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Beyond Today
Submitted by Nic Lenoir of ICAP
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.
Let's completely put aside the fat finger trade in terms of price action. The one thing the financial industry did NOT need is any bad press or give reasons to people to pass regulation that could have dramatic consequences. I am not saying I don't think any reform is needed, clearly some things haven't been working great, but don't kill the golden goose either. Financial innovation and capital markets development have been one of the main enablers of the phenomenal growth of the 90s. The problem is that when CDO^3s (yes that actually did happen) blow up and threaten the system it looks like some mad scientists blowing up the lab. When someone inputs billions instead of millions (if that really happened) it looks like a kid blowing his hand out with a firecraker. Unfortunately people will use the incident to serve their political means.
Talking about politics, I almost felt bad having such harsh words for Trichet and Weber yesterday and felt I might have let my emotions past what is appropriate in a market commentary. Watching this morning's press conference however I felt like I probably held back a little much. Without implying Trichet is responsible for anything going on in Greece, there have been three dead people there yesterday in the midst of riots: claiming the purchase of sovereign bonds by the ECB has not even been discussed is arrogant and most importantly it is pointless. It would be one thing to argue that the ECB is reticent to go down the path of quantitative easing, but it is disrespectful and simply not true to claim it hasn't been discussed. It has been the word on everybody's lips for the past few days, so pretending it wasn;t even a topic of conversation is misplaced arrogance, plain and simple. The market reacted very badly to it, and even without knowing what the process is to remove the head of the ECB one can hope it is being discussed.
So what to expect? The federal reserve is likely to offer currency swaps to other central banks like in 2008 if the funding situation doesn't improve rapidly. The ECB is very unlikely to come up with a solution tomorrow let's be honnest especially given that they haven't started discussing one apparently. The world is very binary right now: default or quantitative easing. It seems improbable at this point that private demand will step up for any PIIGS sovereign bond without one or the other. A third solution being talked about would be to let the PIIGS fly out of the Eurozone, but obviously devaluation (even if it takes the place of an actual default which might not be avoided anyways) would punish the holders of PIIGS debt and the domino effect would not be prevented in terms of contagion to members still remaining in the Euorzone. This is why I do not think this latter solution is a viable one. Hence being left with a choice of defaulting within the Eurozone or quantitative easing. Sadly there is no rabbit hiding in this hat. Politicians will come to that realization after a lot of destructive arguing and back and forth, and I personally lean towards the idea they will try to find some form of debt restructuration but end up adopting Q.E.. Sadly this will come only after more volatility and chaos in the markets. Some have questioned why the markets get to decide what politicians should do. To that I would respond that when politicians run huge deficits and burry countries in debt, they hand out the keys to their countries to their creditors.
We remain strongly convinced EURUSD bears, and EUR-almost-whatever bears in general. Eastern European currencies should get affected quite a lot as well as they depend on Western European demand which is obviously going to be annihilated. We also called for a strong JPY a couple days ago and we had spectacular downmoves in AUDJPY and USDJPY today. Emerging market currencies should be weak in general and we point out to ZAR we recommended shorting recently as well. Given there is no resolution to any issues right now I believe more downside for risky assets is being expected even though bounces could be sharp. Psychological market response to NFP tomorrow will be very interesting, though ahead of the weekend it is hard to imagine who would want to go home long risk. In that perspective could a strong number tomorrow be ignored by the time the bell rings? Absolutely.
1,041 is the key support in S&P futures below.
In the name of French people I apologize for Jean Claude Trichet.
Good luck trading,
Nic
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I wish the world would become tertiary and add jubilee to the list of solutions, before war.
In the mean time, for those of us that are not central bankers or heads of state, I recommend disintermediation.
Jubilee is a word I am seeing a lot of recently.
It is an ancient concept. The only problem I see is that to some degree it lets off those who were irresponsable (borrowed too much) and hurts creditors (those who invest).
But, natural justice may choose the Global Jubilee.
A nice place to hide is gold.
Artificial dilemmas are a trap. Cuttlefish ink to blind you.
It is not what to do in the future. Future is the past.
