Sunday, April 13, 2008

100 Days to the Moment of Truth?

Just a quick post. This could be huge. The G-7 met over the weekend. Here is one of their conclusions. From Bloomberg:

"100-Day Plan
Policy makers laid out a 100-day plan to strengthen regulation of capital markets. They urged financial companies to ``fully'' disclose their investments at risk of loss and boost capital as needed. They chose not to outline new monetary or fiscal policies other than promising action ``as appropriate.''

While the G-7's currency warning may help temper the dollar's descent, central banks would have to realign their monetary policies to reverse its direction, analysts said.
Since August, the Fed has lowered its main rate 3 percentage points to 2.25 percent, aiming to forestall a recession. At the same time, the ECB has kept its benchmark at a six-year high of 4 percent amid the fastest inflation in almost 16 years."

My quick take:

If the G-7 sticks to their guns and forces the financials to show all of their losses then all hell could break loose in the stock market. This is a very interesting development and it makes a lot of sense. I think many of the policy makers have come to the reality that until there is transparency in the marketplace, there will be no credit markets.

We could be 100 days from one wild ride in the markets. Keep an eye on this developing story.

1 comment:

Jeff said...

If this G-7 mark to market story has legs you are talking about a "Black Swann" type of event.

Anyone else agree?