Markets were 500 Trades away from a Meltdown

[dkf]

http://www.nypost.com/seven/09212008/business/almost_armageddon_130110.htm

By MICHAEL GRAY

Last updated: 6:20 am
September 21, 2008
Posted: 4:16 am
September 21, 2008

The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.

Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level - a 22 percent decline! - while the clang of the opening bell was still echoing around the cavernous exchange floor.

According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.

The panicked selling was directly linked to the seizing up of the credit markets - including a $52 billion constriction in commercial paper - and the rumors of additional money market funds "breaking the buck," or dropping below $1 net asset value.

The Fed's dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.

[BlueManDude]

1. ahh the "magic hand" at work.

[phrigndumass]

2. Yet many investment bankers will tell you we're not in a recession "yet"

because of the three straight quarters rule. :eyes:

[high density]

3. The NY Post is infinitely away from being believable.

[dkf]

4. I am skeptical of some things in this article.

I don't know where they get the 22% decline in the Dow.

But I did hear something of the institutional investors that were selling out of the money markets.

[BumRushDaShow]

5. I think that may be referencing the difference from the record high of 14,087.55 in October 2007.

http://www.usatoday.com/money/topstories/2007-10-01-2549780130_x.htm

EDIT - to add (more relevant to the specific section you are talking about, re: 22%) that there was apparently alot of institutional trades in the works (big pension funds, etc) with sell orders - have to find the link (although I understand that after the 1987 crash, there are limits that kick on program selling so what was described may not have happened).

[Caretha]

6. Exactly

There are stops in the market that won't allow that to happen in one "fell-swoop" so to speak. This government propaganda headline wreaks with the same stench that the mushroom cloud - weapons of mass-destruction - mobile bio-weapon labs - yellow-cake on and on ad nausem type of past news headlines did. Wake-up folks, this is the final step in transferring all wealth from the peasants to the robber barons.

Congratulations! Welcome to your new world. We are now officially a third world banana republic, and you are the serfs.