In our first of many "Trench Warfare" segments, we share with our readers the perspectives of various floor and desk traders and analysts, in this case CBOT floor trader F.S., whose valuable perspective sheds some much needed light on today's odd market behavior, and on just who was responsible, and profited from it.
For all those who wish CNBC would actually focus on the real problem areas of discussion, such as, oh, say Greece, and do some reporting instead of pandering to mutual fund managers puimping their books, here is a clip of what is really going on in this southeast European hotbed of IMF bailout activity.
In a speech before the Imperial College in London, Bank Of England Policy Committee member David Miles made it almost a virtual certainty that Quantitative Easing will continue in England, saying it is "entirely plausible" that further QE will be appropriate. According to Market News, Miles said that the minutes of the February meeting of the MPC showed QE could yet be expanded, and said that for him the decision to keep QE unchanged at that meeting was "finely balanced". "It is entirely plausible that as economic events unfold it will become clear that an even more expansionary monetary policy will be appropriate," Miles said. "To deny such a possibility must mean that you either cannot imagine significant downside risks for economic activity and inflation - which suggests an imagination deficit disorder - or believe that monetary policy has become ineffective."
Dear Mr. Bernanke, dear idiots at the SEC (to paraphrase an extremely observant Harry Markopolos), and dear everyone else who is just an empty chatterbox and a mouthpiece for other conflicted interests, who claim baselessly that it is all the CDS traders' fault that Greece is about to be flushed down the toilet. We present to you the ratio of cash to synthetic (CDS) exposure. As Bloomberg points out, the "maximum amount on the line if 10 government defaulted, $108 billion, is 0.98% of their combined $11 trillion in sovereign debt." So these less than 1% marginal players are now blamed for the end of civilization? How about blaming sellers of cash bonds? Or, here's an idea, how about actually looking at the root cause, like for example governments, who with the assistance of Goldman Sachs, have lied for a decade about the true state of their finances, and have misrepresented on sovereign prospectuses all their economic exposure for years, which was subsequently signed off by countless auditors and lawyers. The corruption goes to the very top, and the SEC idiots are now investigating CDS traders? There will be no end to the insanity and lunacy, until there is a revolution in this country, or until CNBC allows a rational and objective person to talk on its network, whichever comes first.
No better way to spike the market with no ETF flows than to gun ES volume. And we mean VOLUME. And the supreme irony: Goldman trader commentary -
" This rally seems futures driven. Over $9BN of ESH0 exposure has traded in the market place over the last 10 minutes. We have zero ETF flow on the move higher...just more of what we've seen over the past 2 weeks"
Yes Goldman, we agree. And you know better than most.
To all who trade this manipulated lunacy, you have our sympathies. A 1% market move equates to well over $100 billion in market capitalization. And this value just materialized because Apple stock will (allegedly) be $50/share instead of $200, so the quadrillions in cash on the sidelines can buy buy 4 shares where before they could buy one. Just brilliant. Goldman/JPM/33 Liberty just raped everybody for lunch. And to complete the lunacy, this just made top Bloomberg news. The absurdity is just surreal. In other news, the Greek revolution will be televized in 1 minute YouTube 360x240 mp4 clips via iPhone.
For all those who expect to see a strong dollar result in lower gold prices: our condolences. Gold is now as much a flight-to-safety target, as the the ra(p/b)idly devaluable dollar (and all other fiat currencies), as has been repeatedly observed on Zero Hedge. The chart below demonstrates that over the past three weeks, not only has dollar strength resulted in gold strength, it has resulted in gold strength at a 6X multiple.
As always, we start with the Dax, a smaller market bt geometrically and technically a much better indicator or the market than the S&P. On the weekly chart we are still in a bearish scenario where we retraced 61.8% of the sell-off of 2008/2009, and we would now be entering anoher major bear move. Breaking it down since the recent tops, after we reached the 5,389 target on the downside we had recommended trimming or cutting short in a rebound that we thought would take us to the 100-dma at 5,740/5,725. There we advised both tactically and medium term short positions again (See daily chart). - Nic Lenoir
Record Direct Bidders Lead To Record Bid-To-Cover In Just Closed $32 Billion 7 Year Auction (3.078% Yield)Submitted by Tyler Durden on 02/25/2010 - 14:16
Yields 3.078% vs. Exp. 3.103%
Bid To Cover 2.98 vs. Avg. 2.75 (Prev. 2.85) - this is a record Bid To Cover
Indirects 40.30% vs. Avg. 55.87% (Prev. 50.94%) - this is very weak
Indirect bid cover at 72.7%
Allotted at high 9.60%
Direct taken down whopping 17.2% - this is also a record.
