Forget about government bailouts, now its investors that are bailing out. It’s a case of salvaging whatever is left of portfolios now. Hedge funds are unloading anything with liquidity and currencies are taking the strain,

The horrendous spike in LIBOR rates has seen a reverse run on the $. From global pariah to this week’s must have the $ has risen at a rate of knots in the last month against all currencies except the yen, which has been used to fund most of the speculative investment activity. The Aus$/Yen cross rate is down over 40% in 3 months. The Eur/$ rates has fallen 20%. Eur/yen around 25%. These are not emerging markets, these are the main conduits for global trade and when added to stock market moves of between 25-50% one is faced with the realisation that the whole global financial system is at risk.

I wrote recently that at some point global markets will need to be frozen. That may well happen as not just stocks but currencies go into complete meltdown making any form of economic activity almost pointless.

The recent wholesale and blanket guarantees of bank deposits and lending in many countries have just added to the general lack of confidence in the global financial system.

Added to this commodities have collapsed in price also as that speculative bubble is popped. Even gold, something one would consider in the current situation, has fallen, over 20% in the last few weeks.

Nothing makes much sense at the moment except that the unwinding of years of excess is both savage and yet unpredictable.

One can only hope that somehow the markets can stabilise but the lower it goes the worse it gets as the spiral of margin calls increases and investors seek to recoup whatever they can. It’s probably not the time to sell but at the moment cash is king.

And surprisingly the king of cash is the $…….for now.

Tags: banking, credit, currencies, financial crisis, markets, money, stocks