Archive - Jul 26, 2011
PLaN 0 FRoM PLaNET DouGH...NuT
Submitted by williambanzai7 on 07/26/2011 22:10 -0500Always remember the Power of O...
Step Aside UniCredit And Italy: The US Is Number One... In Monthly Spike Of Default Bets
Submitted by Tyler Durden on 07/26/2011 20:48 -0500When we looked at the notional change in net outstanding CDS on the top 25 reference entities tracked by DTCC last week, we first made the discovery that the US has for the first time surpassed Greece in number of net speculative default bets outstanding. It was, also, the most rerisked name in total monthly notional, outpacing China and Japan in second and third place. Following tonight's weekly update from DTCC we get an even starker picture of where America lies on the risk spectrum: just to the left of UniCredit and Italy (left being bad). As the chart below indicates, the monthly percentage change in the number of net CDS contracts outstanding on the US increased by a whopping 10%, beating such insolvent entities as Italy's top bank and Italy itself (with mega black swan China, and 200% debt/GDP Japan coming in 4th and 5th place). And completing the bad news for the US from the perspective of a CDS trader, is that for the first time ever, US 1/5 year CDS inverted. Why? Because with American recovery rates well in the 80s based on trading prices of the cheapest to deliver bonds, unlike other sovereigns such as Greece which may need recovery calcs in the 20s or 30s, this is virtually equivalent to trading points up front and convexity is massive. It also means that with the 52 week Bill pricing at 0.2% earlier today, anyone who wishes to transact in a 1 year basis trade, can make a lot of money by putting on the negative basis courtesy of the blow out in 1 Year CDS compared to cash... assuming the US does not default of course. But in that case one will be bigger problems than paying their counterparty the require variation margin.
Preparing For the Coming US Debt Default Pt 1
Submitted by Phoenix Capital Research on 07/26/2011 20:40 -0500
Round Two of the Crisis, the Sovereign Debt Round, began over Thanksgiving of 2009 when Dubai had a “virtual default,” asking for a six-month extension on $60 billion worth of its debt. The issue then spread to Greece over Christmas 2009. It will not end there. It's coming to the US's shores soon.
Down To The Wire: Wednesday's Congressional Vote On Boehner Plan Delayed Until Thursday To "Find More Savings"
Submitted by Tyler Durden on 07/26/2011 19:58 -0500When describing the Boehner's plan as perceived by the CBO we used one key word: "laughable" in that i) it cut far less than many had expected it would cut, particularly during its "first stage" and ii) it had a pathetic $4 billion of actual discretionary cuts in its first projected year. It seems even the GOP has realized that its plan is nothing but a red herring, and as a result has declared that it is delaying its previously scheduled vote on the debt ceiling which was supposed to take place tomorrow, has now been delayed until Thursday after republicans "scrambled Tuesday night to rewrite the measure to ensure that accompanying spending cuts were large enough." Which means that with far too much action expected int he aftermath, most of which includes the expected voting down in the Senate following just after the House vote, and another vote on a plan proposed by Reid, as well as possibly a vote on Obama's still non-existent grand compromise, this is no longer an 11th hour affair. The budget farce just became a 12th hour and 1 minute affair. Alas, the money runs out at midnight. What happens next nobody knows, but perhaps Ben Bernanke can tell us: after all it is him everyone looks up to in order to justify never selling on any news, good, bard or otherwise. And he better have a damn good explanation.
Both Reid and Boehner's Debt Ceiling Plans Would Still Likely Result In a Credit Downgrade for the United States
Submitted by George Washington on 07/26/2011 17:48 -0500As CBO Scores Boehner's (Laughable) Deficit Cut Plan, Jay Carney Admits Obama Still Does Not Have An Actual Plan
Submitted by Tyler Durden on 07/26/2011 17:21 -0500Even as the Congressional Budget Office has just released its score of the proposed Boehner plan, the president's spokesman Jay Carney was out earlier hemming and hewing for about 9 minutes in front of reports before it was made clear that Obama does not even have an actual plan to paper which the CBO can score. Yet surprisingly enough, as the National Review Online presents, even without actually having any plan, Obama is still happy to announce he will veto Boehner's plan. It is one thing to veto one plan over another, if one believe the "another" is better. But vetoing something on purely ideological grounds, in the complete absence of "another"... well that we have no idea how it can possible be spun aside from pure ideological demagoguery.