Look back and open your eyes. Nothing is only black or white.
Your avatar is, for example.
The colours of Greek flag are blue and white.
Jubilee is a nice, fairly creative idea. But how would you reconcile the strongest net creditor countries to it? How would you convince justsayferinstance China that it's not just a huge expropriation from them?
I am not saying jubilee is workable, only preferable to war. However, extreme disintermediation is workable for every person that reads ZeroHedge, and for most preferable to the nonsense we experienced today.
Exclusive Sneak Peak: NYSE Euronext's New US Datacenter
Here's an exclusive sneak peak inside the new NYSE Euronext datacenter that is under construction in Mahwah, NJ. Earlier this spring, Wall Street & Technology had an insider's tour of the facility. The site, which will open later in 2010, is enormous. It's larger than a World War II aircraft carrier and is future built, meaning there is room to expand (both physically and in terms of using more power). There are 67 miles of conduit underneath the data center -- enough to stretch from 11 Wall Street (the home of the NYSE) to Mahwah and back. The site also has 28 megawatts of power, enough to power 4,500 residential homes. And to top things off, the building's main hallway is large enough to drive a truck through (literally). The data center will soon house all of NYSE Euronext's US exchange matching engines and is equipped to collocate all of the exchange's customers in a secure, low latency environment. Take a look at this sneak peak into the future of NYSE Euronext.
Editor's Note: Later this fall, when the data center is fully operational, WS&T will bring you a full photo gallery of all of the exchange's features and innovations.
http://wallstreetandtech.com/photos/NYSE-Datacenter/index.jhtml;jsessionid=3ZNNVVGUDKIMZQE1GHPCKH4ATMY32JVN?cid=nl_wallstreettech_daily
And so we enter William Gibson's world.
Multi-leveled power game, beyond imagination.
Even the sky will be ramed.
I can't wait to see the LIBOR set in the morning. Just like the good old days in 2008.
EURIBOR isn't dull either.
It would appear the banks do not wish to lend to each other again.....where have we seen that before, hmmm.........
The problem seems to be that Nick wants to repeal the law of cause and effect and find a solution where no one pays a price for living on credit cards and spending like drunken teenagers. There IS no way out without pain, and the farther down the road you kick the can the worse it will be. Nick still thinks rabbets hide in hats.
You read my mind. This is exactly what I was thinking except for the rabbit in the hat part. :-)
How can all bids be withdrawn and the market be left with bids of $.01 or $.00001 on supposedly highly liquid stocks like Centerpoint and Exelon? One explanation is that the bids higher than that were fake and that left only the bottom fishers. The other is that it was a well orchestrated and fully intentional effort to defraud by big market participants. Sell at a high price on their fake bids/asks but buy for real on the zero asks.
But are there not protections in place to prevent this very thing from happening?
Is it possible that this was a liquidity event? Did we get a momentary glimpse behind the curtain and we were able to see the stage hands re-arranging the chairs.
The denials sure are flying fast and furious right now. Methinks they protest too much.
Consider this:
"Due to heightened volatility and market conditions that occurred earlier today, All equity exchanges have issued an Industry-wide Clearly Erroneous Ruling Policy Established for 05/06/10. An industry-wide decision to address potentially erroneous pricing from today's trading has been initiated.
Please Note that:
-The specific time frame addresses trade executions between 2:40 p.m. ET and 3:00 p.m. ET
-The reference price is the consolidated last sale at or before 2:40 p.m ET
-Trades executed with a price deviation of greater than and less than 60 percent from the reference price will be busted.
-This decision may not be appealed
Additionally, your account trades and balances may be affected as a result. More information will be made available to firms tomorrow with regard to trade executions. We will be modifying account positions and balances as the exchanges relay that information to us. These updates will most likely occur through the trading day on Friday 5/7/2010.
Should you believe that the your executions, that occurred on 5/6/2010, falls in the above categories, please contact the trade desk tomorrow morning before trading out of any erroneous positions as a result of the Clearly Erroneous Ruling Policy.
