Archive - Jan 19, 2013 - Blog entry

I know margins have come down, but are still too high relative to the volatility and price in the contract.

Pleasant insider trading dreams...

Over the past few months, the perception has been that the risk of a meltdown in Europe (characterized by the loss of market access for Spain and Italy) has grown increasingly remote. The relative calm comes courtesy of the ECB which conventional wisdom has it, began acting "like a real central bank" in September when it announced it was willing to throw eurozone taxpayers' wallets behind theoretically unlimited purchases of Spanish and/or Italian bonds. This promise of course, was meant to discourage so-called "bond vigilantes" (otherwise known as investors who know a bad deal when they see it) from "speculating" on rising periphery bond yields. As it turns out, the effect of the as yet untested Draghi put has been dramatic. Spanish and Italian 10s have tightened by a ridiculous 240 basis points since late July. 

It’s all a money game on Wall Street.

The groupthink for investors today is predicting three major outcomes for 2013. Unfortunately, they will likely all prove to be popular delusions.