We have long observed the recent tendency for the EURJPY to track the SPY almost identically on an intraday basis. Today, this relationship is no exception. To be sure, some correlation traders have over the past several months picked up on this trend and use it with a higher R2 than any other corr. The keyword here, however, is recently. What has caught our attention is a long-term chart of the EURJPY, which today tumbled to levels last seen in February 2009. A long-term correlation convergence implies that either the EURJPY will bounce to 145 or the SPY will tumble 40% lower to 75. Most likely outcome: the two meet somewhere in between, which is why we believe a EURJPY/SPY convergence trade is very attractive here.
Influence Of Dollar/Euro Mutates Somewhat. Is It Real Or Temporary? – Stocks rose in light volume regaining nearly all of Tuesday’s losses. Crude oil also regained its losses from the prior day. Gold, however, opted out of the traditional troika. Some of the stock gain was attributed to assurances in the Bernanke testimony that rates would remain low for a very long time. Certainly, the timing of the morning rally lent credibility to the Bernanke influence. Stock rose almost vertically around 10:20 as his testimony began. The dollar’s movements showed some muted influence on both stocks and oil. Shortly after stock trading had begun, the dollar weakened from pre-dawn levels. There was an Alice in Wonderland type thesis around the mid-morning softening of the dollar. It occurred as TV screens showed the demonstrations in Greece turning rather ugly. The thinking was that European partners might be more motivated to help, lest the violence worsen and spread to other challenged sovereigns. As the images left the screens, the dollar began to tick back up. - Art Cashin
Ah, curve pancaking - better known in bond parlance as the death rattle. The Greek 4 Year GGB just traded wider of the 15 Year at a spread of -4bps (yup, negative). This, to continue the parlance lesson, means the bond vigilantes are now pretty sure how the Greek situation will play out. Oh, and Greece, all the best with that €5 billion10 year bond issuance. The 1 Year spot his exploded from just over 200 bps on January 1, to just under 5%, a rout for all short-term GGB holders. We are anxiously awaiting RBS' rebuttal.
Greeks just can't catch a break. Market News reports that a "joint report drafted by the European Commission, the International Monetary Fund and the European Central Bank finds that the calculations contained in Greece's budget plan falls €4.8 billion short of what is needed to meet its deficit cutting objective this year" according to senior Greek government officials. Well, our RBS spin-unadjusted take on this data is bearish to quite bearish for the country's Moody's downgrade prospects, which is the gating factor to utter and total chaos once the GGB are no longer accepted as collateral by the ECB. Not to mention Greece's bond issuance propensity (but anonymous government sources have said about 50 times this week the.bond.is.getting.done), and its Bund spread, which at last check was set to probe recent record wides. In the meantime there is no bank run, repeat NO BANK RUN in Greece.
Many have speculated, but so far there have been no real facts. Until now - Pravda quotes Russia FinMarkets news agency, which has said that Chinese officials have confirmed an interest in purchasing the 191 tons of IMF gold currently on the block. The IMF, which will likely see a significant funding need shortly as it commences to bail out PIIGS by peripheral PIIGS, is likely running out of time with gold sale posturing and will need to find a purchaser who can take the entire amount asap. Even as the agency has already started to expand its domestic funding capacity via bank lines, the total amount could easily be greater than capital that the IMF has access to which could force the IMF's hand to transact swiftly. And China fits just the profile for a distressed buyer of such a sizable amount. Should the FinMarkets information be credible, look for the price of gold to spike following confirmation of Chinese purchasing interests.
Today's ugly initial claims number has already found its scapegoat: excess February snowfall. As the NCDC charts below demonstrate, February 7-13 drought/snow debt levels were certainly material. This has caused reputable firms such as Stone & McCarthy to speculate that weather sensitive jobs, such as construction, have "probably suffered." Yet with ongoing inclement weather, with today's Nor'Easter being no exception, this "non-recurring" component will be a prevalent one for at least 2 more weeks, allowing pundits to provide whatever explanation they wish to recent not so good Insurance Claims patterns.