Bailout bill: the Russian way

Today Prime Minister Vladimir Putin announced that the government will spend approx. 100B roubles ($3.5B) on buying back real estate at market value. Putin said that those measures are "fair to both Russian citizens and developers". I think it's the biggest failure since the crisis began. More than a half the required amount ($2B) comes from "ZhKH" fund. It's basically a budget spending category for building and maintenance of utilities, urban structures etc. - i.e. the taxpayers' money. So we're now forced to 'finance' the purchasing the troubled real estate at pre-crisis market value. The government is postponing the unevitable and amplifying the consequences. Just try to imagine the US congress advocating the buyback of overstocked housing inventory. The author of such a proposal would be politically dead within five seconds. But in Russia you can get away with such a trickery - and even improve your approval rating. The situation is exaggerated by the fact that there aren't no oversupply of apartments in Russia. Many families are living in overcrowded apartments and are willing to improve their housing status, but they're unable to pay $3-5-8k per sq.m. for crappy concrete building flats. So instead of finally letting the market do its thing (a.k.a. correct overinflated real estate prices naturally) and improve the availability of housing, the government is setting up an exit route for oligarchs. The bailout for billionaires. Just...great.

Black Friday?

Today we gonna see BLACK FRIDAY. Or something...

NIKKEI is down ~10%

Update1:
European DJ STOXX 50 down like 10%
OPEC cut production by 1.5mbbd, but it's probably not enough. Oil down 5.5%
Russian RTSi down 10%, MICEX down 15%
Dow futures down 550
Libor changes are irrelevant

He did it

Greenspan Concedes to `Flaw' in His Market Ideology

Yes, I found a flaw

Another one bites the dust

Actually, not just one

Econatsbank (enb.ru)
Navigator Bank (navigatorbank.ru)

Where we're going?

Overnight MosPrime rate in roubles is at 7.67% today but was at 21% at Monday, according to Centrobank.

I think it was due to "weekend hangover" effect. The dollar began to rally after the Reuters article was misinterpreted by local media as "limits will be introduced on currency purchases".

MOSCOW, Oct 17 (Reuters) - Russia will introduce daily limits on currency swap operations starting Oct. 20, the central bank said in a statement on Friday.

On Monday, people rushed to currency exchange bureaus to get dollars. The rate was as high as 30 roubles per US dollar (official rate of Centrobank was like 26.2ish). The things cooled down at Monday evening, however, the official rate USD/RUR began to rise. So the 21% interbank overnight rate was due to fear of something bad beginning to develop (i.e. rapid rouble devalvation).

Meanwhile, the global outlook gradually becoming somewhat less ugly (VIX at 50ish instead of 70ish, 3mo LIBOR at 3.5ish% and going down, TED spread going down also). The stock markets are beaten, but who cares? The credit market situation is the thing that matters.

Concerning the Russia, the situation is different. I'll post my thoughts when i'll get some spare time.

Quite a day

Rallied into close....

Dow close +370 and now +413
3mo t-bill yield is 1.10
TED spread down 18% to 2.96
VIX down 20% to 56

3mo t-bill

right now the yield is .78
we're slowly getting out of the woods?

Wall St Bar

Yesterday I was drinking at Wall st' bar at Volkhonka. It was fun watching Dow Jones going up and down with the intraday swing of ~1000pts. Few days ago I told my friend that the Dow soon will be like 7000ish. Well, yesterday the Dow actually tested sub-8k levels and violently soared right before the close.

Naturally, we're living in (through?) interesting times.

Defaults

As of 10/9/2008

According to Finam, so far 15 bonds went into technical defaults, and 5 went into actual defaults.

Stuff to watch

In order to gauge the current status of the credit crisis, I watch the following data

1. LIBOR USD 3mo
2. TED Spread
3. US 3mo T-bonds yield
4. VIX
5. Repo auctions, Bank of Russia