Morgan Stanley's Q3 Outlook On Gold, Silver, Rare Earths And Every Other Metal Under The Sun
Submitted by Tyler Durden on 07/26/2011 17:01 -0500
Morgan Stanley has released its comprehensive quarterly metals outlook update for Q3, which while traditionally furiously wrong in its price targets for the assorted metals under consideration, represents one of the best reference materials for the underlying fundamentals behind each hard asset including base and precious metals, steel and bulk commodities, mined energy, rare earths, even such arcania as zircon and titanium dioxide. We suggest readers avoid the conclusion by Morgan Stanley which ultimately will be based on the firm's prop trading bias, and instead focus on the key supply/demand mechanics in any given product. For the sake of reference, we break down MS' outlook on gold, silver due to the special place these hold in the modern geo-political and voodoo economic discussions.
On Broken vol, Skew and Market Implications
Submitted by thetrader on 07/26/2011 16:10 -0500Some points on skew, vol and it's implications by www.thetrader.se
Stop Loss Terminator Algo Reemerges, Picks National Bank Of Greece As Today's Victim
Submitted by Tyler Durden on 07/26/2011 16:08 -0500
You have seen it before in action, first in nat gas, then in crude (with some caveats), now see it morphing to plain vanilla products... like stocks. Observe the stock chart below: it shows the trading in the stock of one of the most insolvent companies in the world: the National Bank of Greece. The pattern should be familiar. It is the very comparable "fractal" algo pattern that we have grown to love and miss. Granted, as Nanex points out to Zero Hedge, the underlying dynamics are different from those observed before, although the end game is obvious: hunt for loss triggers on both the up and the downside, and hope to precipitate a stop loss collapse or surge. How the underlying engine generating the trading pattern is positioned in parallel to the underlying, certainly via options, is unclear, although it is obvious that the ulterior motive is to generate some very dramatic short-term liquidity. Not surprisingly, after it completed two quick cycles, the algo disappeared and was not seen from again. Expect to see it migrating through other less liquid stocks as it continues its prowl for stop loss triggers.
The Fed’s Killing the US Dollar Behind the Scenes
Submitted by Phoenix Capital Research on 07/26/2011 15:53 -0500Aside from a brief dip at the beginning of July, the US monetary base continues its near vertical trajectory, which tells us that the Fed continues to print money despite QE 2 ending. It’s not much of a surprise, the Fed knows how to do one thing only: print money. However, the fact the Dollar is showing so poorly while Europe is taking a hit is a major warning that all is not well with the greenback.
Guest Post: Complexity And Collapse
Submitted by Tyler Durden on 07/26/2011 15:23 -0500Complexity works beautifully as self-preservation, because it actually expands the bureaucratic power of fiefdoms and widens the moat protecting cartels. Once the fiefdom expands to manage all those new rules, only a handful of corporations can possibly afford the regulatory reporting burdens. They are thus free to exploit the populace as an informal cartel. Put another way: in the competition with the private sector for scarce capital, the State and corruption always win. That's why kleptocracies and banana republics are characterized by bloated, unaccountable State bureaucracies and systemic corruption: sweetheart deals, no-bid contracts, shadow banking, shadow governance by Elites, inefficient workforces that cannot be fired or held accountable, and so on...The single goal is preserving the revenue and reach of concentrated power centers: State fiefdoms with large constituencies and headcounts, and cartels with no competition and stupendous profits. The two are hand in glove. But complexity does have an eventual cost: collapse. Keep adding decks to the ship and eventually it capsizes and sinks. One the ship is sufficiently top-heavy, all it takes is a small wave.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 26/07/11
Submitted by RANSquawk Video on 07/26/2011 15:21 -0500RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 26/07/11
Market Gets Indigestion Into Close As Stocks Close At Lows Of The Day
Submitted by Tyler Durden on 07/26/2011 15:00 -0500While it is unclear if something said in the Paul-Hoenig hearing is what spooked the market, one thing is clear: something spooked the market. As of a few minutes ago, with an increasing average block size, the ES has just slid to fresh lows after levitating almost in the green earlier. Oddly enough the sell off in stocks is not being replicated anywhere else, as both the DXY, the 10 Year and Crude are all at levels last seen at the start of the sell off. Are stocks, with just 2 days to go until Thursday, finally starting to get tired of pretending that all is well with America? And while the dump accelerates we are awaiting the inevitable headline from Boehner in which he will make it all too clear that he refuses to compromise with a president who has threatened a preemptive veto on his "debt ceiling" plan. The soap opera is once again up front and center.
Some cracks in the sidewalk
Submitted by Bruce Krasting on 07/26/2011 14:43 -0500Things changing faster than I can write.
Special Examination or Special Sham?
Submitted by Leo Kolivakis on 07/26/2011 14:06 -0500The Auditor General of Canada dropped the ball on this "Special Examination"....











