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And Scene: CME LOWERS ES, SP, YM Margins, Despite An INCREASE In Realized Vol
Speechless. Just.... speechless.
Oh, and by the way, over the past month, realized vol in the ESM1 has... risen.
So aside from what is now glaring market manipulation with the collusion of the exchanges (rip silver longs), there is no manipulation.
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lolz
Thye closer to the end, the more blatent the corruption!
why is everyone surprised about this? You are playing calvin ball. You are not calvin.
Great analogy.
THE FEDERAL RESERVE IS THE ROOT OF ALL EVIL!
WHY IS THIS NOT THE #1 BUMPER STICKER IN AMERICA?
WHY IS THIS NOT ZERO HEDGE'S MOTTO?
I had to look it up. Worthit. Well said. Calvin!!!
FLOL!
The Unofficial Official Rules of Calvinball
Permanent Rule: You may not play the Calvinball the same way twice.
Primary Rule: The following rules are subject to be changed, amended, or deleted by any player(s) involved. These rules are not required, nor necessary to play Calvinball.
http://www.bartel.org/calvinball/
But then isn't the CME game in reality, "Calvinpoker"?
Uh, I liked the analogy too, but keep in mind that Hobbes, the sport's only other willing competitor, managed to win more often than not.
I am Sancho. Are you Sancho? No, you are not Sancho. Neither is Scott Baio, Sancho. I am Sancho.
You are not Sancho. I am Sancho.
Can't argue with you there.
No, not Calvin Ball since anyone can change the rules.
We are Charlie, and the CME/Fed/UST is Lucy holding the ball for placekick.
http://www.pbs.org/wnet/wp-content/blogs.dir/4/files/2008/09/schulz_flip...
"why is everyone surprised about this?"...
...much less speechless.
Here excerpted is Dr. Michael Hudson's take on the current scene, re Iceland et al and breakup of Euro:
http://www.informationclearinghouse.info/article28221.htm
The truth can be soothing if it allows preparation for what must occur.
Please, I need some assistance. I can't make heads or tails of this chart. I'm not a trader, I find ZH very useful for historical perspective. I try to make sense of the charts and the lingo but this is beyond my ability to understand the implications.
So, can somebody explain a bit or point me in a direction where I can figure it out myself?
The "supposed" purpose of margins, is to ensure that there is enough capital available to process the buy and sell orders. How much capital is needed, depends on how much marketprices may change (volatility). Now obviously, the more activity there is in the market (number of buy and sell orders), the more the marketprice may change.
The chart shows just that: Volume of buy and sell orders.
In this case, CME *lowered* the margins, even though the amount of buy and sell orders actually increased. Thus, CME lowered margins despite increased potential volatility.
this is waaaaaaaay over my head. so what are ES, SP and YM? and how is lowering the margin, thus increasing volatility(?), manipulating the market? why did CME do this? whom does it benefit and whom does it hurt? how? i feel like that guy, ross perot's running mate back in the day. where the hell am i? why am i here?
Aw shucks, for a minute there I thought you were from Texas.
I'm rooting hard for the Mavs. :)
Tyler, you really should do an educational article about what margins are and why they supposedly exist. A lot of people are not aware of how exchanges work, because it defies what one would expect by intuition.
Anyways, here is my attempt at an ultra compact crashcourse. When you think of people buying commodities, you probably expect them to pay full price. I.e., when they buy something at 35$, you expect them to actually pay 35$ in cash. As far as i understand this (someone correct me if this is wrong), traders actually do NOT pay the full price! They only pay a certain percentage, called the "margin".
The idea, if i understood this right, is that if you buy something at 35$, and sell something at 40$, the amount of cash at the exchange doesn't really need to be 40$.... only the 5$ win you made (it's similiar in the case of losses).
Doing stuff this way however, means that the exchange also plays the role of a bank, instead of just being an exchange. This becomes most noticable, if you consider that the amount by which marketprices change, is variable. Maybe you will not make 5$, but instead 10$? So, for the exchange "bank" to not run out of money, they need to predict how much marketprices may change..... the more prices may change, the more cash people need to deposit (higher margins) - the less marketprices may change, the less cash people need to deposit at the exchange.
If there are errors in the above, please feel free to correct me.
