Updates

Short-term credit crisis has relaxed as shown on LIBOR spreads: 203pts and 233pts for 1 month and 3 month respectively. Nevertheless, the spreads of AAA finance still stand high: 483pts and 603pts respectively for 5-yr and 10-yr. Risks on longer-term loans for F.I. and corporates are still rated HIGH.

Mortgage, as expected, is no better off. Relaxation by not more than 20pts are nothing significant comparing to 100pts less (than now) on the same rates at 6 months prior.

M2 supplies is negative on the 2nd week of October. While the government has made various bailout plans, the money supplies can go nowhere but on the balance sheets of banks and on government bonds (overseas investors). Same trend continues; liquidity trap can be observed.

With such pattern, plus the rally of USD, still tells us that despite the gone of immediate credit collapse the shrinkling and de-leveraging of the economy is still substantial and continuous.

The market will see the first real bottom around the time the announcement of annual results of various companies. Although market has expected the "worst", it is only an expected estimation. What actually happened is not known, but at the very least, we can expect consumer goods, unless those cheap daily ones, will drop in sales. Following the entire value chain, one will see the dealers and manufacturers are in even deeper troubles. After last year, the golden age of commodities has temporarily gone. Raw material producers, many of whom have had stockpiled doubled or even tripled for last few years will swallow the bitter fruit they pow.