Shalom Hamou's  Instablog

Presents a list of policy options which have or already been used with dismal results or not even plausible.

Note: for those not familiar with the Fed eggheads lingo in

"Market expectations for continued accommodative policy have in turn helped reduce interest rates on a range of short- and medium-term financial instruments to quite low levels, indeed not far above the zero lower bound on nominal interest rates in many cases."

"Zero lower bound on nominal interest rates" means "Keynes' Liquidity Trap".

Try that Google Search

What you must know is that the Zero Lower Bound is for 0% short-term interest rate and obviously, as my option model proves, it is higher for long-term yields. So we are not "not far above" but "far below".

Of course when you replace "Zero lower bound on nominal interest rates" by " Keynes' Liquidity Trap" it gets a lot more freaky!

My estimate of the use of that syntax is that it make it less frightening and you will not find on Bing or Google the amount of research the Federal Reserve System did on the subject since 1994.

At 1 p.m. on the same day (October 24), several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor.The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. With the bankers' financial resources behind him, Whitney placed a bid to purchase a large block of shares in U.S. Steelat a price well above the current market. As traders watched, Whitney then placed similar bids on other "blue chip" stocks. This tactic was similar to a tactic that ended the Panic of 1907, and succeeded in halting the slide that day. In this case, however, the respite was only temporary.

The trading floor of the New York Stock Exchange just after the crash of 1929

Over the weekend, the events were covered by the newspapers across the United States. On Monday, October 28, the first "Black Monday",^[12] more investors decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 13%. 

We have also to look closely on both the Ted Spread as banks will come to realize that trading with each other is not that safe after all and the infamous Credit Default Swaps. Expect an sharp increase of the insurance premium from now on.

Finally and apart from the normal flux of macro economic figures (especially unemployment data):

We must watch the auction of 10 Years US Treasury Notes on September 8^th ,which I expect bad, and especially the auction of 30 Years US Treasury Bonds on September 9^th, which I expect to be dismal.

Friday Sept 10^th, after the close, the number of failed banks as published by the FDIC.

Anecdotes:

The Hindenburg Omen:

This is a buzz on Wall Street now:

^{Google Trend for Hindenburg Omen}

Yes Folks, Hindenburg Omen Tripped Again from the Wall Street Journal.

Hindenburg Omen on Wikipedia


Mixed Signals and the Hindenburg Omen from Forbes

Note that 40 days after the first occurrence of the Hindenburg Omen is September 21^st.

Labor Day:

September 6^th, 2010. 

Labor Day brought the summer of 1929 to its conventional end on September 2. The next day the New York Stock Exchange had near record volume of 4,438,910 shares - The market was strong with what the press called a good undertone. On this very day, September 3, 1929 - as if by common consent - the great bull-market of the 1920s came to an end. In the days that followed, stock prices see-sawed under increasing volume as professional market veterans sought to unload.

The Quadruple Witching Hour:

September Friday 17^th from 4:00 PM EST to 5:00 PM EST is Quadruple Witching Hour, which is prone to high volatility. 

Rosh Hashana and Yom Kippur:

There is a say on Wall street: "Sell at Rosh Hashana, buy at Kippur." well bad luck: this year Rosh Hashana fall on September 9^th, the day of that dismal 30 Years US Treasury Bonds auction and Yom Kippur fall on a Saturday immediately after the Quadruple Witching Hour. It will be difficult to buy on a Saturday, won't it?

This year Erev Yom Kippur, falls on Sept 17^th, 2010 or 9^th of Tishrei, 5771, 911!

Eid al-Fitr (Arabic: عيد الفطر 'Īdu l-Fiṭr‎)

The Eid (the sacrifice that marks the end of Ramadan) will fall (approximately) on September 10^th - 13^th.

For us economists holidays are a way to coordinate the economic activities of those who celebrate as well as those who don't. (confer Christmas for Christians, Passover for Jews, Indian marriage season,...)

You might not believe these urban legends but your opinion or mine are irrelevant to the stock market. What counts is what the average opinion believes the average opinion will be. This is what you want to discover:

In one of the greatest investment markets in the world, namely, New York, the influence of speculation (in the above sense) is enormous. Even outside the field of finance, Americans are apt to be unduly interested in discovering what average opinion believes average opinion to be; and this national weakness finds its nemesis in the stock market. 

^{Deus in Machina
Chairman Ben Shalom Bernanke ticking bomb: 9, 8 ... 1, 0}