Updates will follow as soon, via your software as well as emails and notices, as they are made available from Exchanges and we will promptly communicate with you as soon as possible.
Thank you for your attention to this matter."
BTW Nic, you forgot to mention the banks in your missive. The banks Nic, remember?
funny how nobody on CNBC mentions the fact that the market ended up 350 pts lower today. That's half of the 700 pt record back October 2008.
Unless of course they want to fess up that yes the market plunged 1000 pts today and the only fat fingers were the plunge control propping the junk up they crashed momentarily as they continue their sadistic global extortion.
- time to crack out the guillotines.
Remove Trichet??? The thought never crossed anybody's mind.
There is a reason guillotine is a French word...US sheeple don't have it in them to care...even in our revolution, the best our forefathers could produce was a tea dumping and tarring and feather before straight up war was brought by Brits...unless of course, you were a slave or native american, then they were mid-evil...we will turn on Mexicans or Muslims before we turn on Wall Street...
Ya sure. And keep making fun of that emo kid. He won't peak freak and kill everybody at school. Have faith in a persons past refusals to give into the rage. It'll never let you down.
+ 1776
Most sheep I talk to immediately lay blame our problems on immigrants or welfare recipients.
It never occured to them that Wall St/Fed/Treasury are the true culprits.
Lemmings are a better term than sheep, I believe. Just a minor suggestion.
Maybe those sheep you've been talking with are tired of getting sheared while the other 50%+ don't even earn their income.
Add entitlement programs to your list... Once the entitlements stop or become irrelevant due to inflation, the ire of the American people will come to an explosive boil. Best not be in a high risk city/community when that happens.
Hey, most of the quants are foreigners and immigrants. Americans don't "do" math.
The whole world saw just how full of shit the US stock market is today. It won't forget.
whatever credibility GSacs hadn't trashed already was just destroyed
It is not just the stock market that is full of ca ca in the US (the stock market has always been b.s. and after those goldman hearings - wow. such nice people who work in around it....) ....why so limiting.....every single solitary thing in the US (and Earth) is ca ca right now. The whole kit and kaboodle.....The dominoes are moving...and there are some we as a collective cannot even see coming yet and neither can anyone else. That 2:30 p.m. today was damn funny though......Oh the panic! Oh my god!
The market was still down 350+ and going down before any fictional mistake.
heph,
i'm not so sure.
So... political figures are lying to the general public?! Where's the story in that?
Agreed.
Looks like the European swine flu is spreading. Well looks like there will be forced vaccinations and quarantining Greece.
Meanwhile i was watching FOX business and they were saying how America is not greece. Ah American arrogance and stupidity. Boobus Americanus more like it. "We are America and history does not apply to us." This will be our downfall. Do you know what Zimbamwe Ben,Turbo Tax Timmy,Sheila bimbo Blair,Larry "i fall asleep in meetings"Summers,the GOP and DNC,Sarah Palin,Barack Obama and the rest of them remind me of? This evil,sinister group http://www.youtube.com/watch?v=lfvR4hl-Gzw&feature=related
http://www.tvcrazy.net/tvclassics/wallpaper/cartoons/mike/legion-doom.jpg
Just out of curiosity....Why the fuck would anyone put real money into this stock market?
"Given there is no resolution to any issues right now I believe more downside for risky assets is being expected even though bounces could be sharp."
Agree. No reason in particular that stocks couldn't sell off 30% from here and still be rich. And if that stock market sell off is reflective of Europe slowing down further, then you forget about a world wide economic rebound (see Chinese stock market rolling over).
Somehow debt must be either destroyed or monetized--the former is deflationary and the latter is inflationary--in general. Hence, I have gold coins and cash both stashed.
ZH is the shit !!!
Nikkei down 400+ (3.7%) but SnP futures are positive 5.
Tonto says to many down days for America bad. Up days good.
