Earthquake Warning

Looking at the ASX toward the end of day, you'll see a plunge, around 1%, from 3:40PM to 4:00PM. It was across the board, affecting all sectors equally, and it appeared to have no origin and no news behind it. On the futures market, it's a 1.5% plunge from 3:40PM to 4:10PM, a sharp spike up, another spike down and then settled. The volume on the futures had 10,000 contracts over half an hour, a record for the March SPI contract.

To me it looks like someone decided to short Australia via the futures market with A$800 Million nominal value, or at the very least A$50 Million margin, and the entire market was dragged down through arbitrage from that. There's no way the market would have supported that large a short after close, so it would seem that someone knows something going down over the weekend and is betting large, and at the last minute available.

Australia is strong - part four

Do you believe it yet? The propaganda machine is whirring at high speed now:

Australia is not about to lose its AAA credit rating, Treasury secretary Ken Henry says.

CBA loads up

Commonwealth bank, in addition to the acquisition of BankWest and probably repurchase of RMBS (Residential Mortgage Backed Securities) has acquired A$2.25 Billion of Wizard home loans. They're a fan of taking on debt too hot for others to hold. Many would call this "catching the falling knife".

In other news, AIG is to report a $60 Billion loss and is threatening bankruptcy if they don't get it this week. Also, the UK banks need £500 Billion government loss insurance to prevent everything from seizing up over there.

Games all round

The A$42 Billion stimulus package passed - to get it to pass, one senator who seems to hold the balance of power performed more extortion. Having a single person as the balance of power is dangerous.

On the up side, my rep, Tony Abbott has organised a meeting to discuss the stimulus package, its implications, and how the liberal party doesn't think it is money well spent. I'll be there - 24th February, Balgowlah RSL, from 7:30 PM.

In the US, the United Auto Workers refused to settle with General Motors, leading to renewed discussion of bankruptcy by the biggest US car manufacturer.

Australia is strong - part three

The Reserve Bank of Australia cut rates by 1% down to 3.25%. At the current rate, we'll successfully ZIRP in June. The government is issuing bonds to cover the newfound deficit. In addition, we have an A$42 Billion stimulus package still in the works.

The optimism expressed by the government in the statement about issuing bonds is truly special:

Updating November's Mid-Year Economic and Fiscal Outlook, the government said it expects deepening deficits of more than $30 billion in the following two years and about $25 billion in the year after that.

Pretty good given a sudden slide of A$115 Billion and stimulus of A$42 Billion that you're only A$35 Billion behind your previously forecast A$5 Billion surplus, with another A$55 Billion into the future.

Earlier, the federal government said it expected economic growth to be just 1.0 per cent in 2008-09, slowing to a mere 0.75 per cent in 2009/10.

That's significantly better than the IMF thinks. I'll be sure to revisit both these figures every time you revise them.

Australia is strong - part two

Australia's tax revenues are coming in A$115 Billion lower than expected. This same figure was at 50 two weeks ago and 75 two days ago, as near as I can tell.