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More Of The Same: Fund Redemptions And Margin Calls

Monday redux: we are seeing today what we saw on Monday: fund redemptions and margin calls.

On Monday, for example, mutual fund investors panicked and pulled $10.9 billion out of the market (TrimTabs), with particularly large outflows ($4 b) from global funds.

So far, there's $13 billion in outflows in the first ten trading days of September. If we stay at this level, it will be shy of the $35.8 b outflow we saw in January and well short of the record $49 b outflow in July 2002, but it will still be a big month for outflows.

WALL STREET IN CRISIS - A CNBC SPECIAL REPORT
WALL STREET IN CRISIS - A CNBC SPECIAL REPORT

July 2002? Remember the stock market bottomed in October 2002! That's the rule: retail investors tend to panic near market bottoms. So the big outflows this year were in January, July…and September.

Morgan Stanley
I have read 6 analyst reports on Morgan Stanley today, all of them have that Dear-In-The-Headlight look, as analysts are clearly more comfortable talking about earnings than the selloff in the stock.

Struggle at AIG - A CNBC Special Report
Struggle at AIG - A CNBC Special Report

UBS's Glenn Schorr is the first one I have seen to directly address the cause of the selloff, the increasing cost of credit default swaps to guarantee the company's debt: "we find it disconcerting that the illiquid CDS market (or the rating agencies) can have so much influence on the fate of these companies and alter the landscape of the brokerage industry."

Hear, hear. He notes both Morgan and Goldman have strong capital and liquidity positions, have reduced bad asset exposures, and have prefunded their issuing needs for the next 6 months, but does not say the obvious: the company itself has done all it can to address the fundamental issues in its earnings report.

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New from CNBC.com:

- The Dow 30 at a Glance

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CNBC's Names in the News:

Lehman

AIG

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