-- Posted Wednesday, 22 October 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Wednesday, October 22, 2008
“Phenomenally accurate forecasts”
Even though stocks had sold off pretty hard the night before, we were mildly bullish at the opening on Tuesday, mainly because LIBOR rates supposedly were at last starting to thaw. We say “supposedly” because it’s quite possible the banks have been flat-out lying about how much they’ve been paying for unsecured loans from other banks. Since many loans around the world are pegged to LIBOR – short for London Interbank Offered Rate – even a small change has consequences for borrowers that can mount into the billions or even tens of billions of dollars. However, the banks are on the honor system in reporting LIBOR data, and it’s not hard to understand why they might want to bend the truth. Indeed, merely creating the appearance of easier credit might help calm the fears that have pushed rates up to begin with.
A dispatch from Bloomberg makes clear why the British Bankers Association (BBA) has been investigating the possibility that at least some of the data they have been receiving is bogus. “The global credit squeeze has raised concern lenders have been manipulating the so-called fixing process to prevent their borrowing costs from escalating,” the Bank for International Settlements said in March. “Participants have complained about whether banks are submitting accurate information.”
Yesterday, at the annual board meeting of the BBA, directors voted to ban any member deliberately misquoting lending rates. Our hunch is that even without such threats the liars will be found out soon enough when market forces prevail, as they always do. Will the truth dribble out over a period of weeks or months – or will it come to us in a wrathful epiphany from on high? Based on the way the stock market sold off yesterday despite the bullish LIBOR data, we think investors have already glimpsed the truth, and that the collapse in confidence that the spinmeisters have been working so hard to avoid will precipitate out literally overnight.
***
Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 22 October 2008 | Digg This Article | Source: GoldSeek.com
