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Here Are The Critical Credit/Liquidity Indicators To Keep A Watch For In The Coming Week
Call it Lehman 2.0, sovereign risk flare up, or plain old money run, the liquidity crunch from last week almost killed the US equity market, has generated an unprecedented swing in FX pairs, and is starting to move into key credit indicators and spreads. The "big bail out" from the weekend has come and gone (unless Trichet is preparing to release something at 5:59pm Eastern tomorrow), and if Goldman is correct will have no material impact on markets... Which means that the downward path of least resistance will continue. And with equity markets not only decoupling from the rest of the world, but from the credit market as well, as they migrate to a plane of existence of their own, replete with unicorns, rainbows and spittoons full of hopium, keeping an eye out on early stress indicators from the credit markets is critical - credit is and has always been a far better early warning of market health, or lack thereof, than the HFT controlled, rebate-driven trading action in the shares of C, FNM, FRE, AIG, and other bankrupt pennystocks which account for up to 40% of daily trading volume. Earlier today, we touched upon some of the key early warning indicators to watch for in determining if the European contagion is going airborne. Below, we share a presentation from Morgan Stanley's Jim Caron, Measuring Risk: Extracting Market Sentiment from the Interest Rate Markets, in which the credit strategist provides a much more detailed framework of what critical credit signals are and how to interpret them. We recommend that all those still trading, either with their own, or other people's money, familiarize themselves with this 27-page overview.
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Riots In Picadilly Circus?
British taxpayers ordered to bail out eurohttp://www.telegraph.co.uk/news/worldnews/europe/greece/7696870/British-...
So many questions. So few answers.
http://www.youtube.com/watch?v=lX3uCuFKlqw
Great song.
a must see set of graphs presented by Der Spiegel regarding the Eurozone
http://www.spiegel.de/fotostrecke/fotostrecke-54629.html
Grim.
Nice find. Not sure if I want to thank you or lock myself in a dark room, rocking back and forth on my haunches in a corner.
That's one hell of a recipe for disaster.
I've lost my appetite.
What an incredibly corrupt and underhanded process.
If I were the UK I would tell the Eurozone to get stuffed. If the E-zone returns the favor, the UK would be better off outside the EU anyway.
So this is why Sarkozy made the statements he did about dirty speculator attacks on the Euro---to establish that the conditions were met to force EU countries to pony up bailout cash per the Lisbon Treaty. Lying pol bastards.
Brit voters have never been totally on board with EU involvement. I doubt this will improve their mood.
That's pretty funny, considering Britain is broke.
Help build America
http://www.youtube.com/watch?v=-A57SzNu1vU
From doublethink's Telegraph link:
Satire is truly dead. No, scratch that. Satire is reality. Reality is dead.
It does open up new possibilities tho ... like raiding FEMA for bailout funding. Do they have any money left?
Wow, just when I thought I was starting to understand some things. I can only hope the fine commentors here elucidate on what this all means while I dig my just-exploded head down into swaps, rolldown and all these equations. What a week to pick to quit drinkin...
Rate vol is ridiculously directional at the moment as dealers are short and get more short the vol as the market rallies, and vols did start to get hit as the rally stalled on friday, so some of the panic spikes you see are to do with bad positioning. Late last week there seemed to be a lot of people getting stopped out, so sure, they aren't comfortable with whats going on, but if rate markets stabilise 1y10y and stuff like that will prob go down a chunk in a hurry. Point being...the street has bad vol of vol positions so you have to really wait and see if these levels can be sustained to draw an assumption about whether its heading to 2008 levels.
Sure, Goldman bearish now. Gasoline on the fire. In the military, they have a phrase for it: "Broken Arrow". Position is overun so drop the bombs anywhere, it will have to be better than what we have now.
For the Gold Snakes, the more chaos, the better ..things will be so bad, they'll forget about skewering GS....
Its a slow fuse, its lit and Nero can still fiddle but the explosions are going off.
Hat tip to Jesse
http://mgray12.wordpress.com/2010/05/07/feds-probe-jp-morgans-silver-trades/
They hold it together in may. But june is going to get them.
It seems prudent to shoot the vehicles till you hit the iron block.
http://www.youtube.com/watch?v=0ABGIJwiGBc
great audio on that!