I'm starting to think that the market went down to -1,000 and they came in to save it somewhat. They are saying that the plunge in our market was the result of rumor and fact that European banks have stopped lending, similar to what took place pre-Lehman Brothers. There is a liquidity crisis in the EU and it's scaring our markets who are connected to it. Also here's something for everyone with an IQ over mud. How is it possible for an order 1 to 10 billion instead of million for sell (I presume) to get through the system without the checks and balances and also do this much damage from one or two people. If thats the case then someone could even do a 1 to 10 billion buy and in so doing shoot the market up 600 points in 20 minutes. If it's that easy to manipulate and call it an error, then we have witnessed how the Market Makers in the know make their money purely on paper. They front run and through hook and crook manipulate the ups and downs to make their profits. No wonder they don't care what is bought or not bought, they don't care about the fundamentals, just the ups and downs and where they can get the numbers to move.
We are done as an economic powerhouse. Also CNBC Squawk Box is starting at 5am tomorrow, I guess the change is that they believe it's going to be a very very bloody friday.
"SQUAWK BOX" WILL START AT 5AM ET ON FRIDAY, MAY 7TH, PRE-EMPTING THE SECOND HOUR OF "WORLDWIDE EXCHANGE".
http://www.cnbc.com/id/37004246
+1 to all that you said.
I resemble this post! Half of us have 2 digit IQs and we deserve respect!
So... anyone think "the President from Illinois" was sent a little message today, when two IL -centric stocks (ACN and EXC) went to $.01 for at least a few minutes?
Coincidence?
This was Obama's horses head in the bed moment. Financial "reform" bill will be an offer Congress can't refuse.
now, that's very interesting.
i love the 'association machine'
From Vox Day's Book:
Ten immediate measures that would help bring about economic recovery sooner rather than later are as follows:
1. Stop pouring gasoline on the fire. The Federal Reserve must raise interest rates. . . .
2. No more financial necromancy. No more bailouts. An organization that is too big to fail is too big to be permitted to exist. . . .
3. Cut state and federal income taxes in half. . . .
4. Eliminate all federal spending that cannot be supported by a supermajority in both the House and Senate. . . .
5. Audit the Federal Reserve. . . .
6. Repeal the Gramm-Leach-Bliley Act of 1999, the Carn-St. Germain Depository Institutions Act of 1982, and elements of the Depository Institutions Deregulation and Monetary Control Act of 1980. . . .
7. Withdraw American troops from Afghanistan, Iraq, South Korea, Europe, and most of the dozens of countries around the world where they are stationed. . . .
8. Halt immigration and provide significant financial incentive for married women with children to raise them at home. . . .
9. Ban banking bonuses. . . .
10. End the federal monetary monopoly. . .
Sounds like a good start!
11. Term limits for senators and congressman, please.
12. Lawyers should not be allowed to contribute to judge's "campaign" funds
13. Cut foreign aid to no more than 5% of any budget SURPLUS
14. Reinstitute Glass-Steagall
Ahh, screw it! We don't need more laws. We can't follow the one's we have. Let's spend the next decade removing laws from the books, starting with the tax code.
15. Any private company requiring a publicly funded bailout shall immediately dismiss its CEO with no payment of any severance, pension, or other compensation.
16. Government regulators who cannot show cause for failing to enforce existing regulations shall be subject to immediate dismisal with no payment of severance, pension, or other compensation.
If these conditions are good enough for the general public then they should be good enough for the folks responsible.
17. End corporate campaign contributions from corporations, and limit individual contributions to below $5,000. Let the people's choice win, and not have canidates beholden to any special interest bribers.
All ten of those ideas sound completely logical...which is exactly why they'll never happen.
While Obama is known to flip flop, he's way to balls deep into his policies:
1. You raise rates...the federal reserve holdings are fucked, not to mention you would put the nail in the coffin of the housing market.
2. You stop the bailouts and Fannie Mae, Freddie Mac, the FHA and the FDIC are all officially worthless. Once again the housing market gets put to bed.
3. Cutting taxes is what should have been done in the first place. But now 47% of Americans don't pay them anyways so the effect is de minimis. Plus corporations are still probably too jaded to start hiring again en masse anyways even with lower taxes.
