CDS Rout In Financials Continues, As Equities Finally Smell The Foreclosed Coffee

Tyler Durden's picture

First thing yesterday, when we first highlighted that CDS in mortgage fin names were blowing out, even as the moronic market was all giddy on JPM's earnings beat which was really a miss, we warned "be careful trading financial stocks: JPM's earnings were actually very bad, and so far only credit has figured it out. Equities, being traded now exclusively by Fed-frontrunning retards and virus-infested robots, are a little slow." Prophetically, the equity slowness has finally caught up with reality, and BofA and Wells stocks are tumbling. Alas, fins have much more to drop, especially if and when the RMBS and CMBS markets are gutted (incidentally that CMBX III-IV AJ is looking like a screaming short right here, right now). Below is that latest CDS fin rerack - it is a bloodbath.

  • Bank of America Corp.        195.50    182.5    +13.00
  • Citigroup Inc                       176.50    165.5    +11.00
  • Capital One Bank                  86.50    80.3    +6.25
  • Capital One Financial Corp.  114.50    107.5    +7.00
  • JP Morgan Chase & Co.         97.50    90.5    +7.00
  • Wells Fargo & Company      131.50    120.0    +11.50
  • Ally Financial Inc.                 447.50    390.0    +57.50
  • Residential Capital, LLC       746.49    685.0    +61.49 
  • Goldman Sachs Group Inc   151.50    145.5    +6.00

and, last but not least,

  • Block Financial LLC              557.50    522.5    +35.00

Good work Strat Session for catching up here.

h/t Credit Trader

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Turd Ferguson's picture

Don't count on it. Tomorrow and Monday are both POMO days.

cossack55's picture

Is POMO Fedspeak for CDS?

HarryWanger's picture

POMO is Fed speak for QE2.

espirit's picture

Perhaps, but more appropriately called QE lite.

MaxVernon's picture

This little bastard HFT machine will certainly help:

Cheeky Bastard's picture

Why only AJ III-IV ? Due to composition ? I would say III-V IG  tranches are all a short. 

doolittlegeorge's picture

I was wondering when you were going to make an appearance.  Don't forget "the market is shrugging it off." 

cbxer55's picture

Hey, he's back!

Where ya been hiding?

Stick around for awhile this time.

Cheeky Bastard's picture

Ok; to make my point for the commentators here [then I fade back into obscurity].


Basically these 4. The rest, possibly, but not as sure as this. I mean come the fuck on; trading at almost par in this environment with these problems; no way. Someone [read FED or its "affiliates"] is bidding this up to keep the illusion that everything is fine going on since this shit is practically a benchmark for the CRE market as a whole. I am too lazy to go trough my bookmarks but there was an uproar in the CRE industry a while back when they basically stated that the volatility in CMBX [pick your tranche] is causing massive problems for them since potential investors use it as a benchmark. So, extended that logic here and its only been bid up to these levels to "give assurance". Ditto some ABX tranches [even more ridiculous than CMBX].

Miles Kendig's picture

Watch out Cheeky .. Gotta love the attempt at covert and what that means for overt measures. 

Evil speculators will once again become the topic du Jour at Chez Shalom...  Can't have speculation in financial markets since it would destroy the financial order. Too bad that crap called price discovery or genuine financial alchemy has to get tossed.

silver surfer's picture

The CMBX index should now go to zero.

Turd Ferguson's picture

Cheeky: The Fed is buying (manipulating) everything else these days so this shouldn't be too surprising.

the not so mighty maximiza's picture

Only the POMO can save us now.

TooBearish's picture

But...AAPL is still green!

HarryWanger's picture

For now - watch out if it loses 300 intraday. Market (AAPL) could cause some real selling. Believe if me AAPL which is TBTF (if TPTB are smart anyway), hiccups then you will see a major mass exodus. 

Forget financials, dollar, etc. Every fund has a stake in the 2nd largest company in the world. If they all start pulling out at once, you'll see a flash crash like you wouldn't believe.

antidisestablishmentarianismishness's picture

How do you define "hiccup"?  I didn't notice that the hiccup 3 wks ago caused much damage.

