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Europe and America pump the money, Stock market rallies, main Indices still -20% -40% oversold.

Posted by Adrian on October 13, 2008

Despite the dramatic buying frenzy on all the main indices (Dow up 936.42 (11.08%) ), they all still haven’t recovered from the biggest sell off in history on the 9th October 2008. The German DAX, UK FTSE and the Dow and S&P 500 are still under 20%, with the DAX sitting under 40%. The hope with this ‘rescue’ plan or bail out package was to free up the LIBOR (London Interbank Offered Rate), this hasn’t happen the LIBOR has only dropped 0.07% (Dollar Libor: 4.75 per cent from 4.82 per cent).

The Federal Reserve have decided to flood the world with Dollars (allowing banks unlimited amounts), as also offered by the European Central Bank. It will be interesting to see how the EUR and USD will compare in FX markets. We may see the EUR decline further against the USD.

Still with all this money being pumped into the banking system by European countries and the US, the question has to be asked when a whole country (or countries) will go bankrupt. Iceland came close.

The IMF hinted recently it was ready to prop up a whole country, if need be.

(graph 3mths, current)

Also refer to the VIX all time high

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