4. In our dreams
5. Haha, also in our dreams. I'd almost rather not know the dogshit they have on that BS
6. Fantastic idea which may actually happen
7. Another fantastic idea but that would be admitting defeat by a president who is on his ways to all-time lows in approval ratings
8. Not a bad idea in theory but as seen in AZ it will be met with extreme backlash
9. I worked for a bank for 2 years and they would just hold the economy even more hostage if this was the case
10. I'm doing my part one ounce at a time
In other words, we are trapped my friend.
Just remember the following 5 words:
1. Minsky Moment
2. Crack-Up Boom
That is the only logical result. And then we start over.
Thanks for your feedback. I agree that these are impossible dreams, but the bailouts and spending are crowding out any real investment. I am in CRE and there are countless funds to take advantage of the distress, almost $200 Billion, but by the government not letting anyone fail (I definately benifited), it kills the ability to put resources to better use and the economy never has any real growth until the bid-ask spread narrows from their sky-high levels.
I feel I have been in suspended animation since Aug of 2007 and wish I could pull a Buck Rogers and be frozen for 500 years, but at this rate I'll be pissed when I wake up and things are still the same!
Haha, I too moved over to the RE world and like you the bailouts have benefited me greatly (for now). There is truth to the, "money on the sidelines" argument, but like you said most funds/REITS with money are repulsed by the cap rates existing equity holders/banks are demanding. I think ideally the government would like to gradually allow the distress to spread through the marketplace, but judging from the recent decade, "gradual control" is not one of the government's strong suits.
See I disagree on wanting to be frozen for the next 500 years. Personally I am loving every minute of this right now. It's enriching to wake up everyday and realize just how insanely interconnected this world is and how societies never really learn from previous mistakes. So much more intriguing than the so called glory days from 2005-2007!
i'm with recovery3k on this one, but am impressed with your attitude!
i could learn from it. much healthier, methinks...
Another good idea: eliminate the mortgage interest deduction and real estate tax deduction on schedule A. These deductions played no small role in the housing bubble and bust.
Maybe the Europeans want to be the ones to finally stop the bail outs. Maybe they just can't afford it. They have lived through hyperinflation and we have not. Someone has to stop the bailout madness. They don't want to get duped into a Tarp like our politicians did. They don't want to intentionally overpay for someone else's junk debt.
Someone fat-fingered an entry. I'm a programmer and I'll call bullshit. It's called input validation and there isn't anything more basic than that part of programming.
They can do all the programming related to HFT and what not ... but someone fat fingers an entry and there no code to validate "did you really mean billion?" Accident my ass.
Brilliant, silence. The systems these *people* use don't have data validation? We got a glimpse of the NYSE future and Harry Wanger isn't going to like it.
Hmmm... when I accidently try to execute a sell order involving more shares than I own, I get an error message. I guess you have to be one of the TBTF PD's to have a system that will instantaneously clear 1000x as many shares in a sell order as you own, huh? (Or perhaps their system will just automatically materialize enough short shares out of thin air to make up the difference... kind of like HeloBen's magic printing press...)
Oops, my bad! The PD's have been the ones trying to prop this market UP. No reason for them to sell, right??? Not with all the green shoots sprouting up everywhere you look in all those carefully crafted govt economic "reports"!
Gee, I don't suppose it's an "explanation" simple enough for the sheeple to understand and digest to keep the masses from panicking and running for the door... nah! Who would even think such a thing???
The 'fat finger' bullshit is a gift to anybody with any ability to think for themselves, as it will probably cause a nice little bull-trap rally that will be a great opportunity to short the living hell out of this market before the real reasons for the selloff re-assert themselves. As I said earlier, the savagery of this assault on middle-America suprises even me.
Exactamundo, AH. Let's see how much the American investing public has learned in the last 10 years.
Anybody who has an IQ north of 67 who wakes up tomorrow morning, sees that the Nikkei opened down 3.5% and buys in at the opening tomorrow deserves everything he is going to get.
The UK seems set for a hung Parliament tonight, and maybe a Lib-Lab (Liberal Democrat-Labour) coalition as a result. That will not be cheering the markets on Friday, though it was already the expected result.