EDIT: The way how margin requirements affect the market is this. Imagine you're a trader. If margins decrease - thus you need to pay less to aquire a commodity - you are more probable to buy (especially if you have excess cash deposited at the exchange). Conversely, if you need to pay a higher percentage of the spotprice, you are less probable to buy, simply because the amount of cash required to buy commodities, is increased - if only because the new margin requirements are higher than the amount of cash you have deposited at the exchange. In principle, by people no longer paying full price, but instead a percentage, the exchange can arbitrarily modify the ACTUAL cost of buying a commodity (the amount of cash you need to deposit at the exchange). So, in addition to spot price, there is a secondary price, that is arbitrarily modifyable by the exchange: The amount of cash you need to deposit, to buy a commodity).
EDIT2: If this still was too complicated for you to grasp (not meant as an insult, this stuff indeed is more complicated than necessary), then imagine it like this: Traders do not pay spot price for commodities. They only pay a percentage of the spotprice. For the exchange to not run out of money, they need to estimate the percentage of spotprice people need to deposit at the bank.... err, i mean exchange..... based on how much spotprice may change. However, by there being this variable, the exchange can modify the amount of cash, people actually need to pay to aquire a commodity. Thus, the final actual price to buy a commodity, is modified by the exchange, in the form of margins: If the exchange is evil, it can arbitrarily change the percentage of the spotprice, you need to pay to aquire a commodity - and naturally, if you need to pay more, it is less probable that you can afford it.... while if the percentage is lower, you are more probable to being able to afford it.
Naive example: Imagine silver margins being at just 5%.... you could buy silver ETFs at just 5% of spotprice.... of course you'd be more probable to buy, than i.e. if the margin were 50% of spotprice.
If this is your first time at Fight Club, you have to fight. That is your initiation. If you don't know what is going on, you'll learn quick. Nobody here needs hand holding, they all have a brain in their head. Advanced questions are always welcome, but the new kids must be initiated through a fight. This fight is not a physical mutilation, but instead the battle must rage within one's self to see the world around them how the've possibly never viewed it before.
Oh man... you should have seen me try to figure out what GC-IOER is and how that whole repo thing works and how it relates to excess reserves... took me hours and hours, but it was worth every frustrating second.
As much as i admire the rules of the fight club, i prefer the fight being about BEATING the fight club, rather than breaking even with it (translation: I prefer the "test" being about beating common consensus or going beyond it, with sound arguments, instead of just achieving the understanding of the common consensus. Though, i agree that people should not get more education than necessary for them to grasp it via reasonable effort).
Disclaimer: I frequently (though not all the time) argue in ways that conflict with the common consensus here. Not for the sake of disagreeing, but simply because of thinking "independently". For example, i recently argued that the popular free market model of people around here, is defective, and actually guarantees socialism.
Everyone would that's why bury this place in trolls. Though you're not a troll and I bet you get your questions answered.
seriously, figure it out yourself. This is supposed to be a news site, not an educational one per se. Similarly, why would you read the Financial Times if you don't know what a stock is.
News site, yes, comments and questions are just that. Wading through crap here is a chore, especially this kind.
Is this the reason that I have been ignored so far? It would make some sense. I enjoy a good fight as much as the next guy. But so far no one is playing. That's OK. (You see? I'm just too damn agreeable.)
The inverse of margin is debt. The margin is a minimum set by (see below) in order purchase an instrument. Once you purchase on margin you now take ownership of said instrument and hope to earn equity by an increasing value of said instrument. If the price declines and the equity of your account goes below the margin requirement you either have to post new equity or a forced sale of your account holdings ensues. Banking institutions supply the credit to the exchanges then onto you. It is a choice to lever. You buy or sell the instruments provided by the market or exchange. The exchanges create this forum primarily by guaranteeing cross-party liability and offering other functional attributes like advanced technology and they make their money by providing this service. In addition to constantly offering 'new and innovative' products. All kinds of risks have to be managed by the exchanges through things like maintenance requirements and margin;otherwise, they risk their equity and so do the credit providing institutions. Sounds great but it is inherently inflationary.
