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In a day full of good news, does one really need commentary on the US undecoupling form the rest of the world? Funding problems, upcoming failed Spanish auctions, Volcker rule passing, commercial paper troubles, the SNB left as the only player in FX land, Libor problems, some salt water left in the Gulf of Mexican Oil, bankrupt states, it's all priced in. And whatever is left, Liberty 33 will take care of.
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If the FED controls the Market... hence the 10k plus close on a 9,600(ish) day... all on volume... and the market controls LIBOR based on BANK's available cash for each other... how does the U.S. Stock Market control the London Interbank... The FED is flooding England in Pounds? The pound should be doing well, given the other option is the Euro... English Bank one wants to Lend English Bank 2 Monies overnight or other short term? and the rate has risen due to the FED keeping our stock market above 10k?
Seems like there is some risk somewhere driving the LIBOR Rate, I doubt the FED running out of paper is the concern... more over I don’t see the correlation.
Here is part of a good article that pretty much sums up that the FED will not be able to control Libor, just like they couldn't in 2007-2008, they wont be able to now.
"We didn't learn much from the 2008-2009 credit crisis," Pento says. "One of the things we forgot is there's no such thing as decoupling. When investors were absolutely positive that China and Australia and the rest of the emerging markets would be unscathed by our credit crisis, they were proven completely wrong.
"Today they are telling us the United States is immune from the sovereign credit crisis in Europe. They are completely wrong."
To be sure, if the most recent incidents are indicative of anything it's that things can change rapidly in such a volatile global economy. After all, it was only a few weeks ago that economists were touting a sustainable global recovery and strategists were encouraging clients to pile into emerging markets.
And the Federal Reserve's fed funds rate, which is the US counterpart to Libor, has not budged, though it is under more centralized control than the European rate.
The spike in Libor, then, could be a problem until it isn't anymore, and that can happen quickly.
"People understand the policy response a little better than they did in 2008," says Nicholas Colas, chief market strategist at ConvergEx, an institutional investment advisory firm in New York. "In 2008 you had a real power vacuum in the White House because you had a president-elect and a lame-duck economic team. Now at least you have some continuity in decision-making and people understand how central banks respond to credit markets."
But inasmuch as the European crisis is reflected in Libor rates, there appears to be at least some cause for worry.
At the most universal level, mortgages are closely tied to Libor rates, and some $350 trillion in global derivatives and corporate bonds also are linked. The housing market has been unable to recover even with extremely low rates. A run higher, even as low Treasury yields have kept mortgage rates down, might prove another stumbling block for the sector to grow.
The Fed also will be limited in what it can do to mitigate effects from a Libor surge.
Most recently the Fed agreed to currency swaps with European banks who want US dollars in place of the shrinking euro. Analysts say that will help put liquidity into the system and aid somewhat in keeping other lending rates low, but will not be able to stem a fast jump in Libor.
"They think the Fed kind of runs the show and they do to a large degree. But there's a limit to it," says John Lekas, CEO of Leader Capital Group. "There's only so long you can put your foot on the free market and hold it down. Eventually it bubbles up. It's like putting your foot on a volcano."
Have a link to that article? Looks like one worth printing out.
http://finance.yahoo.com/news/Libor-Spike-Is-Rekindling-cnbc-4262659974....
thanks
....on Bloomberg today
Smoke 'em if ya wanna
And to think I was kicking myself for selling my SDS too soon when the SPX was at 1045 this morning.
Time to wire over the funds for another 100oz bar and get some FRNs out of the ATM while I still can.
I bet a beer, half the trading happened through some sort of leveraged ETF and not actual stocks today.
I just don't honestly see who would be insane enough to play Denis the Menace trades today.
If if was mostly leveraged ETF's it's nice to see the capital the PPT pushing around is getting eaten through leveraged decay.
Leveraged ETF's? http://etf.stock-encyclopedia.com/category/leveraged-etfs.html made the market dip?
How about $1.7 Trillion that was just taken away from the market? $1.7 Trillion Dollars in real luquidity? or $1.7 Trillion that was being used to short the Euro? I had to say it sorry.
No worries, they'll just print (HA!)...sorry push a button and do it.
I'm just saying on the direxion X3 ETF' the volume for TNA/TZA - FAS/FAZ pairs by EOD were in the 300 million shares traded alone. Those are only two pairs out of hundred of them now.
You could see this move coming by the price action in vxx and vzx (particularly vxx) yesterday. I covered all volatility and short positions and bought gs calls. I was a bit nervous last night and this morning but it paid off big at the end of the day.
All the puts I see are too expensive. Which puts are discounted?
The ones you write yourself?
ya--spy atm iv at .37dontcha know
The PPT at 3:30PM:
http://www.youtube.com/watch?v=EuFAFPjbdy4
Good one--
Yup..
And just look at those futures take off as if stocks were the best things on earth..
And UK and DAX futures now soaring when earlier they were like super hot potatoes
We're still a house of cards, but today was pretty strong. This may carry right through Memorial Day because, lets face it, who wants to be out in the Hamptons for the long weekend worrying about the market? Lets ramp it, keep it ramped and enjoy the break!
You need to shorten your time horizon a little, you're thinking too long term.