowhere near settling a dispute Thursday over Finland’s collateral demands in exchange for participating in a €109 billion ($157.1 million) bailout for Greece, raising concerns the Mediterranean nation may default.

…

Under that deal, Greece would pay Finland hundreds of millions of euros from its bailout loans as collateral against those same loans at the expense of other euro-zone countries. Since Finland is set to contribute just 2% of Greece’s total rescue package, guarantees from the richer euro-zone nations would be going directly to Finland.

Which leads to headlines like this one in The Telegraph–

Market crash ‘could hit within weeks’, warn bankers

A more severe crash than the one triggered by the collapse of Lehman Brothers could be on the way, according to alarm signals in the credit markets.

By Harry Wilson, and Philip Aldrick, The Telegraph

9:50PM BST 24 Aug 2011

Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender’s bonds against default is now £343,540.

The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.

…

“I think we are heading for a market shock in September or October that will match anything we have ever seen before,” said a senior credit banker at a major European bank.

Here’s a bit of video from the BBC of an interview with Nassim Taleb-

(I wanted to include a quote from Robert Alexander Dumas at MyFiredog Lake, but it’s crashing the piece so I’ll try and figure it out later.)

But you shouldn’t worry or fret.  Warren Buffet just dropped $5 Billion of new capital into Bank of America so my advice is that you take all the money you have in the world and view this downturn as a buying opportunity to get long in banks.

Sucker.