Regardless of Captain Benny's snide remarks, I appreciate what you wrote. I know this stuff but I know there are many who do not. You took the time to help others and good on you for that. There is bad action in the markets. There are crooks. But not everything is a conspiracy. Better education helps us tell the difference. And it helps maintain our credibility by not claiming conspiracies where they don't exist. Better to focus on the real ones. (I'm not making a judgment about CME one way or the other. It's just a good general rule).
Thank you, and i agree with the overall mentality you implied.
Nice handle :-)
Margin is the amount you can borrow. The danger is a margin call. One day they'll tell you you can borrow $50 for every $5 in cash, the next they'll change it to $10 for every $50. So, if you borrowed the $50 you now have to double your cash to cover. If you are away on vacation that day, they'll sell whatever they need from your account to make up the difference deducting commissions and margin fees, penalties, etc.
You'll see a lot of ZH'ers deride Interactive Brokers and perhaps you've seen their ads on TV that allow you to borrow $1 million for every $100,000 you deposit in cash.
I'm beginning to understand people who argue for total abolishment of this system, rather than specific static margins. It turns an exchange into all kinds of things, except of an exchange. Your as well as Ckshan's post pretty much make's it obvious, that the most simple and transparent method, would simply be for people to deposit cash at the exchange, and pay/receive full price.
and like, banks should only loan out what they got right?? you gonna let them slide?
by that logic you are advocating a conversion to sound money, money backed by something physical (be it gold, silver, et cetera). Are you prepared for that?
thank you for your detailed explanation. I had a small but passable understanding of what a "margin" is but you really drove it home for me. What I'm trying to understand is what ES, SP & YM are and how CME's lowering the margin affects the market (increased volatility?) and by extension the big banks and us regular folks. Maybe I need to go back to college and major in economics but then I'll start thinking like the Bernank? Shudder!
Short version: Lower margins = more people can afford to buy something who wouldn't be able to afford the full spot price.
I get it now. By lowering margins for these stock index futures, they are luring more people to invest their money in the stock market and eventually prop it up? Correct? So, assuming I'm near the ballpark, this seems to me like a stealth QE? My head is spinning.
so no one gonna tell him that margin is just another form of credit card?? you gotta pay interest on all that leverage you playing with... best used with insider information or naked shorting.. real quick and dirty maxxed margin
interest doesn't really matter much, if you're short.
Yes, it is just plain stupid - may as well make people pay full price, and if they want credit, use a bogstandard credit. But in terms of "comfort", i guess that is too much to ask.
The Fed is trying to engender a renewed "wealth effect" and gin up "confidence" in the economy by driving up equities (by any means necessary). Lower margins help this scheme.
But the Fed's bouts of Quantative Easing (printing/currency debasement) have been spooking people into commodities and gold/silver as people attempt to maintain their wealth in "real things"...THESE have been getting hit with HIGHER margin requirements thereby driving their prices DOWN. The Fed doesn't like competition.
thanks
Thanks, it's going to take some work.
Purpose of margin is to overleverage the little guy long enough for the bankers to rip off his nuts.
Next question
I understand and agree with the nuts part, but my question is do margins only pertain to longs or does a lowering of margins allow you to better short an overblown manipulated excuse for a market such we see today?
shorting has it's own set of rules too.. some stocks require/restrict this and that.. doesn't e-trade have that baby makin training vids or something?
There is a symmetry between long and short positions as there is between calls and puts. So, if I sell (i.e. short) 100 shares of SPY (S&P500) (I actually did that today) I receive a credit in my account of around $13400. Only if there is a dramatic change in SPY value (volatility) in the positive direction is there any problem requiring me to supplement this credit. Otherwise I can just wait for the next big "event" to occur (likely the ISM index miss tomorrow) and can buy it back at a lower value (say $12,500) and pocket the difference. Or it could "explode" to the upside (LOL).
Shorts??? You mean shorting? Fools rush in where angles fear to tread. Not in any markets manipulated like these are, meaning stock, commodities, even T-bills and bonds.
You can loose your shirt in a heartbeat. Sorta like Tiffney's letting goods go on a simple signature.
Only the TBTF banks can short without fear, since they don't have to disclose or cover losses thanks to the Executive Presidential Order claiming national security.
but of course
Is this QE3?
Yes
LOL, I am soooo freaking glad I am outta this market.
