vs the last reported rate (Monday morning)

Basically all the banks said they were taking their ball and going home, just because they quote those prices don’t mean anyone is buying

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Libor Rise to Boost Subprime ARM Defaults 10%, Citigroup Says

By Jody Shenn

Oct. 7 (Bloomberg) — Increases in benchmark London interbank offered rates may boost homeowner defaults on resetting adjustable-rate mortgages, contributing to a “vicious cycle” in the credit crunch, according to Citigroup Inc.

Among subprime loans, defaults may climb by 10 percent, analysts Rahul Parulekar, Udairam Bishnoi, Sumeet Kapur and Tanuj Garg wrote in a report yesterday. About $23.7 billion, or 87 percent, of the ARMs underlying bonds whose interest rates begin adjusting next month track Libor rates. Six-month dollar Libor has climbed to 4.02 percent, from 3 percent on Sept. 15.

The deepening of the credit crisis that started last year amid record defaults on subprime mortgages, contributing to $593 billion in writedowns and losses at banks worldwide, may end up causing more borrowers to fail to make their monthly payments. Libor rates, which track how much banks charge each other for loans, help set the cost of everything from credit cards to corporate loans.

“America’s homeowners are going to get uncomfortably familiar with ‘LIBOR’ starting next month,” the New York-based Citigroup analysts wrote.

evilhenrypaulson: what are those “vs” against? Yesterday or last month?

The price discovery system of classical economics sufficiently describes standard goods or services. Branded goods that are sold for “sign” or status value, fashion, art, and gaming are unstable and oftentimes irrational systems of value creation, resulting in a mismatch between price behavior and analytical models. Fashion acts as an accelerator of change, causing quicker turnover of assets and more movement of money. Art functions more as a contrived or rigged system than an efficient marketplace, where critics, art houses, and insiders dominate pricing and movement of assets.

In our contemporary “free market” system, securities analysts influence pricing in a manner more aligned with art critiques than investment analysts. Investment banks act to influence price and value as dominant art houses and fashion brands, acting as deciders of value and initiating trends. Ratings agencies exist beyond the realm of traditional interaction that determine price and may in fact block efficient price discovery and market interaction. The rules governing financial derivatives may be arbitrary and divorced entirely from any physical delivery, possession or ownership of an underlying asset. Money may trade hands without creating value, resulting in a specious form of exchange that serves no purpose.

When the virtual wealth of financial derivatives exceed the material wealth of the world, an ultimate wager had been created, something previously unimaginable, an all or nothing exchange.

Welcome to the Desert of the Real. – Jean Baudrillard

http://knol.google.com/k/james-pruett/the-virtual-world-of-derivatives-the/806cui3nlxoq/12#

http://deadcatsbouncing.blogspot.com/

Yes, finance was selling dodgy scrap and making fees in the bargain. It is much like the spiral in the UK of insurance, reinsurance, retrocession, where brokers sold risks round and round in a circle. The brokers did well, and their fees at investors alive. Much like the bankers in the US with their spiral of mortgages, RMBS, CDO, CDO^2, CDO^3.

Finance should be a tail on the dog; it is madness to allow it to be any more important than that. Letting it grow more important transforms it from a lubricant facilitating the wheels of production, to sand hurting them.