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From a U.S. source but not verified, FYI
In light if today’s massive move higher in risk markets we thought that we might share with you a few pertinent dates. Swap lines were initiated between the Federal Reserve - ECB and Swiss Central Bank on 12/12/07. Remember TAF?? The market closed at 13473 on 12/12/07 only to find itself at 12000 within a month’s time.
Lehman Collapsed on 9/15/08. Swap Lines were initiated with the Bank of Japan, Bank of Canada and the Bank of England on 9/18/08. Those lines were expanded to include Australia, Norway and Denmark on 9/24/08. The market was at 10600 on 9/17/08 and would rally 700 points in the next 2 trading days. It would reverse course and close at 8450 in 3 weeks on 10/10/08.
On October 13, 2008 the Fed took off the limits on Swap Lines and the market rose 930 points the next day from 8451 to close at 9387. The market would reverse course again and close at 8175 within two weeks.
Swap lines were extended with the Central Banks of New Zealand, Brazil, Mexico, Korea and Singapore on 10/28-29/08. The market rallied 1400 points in 5 trading days from 8200-9600 only to find itself at 7550 within the next month.
The difference in 2011 is that we haven’t had a large systemically importance institution fail – yet. Was this response to the crisis done with the knowledge of an impending failure? This was the response that worked to settle markets – eventually- last time. The Fed is trying to stay out in front of this crisis. Did they get out in front of a looming large systemic failure which would have been brought on by a lack of liquidity??
Arthur Cashin would always say that history doesn’t repeat but it does tend to rhyme. I have been getting the feeling that we have been whistling past the Graveyard of 2008. Feels like things are starting to rhyme. Stay patient. Stay nimble.