Perfect coordinated move. I can't stop laughing.
The worldwide food riots came to America in the dollar menu rebellion and are now firmly in place with gang violence increasing to the point of a rolling rage. The food stamps have only quelled the noise of the class most affected by the government policy that banked on NAFTA subsidizing American jobs. Soon the thunder of hungry bellies will turn the streets into a nightmare. Economics is a lie and will not solve the problems that humanity created for itself. The ignorance has turned, and now, hope is gone.
We can only hope for a period of hungry bellies to try to make a dent in the epidemic of obesity in America...bring it!
When I run low on cash I find that a $1 McDouble is the max calories per $
Are you including supermarkets in that comparison? Just asking, because in yurop, i could get much higher than a mcdouble via supermarkets, at least in terms of calories.
If i would try really hard, i think i could get to 1000 calories per $, without it tasting awful. If the result would be healthy, of course would be an entirely different question.
a totinos party pizza is under a buck and 780 calories. the same about of calories as a cup of raw white granulated suger. where is this yurop country?
http://mens-news.com/2011/04/man-survives-on-beer-alone-for-lent/
argh
Add cheese to the pizza, and you get to 1000 calories per buck. That "yurop" is where dragons are :-)
Request shredded lettuce, not leaf added to your double next time.
Also, you can add 'Mac sauce' for $.39. Poor man's big mac combining the two on the McDouble.
Of course, now Buttnuggets will change their menu because I said something...
Figured that one out while living in a back seat.
You do have to love these idiots talking about the price of food, and then you walk out your door, and see the 300 pound cunt on your left wobbling to her mailbox, and you look on your right seeing the 400 pound cunt trying to open her door with her 5 bags of McDonald's and two pizza boxes balanced on her head.
well some can afford to eat salmon, grouper, tuna, snapper every nite and fresh veggies too.
Try doing that on pennies.
By the way, our food industry is now 'growing' meat in test tube tubs for the fast food burgers....chow down.
The only thunder I've heard in the super market is the flatulence of fat assed welfare queens with attitude ! If the population of Haiti disappeared and the Chicom prisons were emptied and the prisoners were parachuted in to Port au Prince....Haiti would be the Switzerland of the Carribean in less than ten years ! Monedas 2011 And don't give me that penis envy crap !
where do all you little people live?? I thought everyone here lived like Simon Black and MadHedgeFudgeFucker
Humanity will keep it together. It always does.
That's what I'm talkin' about ! Chinese prisoners of the Red Chinese....a "humanity based" reconstruction of a blighted, ecologically challenged island ! Monedas 2011 Someone has to say it with tough love like only Monedas can ! Is Haiti too big to fail ? Greenpeace ! Leave the Japanese food supply alone and go clean up Haiti ! Not very glamorous work ? http://trololololololololololo.com/
Fine let them do it....everyone pile into the equities bubble top fully margined. This will be hillarious.
I might have to violate my never use leverage rule just to short the shit out of this turd sandwich.
Buy silver & gold miners and metals instead...nominally S&P will go thru the roof, don't fight the Fed, dodge the Fed
https://mises.org/images4/ZimbabweIndustrialIndex.jpg
I wonder if someone has that chart in gold terms or even in US Dollars, cause that's the problem in measuring in a failed currency...nominally it can go thru the roof, but you're losing money in real terms.
Seriously, this isn't even funny anymore, I'm officially scared of what's going to happen in the market...I thought about going long gold miner/short tech just like Jim Rogers but I'm afraid it may blow up in my face before it's profitable
That is f***ing hilarious !
ty
Look at that massive productivity increase.
+1
That's all you can do... sit back and watch the hilarity as the PPT creates the most epic implosion of retirement assets the world has ever seen. I'm calling it DOW JONESTOWN from here on out.
Thats what its all about, fattening up retirement assets for the big rug pull out which will be soon.
LOL, that's rich man. I want to send in packets so I can get me another pitcher and glasses like I had as a kid, except this one is sorta melted, Kool Aid Man looks more like a skull.
+ a whole bunch!
+12,569
Jonestown, Indeed it is... bitchez.
http://www.youtube.com/watch?v=Su816Wihyvg
Pay me now or pay me later. Of course soon they will need scientific notation to save space when they write the margins.
