Flight to Liquidity

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Article published Washington Post Thursday Sept. 02 (read in my local paper, Press Democrate) says --

"Major corporations, some foreign countries, and even the US Treasury have begun to raise enormous amounts of cash just in case something goes wrong somewhere as computer calenders flip over 2000... they are rushing to sell many billions of dollars of debt now."

The article goes to describe how --

"Telecommunications giant AT&T has put aside $5 billion, and Ford Motor Company raised $8.6 billion from a record bond sale in July."

It's already boosting the interest rates etc.

I always assumed the cash rush would start at the bottom. It appears that the big boys and girls have stopped dancing and chatting and are all very casually but intently eying the exits.

I wish I had the link, but I read it on tree-ware.

Pete the Party Pooper

-- Pete the Party Pooper (getting.scared@home.net), September 02, 1999


Nice catch Poop...


Is it just me or was September 1 like turning on a switch?

-- William in Dallas (bcheek@onramp.net), September 02, 1999.

How much petty cash can businesses take out before not-so-petty cash would break the banks?

Sincerely, Stan Faryna

-- Stan Faryna (info@giglobal.com), September 02, 1999.

A couple of things come to mind:

"Follow the money".

"Do as I say, not as I do".

"Actions speak louder than words".

-- Wilferd (WilferdW@aol.com), September 02, 1999.

We're......... moving to the edge of the whirlpool. The eddy.

Funny, it doesn't feel all that scary.

-- lisa (lisa@work.now), September 02, 1999.

those who have not cashed out by now will have Exxon in line in front of them and GE in line behind them;...

-- Perry Arnett (pjarnett@pdqnet.net), September 02, 1999.

this one is a 'keeper'; print it off and distribute;

need a "smoking gun"? this may be it...[or at least the powder residue]

-- Perry Arnett (pjarnett@pdqnet.net), September 02, 1999.

Whaqt really tipped us off was Ty getting out of the beanie baby business...

-- Mad Monk (madmonk@hawaiian.net), September 02, 1999.




-- sandi (sandihere@malcity.com), September 02, 1999.

Great link and story, thanks. The part about emerging markets is starting to really intensify. The NWC scenario always maintained that leper lists would surface and the lepers banished financially. Cargill (they're freaking huge) today announced that they would be discontinuing their trading operations in South Africa due to Y2K concerns. Yikes.

The games are on. People and countries are gonna get hurt bad, and we may be one of them.

-- Gordon (g_gecko_69@hotmail.com), September 02, 1999.

For anyone who finally sees that the window of opportunity to cash out may be fading, may I recommend Gary North's Surviving All 3 Stages of a Complete Flight to Cash, which appeared as issue #32 of his "Reality Check" series (October 1998). You can access it via the following link to previous "Reality Check" issues.


-- Jack (jsprat@eld.net), September 02, 1999.

There's some confusion here. While the articles coming out do paint a serious picture of the end-game, this "cash" is not the same as our "cash". They will keep theirs in the bank through the rollover. This is just an unusual variant of the otherwise usual movement of big money through the system. If anything, this could help the liquidity of the overall system. I repeat, however, that I certainly do hear the drum beat nonetheless.

-- Dave (aaa@aaa.com), September 03, 1999.

These companies are not actually accumulating real cash; they're building up digital money accounts they hope to draw on if acquiring credit becomes difficult due to y2k (boy is that an understatement!). It is a good warning to the rest of us to step up our cash withdrawals. The window of opportunity will close soon.

-- cody (cody@y2ksurvive.com), September 03, 1999.

Article also showed up in the S.J. Merc...

Published Thursday, September 2, 1999, in the San Jose Mercury News

Debt-issue flood traced to fears of Y2K by investors

Firms, governments rushing to market

Washington Post

http://www.mercurycenter.com/premium/business/docs/ y2kcash02.htm

[Fair Use: For Educational/Research Purposes Only]

Major corporations, some foreign countries and even the U.S. Treasury have begun to raise enormous amounts of cash just in case something goes wrong somewhere as computer calendars flip over to 2000 from 1999 on Jan. 1. And these preparations already are boosting U.S. interest rates across the board, analysts said.

The borrowers say they are rushing to sell many billions of dollars of debt now, not because they fear a computer-glitch catastrophe but rather because they fear that investors will worry such a catastrophe might occur and therefore won't buy securities sold near the end of the year.

There is no panic in the market, as there was a year ago after the Russian government defaulted on part of its debt. Instead, the markets are functioning well, but with some participants acting as if they expect a panic later.

This flood of debt is boosting the interest rates the issuers have to pay to attract buyers. That, in turn, raises rates on many other types of business and consumer loans. Meanwhile, many lenders and investors are pulling their money out of developing-country markets, where significant year-end computer problems are considered much more likely.

``When it comes to raising money in the capital markets, it's prudent to avoid the last few weeks of this year and the first few weeks of next year,'' said Thomas Capo, senior vice president and treasurer of automaker DaimlerChrylser, which raised $4.5 billion through a bond issue last month. ``Why take what is probably a very small amount of risk?''

``Corporations are striving to raise cash so they don't have to rely on financial markets late in the year,'' said Mickey Levy, chief economist at Bank of America in New York. ``It is across the spectrum'' in terms of different types of securities and creditworthiness of the borrowers.

For example, GE Capital, the financial services unit of General Electric Co., said it has arranged special credit lines with its bankers similar to a special borrowing facility the Federal Reserve has set up for commercial banks faced with unusual demand for loans from their customers. Sources said GE Capital's credit line is in the ``billions'' of dollars.

Spokeswoman Mary Horne would not provide details of the new loan arrangement with GE Capital's bankers, but sources said it will provide GE Capital -- the world's largest issuer of short-term commercial debt -- with access to additional capital from Nov. 1 to April 7. The money will be available only for extraordinary circumstances, such as GE Capital being unable to sell any of the $8 billion to $10 billion worth of short-term debt it normally rolls over on any given trading day.

Meanwhile, the Treasury Department announced last month that it wants to have about $80 billion in cash on hand at the end of December, about twice the normal amount. A fourth of that is a consequence of a new law directing Treasury to have $20 billion on hand to advance to the Nation Credit Union Administration, the federal regulator of credit unions, if such institutions themselves need cash at the end of the year.

The Treasury wants the other extra funds ``to provide for the possibility that the timing of receipts and outlays do not follow historical patterns,'' explained Gary Gensler, undersecretary for domestic finance. ``We do not anticipate any problems, but we believe it is appropriate to be prepared.''

-- Diane J. Squire (sacredspaces@yahoo.com), September 03, 1999.

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