Archive - Aug 2009 - Story

We closed at OpEx max pain. If SPY moves sideways right into Friday 4pm, the market will prove to be a vicious sadist, to which masochistic traders return day after day, begging for more. Of course, one assumes the Chinese bubble doesn't implode first.

In order to attempt filling a recent vacuum in public TIC data aggregation and analysis, Zero Hedge is starting a monthly TIC report, highlighting the notable disclosures by the Treasury International Capital System.

Today, the CFTC announced that it is seeking public comments on whether the Carbon Financial Instrument listed for trading by the Chicago Climate Exchange performs a significant price discovery function. As the CFTC has lately faced substantial public scrutiny over the potential abuse of its marketplace, it is prudent to carefully evaluate the impact of yet another market that may be abused by several key players.

The second quarter of 2009 set a new record for the number of corporate defaults, with 82 non-financial events of default, consisting of 16 names in media and entertainment, 15 in autos and 15 in natural resources, according to a new report published by S&P. The total amount of defaulted debt was $254 billion, far larger than the $102 billion spread among 69 defaults in all of 2008.

Spreads were broadly wider in the US as all the indices deteriorated (with HY underperforming IG once again as both reached 3-4 week wides but IG maintained a very tight range like stocks while HY slipped all day). Indices generally outperformed intrinsics with skews widening in general as IG's skew decompressed as the index beat intrinsics (HY-IG and IG hedge technicals holding IG back), HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed. (The HY-IG differential is a better indeication of risk aversion currently than IG since technicals are holding IG back and we note thios would imply a higher VIX and 950 S&P give or take - given empirical levels).

The founder of Elliott Wave International shares his perspectives.

HY 12 doesn't believe in this rangebound mumbojumbo - credit traders have to really earn their living. Speaking of, when will "liquidity providers" also get involved in this product and start trading amongst themselves.

Is there any reason why markets are still open between 10am and 3:30pm?

After millions of unemployed Chinese opened daytrading accounts and started gunning stocks for a living, they were all taken to the cleaners and given haircuts.

No growthyness in the XFL... Or at least today. Hey, wasn't Guaranty supposed to have some press release or another today?

Bloomberg reporting that Sergey Aleynikov wants a dismissal of his criminal case. Whether or not Goldman, which woke the FBI at 3 am to get on the case stat, will agree with his view is a different view.

Too bad small and medium businesses aren't CCC-rated, 6x levered, recent LBOs: they would have no problem obtaining 7% financing. As it stands now, though, good luck.

In a jarring reminder that hope does not pay scheduled interest payments, Readers' Digest announced it is about to file for bankruptcy. And since bondholders don't accept hope in lieu of cash, the company announced that not only would it not make its $27 million coupon payment but that it would undergo a prearranged Chapter 11 process in which its secured lenders would end up owning the company concurrent with a 75% haircut in their holdings.

Call it a pure coincidence, but the second the OMO closed at 11am, someone(s) sold a boatload of dollars. Stocks looking so much prettier since.

I will not bore you with a long post; I just want to point out that the VIX setup mentioned recently is working out perfectly. From an intermediate term perspective, it looks like we hit a wall on that move above 1000.