- Trade: go long financials day after Dubai announcement, as the exposure is most likely limited, and shares will regain as that information comes to light
- UAE established an emergency liquidity facility for local and foreign banks in the area; will assist in the likely debt restructuring of Dubai World
- Berezin (GS): cautionary tale of credit-financed construction booms
- Electricity in the US: "demand response" paying customers not to buy power when they need it the most. Instead of building a power plant that you only use for 50 hours out of the year, why not just pay people to not consume during those 50 hours? Equivalent to selling options.
Fed's first steps in exit strategy
- support of the financial system since 2007 has added $1tn of excess banking reserves; should the banks start lending these reserves, massive inflation
- repo: repurchase agreement - allows a borrower to use a financial security for collateral for a cash loan at a fixed rate of interest. Equivalent to a cash transaction plus a forward. Difference between the forward price and spot price is the interest on the loan.
- reverse repo: counter party view of a repo
- FOMC: add reserves to system by purchasing UST, and then after a specified time remove them
- reverse repo: Fed sells UST to deals for cash, with agreement to buy them back at a higher price, which will gradually remove reserves from dealers
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