Any self respecting conservative / libertarian can't really vote for Cameron. It is better to have a real statist in power not some lame version of it. Cameron is a joke and would make Churchill vote for Brown.
kinda like conservatives and McCain...
is that the best we can do, or is that all we're being allowed to do.
i dunno, anything done by committee seems to result in serious mediocrity.
Canada was only down 0.3% today. That tells me the markets are worried about US debt. US needs to control itself, but with our political system that is just not going to happen
So GC: What do you make of the Nikkei opening down 3.5%?
"Financial innovation and capital markets development have been one of the main enablers of the phenomenal growth of the 90s."
Name one positive thing you jerk. Name just one. I actually worked in fixed income during the time you mentioned. At Salomon, yet! And I'll debate you on the street corner of your choice in any "golden goose" contraption that you care to choose to champion that has made our lives so much richer and better today.
I know as much as you and you are talking through your hat.
I thought the pet sock-puppet was a fantastic development during the internet hey day!
+10! :-)
Direct purchase by the ECB of European public debt is blatantly, grotesquely illegal under Article 123 of TFEU, which is basically the no-ECB-bailouts clause. The only possible figleaf would be a Council of Ministers decision explicitly purporting to authorise it under Article 122, effectively TFEU's yes-bailouts clause.
Trichet is not responsible, how about a bloated population consumed with entitlement. This is where we are heading if we don't stop. unfortunately Obama is hitting the gas pedal with his wish to add more entitlements as the other ones go broke fast.
Those damn Europeans and their entitlements like affordable health care, viable unemployment insurance, etc ! They should cut all that out and put all of their tax revenues in their military. Then they can build 700 bases around the world to protect themselves from terrorists like we do.
Fed audit bill gutted
Bank break up bill gutted
Captured politicians like Dodd & Gregg win again for today. Selling the soul of America for a few million that will later be passed onto the taxpayer. Risk on
+100
we've only just begun.
I've heard more than a few politicians say that you should never waste a good crisis. Clearly politicians in both Europe and the US are not missing a splendid opportunity to embrace the most obvious forms of populist politics in order to advocate for major reforms in our financial markets. Many have focused in on OTC derivatives, specifically credit default swaps (CDSs), as the main culprit for the "great recession." While every crisis needs a good scapegoat, the reality is that CDSs did not cause this crisis. I admit derivatives caused AIG's problems and the bailout that we all paid for (or at least those that actually pay taxes). But we have to remember that AIG was a symptom, not the cause.
Even though CDSs were not the origin of this crisis, we can all agree that they can add to volatile mix of systemic risk when bond issuers begin to default and CDS counterparties are forced to make massive payouts. When looking at post-trade risk management, much of that discussion has focused on the potential benefits of clearing OTC derivatives through a central counterparty (CCP). Conventional wisdom has focused on CCPs as the great hope for managing systemic risk while making OTC markets more efficient and transparent. The problem with conventional wisdom is that is can often be an oxymoron, like the term "free market."
http://wallstreetandtech.com/regulatory-compliance/showArticle.jhtml?articleID=224400445
Greek insurance spikes the market punch... and thusly we all where on a drunken ride.
MAY 1st:
"The weekly DOW chart shows an expanding wedge indicating a significant move is probable... this remains an overbought bear market rally and the uptrend could falter at any time.
http://www.zerohedge.com/forum/latest-market-outlook-0#comment-326767
Posted May 1st - a week before the crash.
'11,250 / 300 is an area of significant resistance and if this level can’t be breached it should signal the end of the March 2009 bear market rally - the weekly DOW chart shows an expanding wedge indicating a significant move is probable - this remains an overbought bear market rally and the uptrend could falter at any time - the VIX index continues to give bullish warnings which is bearish for equities - long term charts of key equity indexes continue to give bearish warnings and the March 2009 lows will be breached in my opinion - USD Index bullish warnings since 2009 on the weekly and monthly chart have not changed and further USD strength and thus EURO weakness is still expected '
http://www.zerohedge.com/forum/latest-market-outlook-0
http://stockmarket618.wordpress.com