Is anything from Chicago NOT corrupt?
Cubs. They always lose.
Touché
Please......have some respect for the dead. At least the Cubs know when to roll over and die. The Chicago zombies keep on going and going and going.......
I'll articulate all those acronyms, as soon as possible.
Didn't I hear one of the zombies escaped and was last seen near DC? You can always tell the undead by checking the color of their lips, it's a 'dead' giveaway.
Yes, but the Black Sox shorted themselves during the World Series so I think the baseball box is checked too.
Easiest way to be corrupt in sports is dope or toss games...baseballs and cricket are right up there at that. Go figure , the 2 most boring sports on the planet are choc full of cheats.
thank you, Smiddy. Just because a team loses all the team doesn't mean their games aren't rigged. In fact, if some team does lose all the time, I would look at that record with suspicion.
Good grammer.
"thank you, Smiddy. Just because a team loses all the team doesn't mean their games aren't rigged. In fact, if some team does lose all the time, I would look at that record with suspicion."
You lost me. The thread was that everything in Chicago is corrupt except baseball, because the Cubs lose a lot. I mentioned the Chicago Black Sox incident as a joke that baseball in Chicago was rigged back then, so it probably is today, and you got mad. I don't get it, are you a White Sox fan, Cubs fan, or just mad. It was just a joke, sorry. PS: Trust me, I look on everything with suspicion. Peace
Except they bet against themselves. Fully hedged don't you know.
i think this warrants some speech...
Where the hell did that rabbit hole come from and how far down it did we go today? Wonderland is one more fucked up place.
We'Re aLL a LiTtLe MaD HeRe BiTchEz!
Any doubt that the Bernanke Fed will be hailed as the "Greatest of All Time?" as a master of market manipulation and the inventor of the "Perpetual Motion Machine"?
Not after it all lies in total ruin soon moron.
dude, seriously. nobody thinks you are witty or clever. people on here know you are a fucking little punk troll.
RainblowFader just pumping his 'I (heart) The FED' t shirt line again....shameless promoter.
R-T-M...I laugh EVERY time I see your avatar.
Amusingly enough, a google images search for ugly woman gives this avatar as one of the first few hits.
Not a machine, yet still fails the Turing test.
He's already secured the title of "Greatest of All Time" Bubble Blower!
I never doubted the mastery of Bernanke. Tyler and Denninger are there to remind us everyday through navigation charts and old world math that this is not fair and The fed cant do this. Im sorry to say this Tyler and Denninger, But yes they can. Math is no match for the computers and those daring young men with their Bloomberg terminals.. No disrespect to John Nash and Adam smith
They can do it, only because the people are such empty worthless shells. Theyll all be destroyed soon, all the 401K statement strokers, and I wont feel the least bit sorry for them.
Which people?
The 401K Bathrobe Brigades, sitting at home lulled into complacency by The Blowhorn CNBC convinced all is well because their statement is up. They have no idea the Treasury plans on seizing all those 401K's and pensions, stuffed full of fatted ETF stocks.
"... all those 401K's and pensions, stuffed full of fatted ETF stocks."
You forgot to mention that those stock are worth only 50% of their quoted value.
jal
Something that can't go on, won't plocequ1. It may not be today, tomorrow or next year, but they are just sowing the seeds for an even worse crisis...like I read somewhere at ZH, the previous crisis will look like a dress rehearsal compared to what may happen if they keep pouring nitoglicerin in the fire...with margins lower and lower, you open the possibility for a smaller market participant to blow up the market if they go down...more leverage, tighter margin calls and also the possibility of more margin hikes. Be wary
Denninger is an ass
I'm dissapointed in you, Robot - again. There was a time when your comments were capable of being misunderstood by even intelligent life forms. You've dumbed down.
hailed.... with bullets maybe.
and
the "Greatest thief of All Time"
I give you an UN-junk because I followed your sarcasm here. But... history is recorded by the victors, and I'm just not seeing that any of these folks are going to make it out alive...
yeah because we have infinite numbers of paper futures but not enough stock of silver. so buy more papers...errr...futures.
Margins lowered because volume is abysmal.
you mean liquidity, LOL.
