Archive - May 6, 2010

RANsquawk Breaking News - UK Election Special

Six unique looks at yesterday's record breaking S&P 500 futures plunge alongside NYSE market internals with a few of our favorite tools ... the lowest NYSE Tick of the millenium, skyscraper sized daily & 1-minute down volume, ES 1-minute, ES Momentum Bars with ranges of 1 & 5

Japan takes a bold step toward moving away from second to last place in the currency devaluation game. Bloomberg reports:

The Bank of Japan said it will pump 2 trillion yen ($21.8 billion) into the financial system after the Greek debt crisis caused instability in financial markets in the U.S. and Europe.

The emergency measure represents the bank’s first same-day repurchase operations since December. The balance of current- account deposits held by financial institutions at the central bank will likely increase to 16.9 trillion yen, up 800 billion yen from yesterday, the central bank said.

Of course, right now Ben Bernanke an d the US dollar are dead last in the fiat bonfire. But not for long.

Luckily, the only real winner out of the Keynesian death rattle will be gold. Which is the LBMA is doing all it can to manipulate the price lower right this instant. All the better - entry points will be fewer and harder to come by as the time to the final Keynesian unwind draws nearer with each passing day.

The global debt supercycle exacerbated income inequality, and the revolts we're now seeing in Greece will eventually spread throughout the world. Is Greece the straw that breaks the camel's back?

There is the danger of walking out of today's session with a sense of relief for equity traders, because that insane move was "just" a fat finger or at least it is the word in the media and on the street. There are three things to keep in mind: 1/ the market was down 3% already when the alleged input error happened 2/ we are still in the middle of a major unresolved currency crisis threatening all of Europe and that led to deadly riots already 3/ the financial industry does not need any bad press right now and detractors just got some more ammo to push tough regulation. - Nic Lenoir, ICAP

The Senate is officially bribed, paid for and in the pocket of the big banks. Too disgusted to even comment on this. This country deserves all that the "big banks" have in store for it.

New York Times:

Traders Jump from Windows; Market Rebounds Before They Hit Ground

No ...

Spreads exploded wider today across all markets as contagion from Europe smashed risk appetite everywhere as broad-based macro/index selling/hedging was clearly in play. So many record-breaking moves and breathless dealers that we are a little stunned still by today's action but to be clear, credit was leading equity down out of the gate, did not crash and bounce anything like stocks late afternoon, but closed at 10-month wides in IG and six month wides in HY.

A year ago, before anyone aside from a hundred or so people had ever heard the words High Frequency Trading, Flash orders, Predatory algorithms, Sigma X, Sonar, Market topology, Liquidity providers, Supplementary Liquidity Providers, and many variations on these, Zero Hedge embarked upon a path to warn and hopefully prevent a full-blown market meltdown. On April 10, 2009, in a piece titled "The Incredibly Shrinking Market Liquidity, Or The Black Swan Of Black Swans" we cautioned "what happens in a world where the very core of the capital markets
system is gradually deleveraging to a point where maintaining a liquid
and orderly market becomes impossible: large swings on low volume,
massive bid-offer spreads, huge trading costs, inability to clear and
numerous failed trades. When the quant deleveraging finally catches up
with the market, the consequences will likely be unprecedented, with
dramatic dislocations leading the market both higher and lower on
record volatility." Today, after over a year of seemingly ceaseless heckling and jeering by numerous self-proclaimed experts and industry lobbyists, we are vindicated. We enjoy being heckled - we got a lot of it when we started discussing Goldman Sachs in early 2009. Look where that ended. Today, we have reached an apex in our quest to prevent the HFT "Black Monday" juggernaut, as absent the last minute intervention of still unknown powers, the market, for all intents and purposes, broke. Liquidity disappeared. What happened today was no fat finger, it was no panic selling by one major account: it was simply the impact of everyone in the HFT community going from port to starboard on the boat, at precisely the same time. And in doing so, these very actors, who in over a year have been complaining they are unfairly targeted because all they do is "provide liquidity", did anything but what they claim is their sworn duty. In fact, as Dennis Dick shows (see below) they were aggressive takers of liquidity at the peak of the meltdown, exacerbating the Dow drop as it slid 1000 points intraday. It is time for the SEC to do its job and not only ban flash trading as it said it would almost a year ago, but get rid of all the predatory aspects of high frequency trading, which are pretty much all of them. In 20 minutes the market showed that it is as broken as it was at the nadir of the market crash. Through its inactivity to investigate the market structure, the SEC has made things a million times worse, as HFT-trading seminars for idiots are now rampant. HFT killed over 12 months of hard fought propaganda by the likes of CNBC  which has valiantly tried to restore faith in our broken capital markets. They have now failed in that task too. After today investors will have little if any faith left in the US stocks, assuming they had any to begin with. We need to purge the equity market structure of all liquidity-taking parasitic players. We must start today with High Frequency Trading.

I can't wait to find out what happened. Just a guess.

Yes, there is a historical analogue for today.

What do you think ... good bill or bad bill?

We have been informed by sources in the US Army Corps of Engineers, Federal Emergency Management Agency (FEMA), and Florida Department of Environmental Protection that the Obama White House and British Petroleum (BP), which pumped $71,000 into Barack Obama's 2008 presidential campaign -- more than John McCain or Hillary Clinton, are covering up the magnitude of the volcanic-level oil disaster in the Gulf of Mexico and working together to limit BP's liability for damage caused by what can be called a "mega-disaster." Obama and his senior White House staff, as well as Interior Secretary Ken Salazar, are working with BP's chief executive officer Tony Hayward on legislation that would raise the cap on liability for damage claims from those affected by the oil disaster from $75 million to $10 billion. However, WMR's federal and Gulf state sources are reporting the disaster has the real potential cost of at least $1 trillion. Critics of the deal being worked out between Obama and Hayward point out that $10 billion is a mere drop in the bucket for a trillion dollar disaster but also note that BP, if its assets were nationalized, could fetch almost a trillion dollars for compensation purposes. There is talk in some government circles, including FEMA, of the need to nationalize BP in order to compensate those who will ultimately be affected by the worst oil disaster in the history of the world.