Miles Kendig's picture

If folks pull out of AAPL now where will they put it next now that AAPL at least has been trading nearly in tandem with the rest of the commodities

Minion's picture

Simple - they go to cash when the margin clerk steps in.  :D

Miles Kendig's picture

We founded this exchange.  It's ours !!  heh  Paint self into a corner attempting to corner, or simply ride shotgun mf'ers

Ned Zeppelin's picture

Harru is right.  As AAPL goes, buoyed by fantasies of to infinity and beyond sales of gadgets and gizmos everyone wants and nobody needs, so does the market.

Miles Kendig's picture

yep.  Gotta give credit for the call where it's due

espirit's picture

Doesn't TBTF mean "too big to fix"?

NotApplicable's picture

Terror Behold, Thou'st Fucked

JLee2027's picture

Like the home-grown terrorist whose bomb he is building explodes and kills him; it would be ironic if the CDS rise results in the destruction of JP Morgan and company per it's inventor - Blythe Masters.

Comrade de Chaos's picture



it's ether that or for S&P firms to:

EARN, EARN, EARN, EARN (money) !!! (hm fat chance)

Not that I want the market to collapse and pensioners to lose some of their sleep. I just want it to be in touch with fundamentals, that's all. 

And those, fundamentals while probably not as bad as some may think in here, still sack one giant ass. 

firstdivision's picture

The Feds are maddly defending 1070 with all their WMD's built today.

Minion's picture

I can't wait to short this POS when it finally breaks.  Bwahahahahaha!

kevinearick's picture

Verizon Joins AT&T Pushing Apple

Pat Hand's picture

The problem here isn't the foreclosures; most of the delinquencies are real, they can get cleaned up.  It will be expensive & might have the silver lining of getting lenders to restructure with meaningful principal reductions.

The real problem (A) is the set of REMICs failing, and all of the MBS paper that might be puttable back to the banks.  Barclays guesses (today) that the total exposure is "only" about $22B, well covered.  They could be wrong.

the real problem (B) is that title insurance could get completely screwed up.  Anyone who bought a foreclosed property should be prepared to fight a quiet title claim

dhengineer's picture

I think the most terrifying part of the whole RMBS mess is that securitization effectively broke the chain of ownership of the deeds as well as the mortgages.  Let's say you are a fully-compliant borrower, make all payments on time, and play by the "rules."  Let's say that you decide to sell your house in a couple of years for legitimate reasons... If your mortgage was sold into the system, can you really deliver a clear title to the buyer of your house?  Is there someone out there who owns a tiny sliver of interest in your house because of the slicing and dicing of the tranches that go into the various bonds?  Did your mortgage get sold twice?  How would you know?

It's my opinion that, while this is seen as a foreclosure problem now, it will become a problem for all homeowners who took out mortgages, and there may be huge numbers of impaired house titles.  If so, no amount of money will ever sweep the problem under the rug.  This is a threat to property rights in general.  Until this is figured out, the entire real estate market is in for one hell of a waterfall ride to the bottom.

Ned Zeppelin's picture

I have been waiting for a post calling out that the MBSs pricing is way off given the possibilities awaiting any of the private label MBSs. 

bugs_'s picture

Its amazing anyone can breath still.

espirit's picture

Deja vu of the stinking derivatives fiasco. Just cut the f*cking bankster crooks off.

wiskeyrunner's picture

Anyone who thinks equities are going to sell off before the election is wrong.

virgilcaine's picture

Mortgage mkt is seizing again.. .. 07-08.  I had a feeling a housing crash was coming when I saw the Supply of homes for sale and no buyers.. Supply with zero demand equals disaster.

The Wile E Coyote suspended in mid air above a cliff, would be a good RE ad.


This almost guarantees a double dip.. good luck with qe Ben.

Glen's picture

The 3pm pump kicks in.....

daniel's picture

Really this is a great post from an expert and thank you very much for sharing this valuable information with us.
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