90% pure heroin losing its kick? Up it it to 100% then double the hit.
I had to do that with my soap. Went all the way to 99 44/100% pure Ivory. Finally got that monkey off my back. Went cold turkey. Wife's not too happy, but I've stayed clean for 13 weeks with no soap.
Chairman Mao, among other things notorious for repugnant body odor because he rarely bathed, said
"I wash myself in the juices of my women."
Try that with the wife and see if it helps.
That is the most favorable thing that I have heard about Mao, the master of genocide.
Puts quite a shine on old Mao boy.
Don't forget:
"You are what you eat."
Sweet, this means more speculators with more volitility. Raising risk always ends well...just look at home loans.
Stock good, commodities bad...when will the damn market learn and bend to the will of our all-knowing leaders?
How else will banks make money if not for MORE LEVERAGE????
Trying to keep the stock market affloat after QE2.
QE3 will likely be delayed until there's a huge selloff.
I feel the same. They will pump the market till the end of QE2. While everyone is expecting a QE3. They will let the market crashes. Just right before the QE3 announced, they will be back into the market again.
QE3 is delayed for a lot of reasons, the primary being that fact that the US is already over the debt limit and there is no way to accomodate QE3 until the debt ceiling is raised. By most accounts, that won't happen until a budget is passed, and we know that will go down to the wire -- presumably early August if the timeframe Geithner gave us is correct.
a joke became reality. Tyler, stop joking!!!
I'm thinking seriously that this is a signal to BAIL OUT of a good lot of what I have left in paper equities.
Which is why, when this mother goes, there will be no stopping it...downwards.
DavidC
Exactly, everyone in on the equity all time bubble top....when it blows this time theres no stopping it. Equity bulls are playing real Russian roulette from here on out with a gun with all 6 chambers loaded.
maybe this marks the turning point where the boys want to get short spooz as cheap as possible?
There is no longer even the remotest attempt to mask the fraud. It is now literally being flaunted for all to see.
We're gonna need a lot 'o rope. Fortunately rope can be used repeatedly.
TBTF
just like Barry's birth certificate
Don't worry about us silver longs. We hold metal, not paper, like some fools.
New avatar?
Nope. Had this one for almost a year.
Looked crisper today. Oh well.
and physical Silver is still on clearance sale over at the Comex vault. Buy it while it's still available.
Anyone watching EEM, XLF, IYR all day today during the intraday selloff knew that "The Fix Was In".
They barely budged.
Now every "multi-strategy" or "long/short" fund is going to have to play this move and buy more stocks.
And the Performance Anxiety over at PIMCO is reaching record levels, as Treasuries closed at another new high for the move again today. Poor guys are still sitting on $90 billion doing nothing but gathering dust.
I cannot believe that you really believe that PIMCO is worried. Do you ignore that as stocks move up, historically bond yields moved upward as well? So as stocks move up and yields fall, using the CLT and ideas of convergence, one of two outcomes would have to occur.
he's still buzzing from the last NAMBLA meeting where he met all his friends who make "six digit incomes" and collect food stamps.
He runs with a classy crowd. One would normally have to join a pedophillic bowling league to meet people of that caliber.
Yes, master of hindsight. PIMCO must be terrified. The kind of terror that comes with having 90 billion dollars NOT at risk. A truly frightening prospect. Oh the horror.
No doubt they would sleep much easier having much of that money in BIDU, LVS, TSLA, LNKD and any of the many bloated pigs you seem to get a boner looking at. Because really...what can possibly go wrong with them?
robottrader: when you need a 1099 expert.
tlt, long bond move is just about over. the past few days it's been the last pump for the last few small gain. seen this pattern often enough. a bit frustrated at how manipulated this is. but now the boys have a good reason to dump bonds and go into stocks even more.
what passes for economic leadership in this country is a joke, it amounts to pay outs to wall street and nothing more.
Double LOL!
Again, could it all be any more obvious? I don't think so. This is just exactly what I imagined The Last Rally would look like.
More BlowHorn stories about video game releases and dumb ass Hollywood movie sequels. More bearish talk about precious metals. More table pounding for QE3.
No one is getting out of this room alive, methinks.
The casino needs victims... I mean players. Funds need yield and leverage. A match made in heaven.