"No general we are not surrounded, I repeat we are not surrounded, But we are engaging the enemy on all sides!!
Hell no I'm not retreating! I'm just attacking in a different direction!
anyone who is trading these markets with their own money is nuts
I guess that would be me. The worse and more fucked up things get, the more I am at home.
Yup..I can relate..
Note that U.S. Steel, NUE, FCX were not down much on Friday.
Copper failed to make a new low.
Most of the European banks also were up on the day.
Bonds pulled back, and the EUR inched up...
I'm expecting a vicious rally for at least 3 days next week.
At a minimum, Goldman Sachs' Prop Boyz will be "cleaning out" all the late shorts put on Thursday afternoon and Friday.
Shorts initiated on Tuesday - Wednesday will probably be OK.
Glad someone else uses a 23” monitor, didn’t Morgan Stanley sell at the bottom of the 2.30 crash!
GS playbook:
That may not happen in the May expirations
And yes! I bought 3k of out of the money June calls, and if I am right, they will be worth 50k-100k
And yes! I can afford to loose 3K
Step 1 should have been...short our own stock in size. The Squid thinks of everything. I'm sure there is a "going private" bid to be played eventually, but not for a while yet.
From that angle, GS should be praying for a lower price when they are ready for going private. Isn't that correct?
Yes indeed. However, going private strategy is defeated IF legislation can break up the banks passes. Funny though.. everyone I speak w/ says the return of Glass-Steagall II is impossible due to the anti-competitive position it puts the U.S. in. Have they considered the world enacting the legislation together? Especially with Sarkozy's rant against "speculators" that Bruce illustrated for us... The anger has to be directed somewhere right? :)
Back to the 20dma maybe, and then down again. This was too big a break to resolve without another leg down. By the way, gold stocks pretty much all held up very well through the week.
Looking for that last leg down as well. Maybe we get a hiccup to 1130ish, but we got to see at least 1065 if not lower soon.
yeah. It did bounce rather hard off that 200d ma last week.
And for readers that doubt we are not yet a Plutocracy:
http://www.scribd.com/doc/6674229/Citigroup-Mar-5-2006-Plutonomy-Report-...
As long as the three month treasury rate is lower than the discount rate, this means lower ddiscount rates overall. With the decline in short term rates, while everyone absolutely expects an increase, market will sell off precipitously.
Also futures are in strongly negative territory, probably should be watched before the open on Monday.
http://finance.yahoo.com/bonds
http://finance.yahoo.com/futures?t=indices
The last trades in the futures are being erased over the weekend for the futures market, but they were all down on Friday.
Copper by virtue of its own weakness, is probably going to struggle, and stockpiled supplies are rapidly declining, not a good sign.
Regardless of the technicals for the moment, a rip roaring unsustainable rally could happen, as we've seen it happen, even in the face of interest rate declines. So far, interest rates on the short end have gone down and up with the markets.
For the first time in many months, the $IRX technicals on the weekly chart are laying up for a broad decline. I think the market will follow this lead, though not tick for tick. Better to look for anything with a moving average crossover or sincere technicals or volume in favour of a rally.
http://stockcharts.com/h-sc/ui?s=$IRX&p=W&b=5&g=0&id=p66874059515&a=191210523&listNum=2&listNum=2
Interesting how liquidity dries up as soon as the Fed closes some of its market stilting purchase programs and ups the discount window rate just a tad. Are we really on that kind of a hair trigger?
Wonderful analysis from a company that shouldn't even be here...if it weren't for the TBTF bs pushed out of Wall Street. Everybody is guessing and anyone who says different is full of shit. The last 18 months have seen all markets fully captured by the CB's. It is very possible that should bennie decide to open up the swap lines once again this little episode is over. However, if the market touts on the financial entertainment stations are actually buying the dips here it could be the perfect set up for a major move down. There you have it...flip of a coin for the next two weeks.
All markets have been captured by CB's since CB's (read governments) captured the monopoly on issuing (bad) debt as 'money', so a long time. They are the market makers.
It's just taken this long for CB's to drive the utility of their (bad) debt to a figure approaching zero.
Yes. It would be a mistake to under-estimate the world's Central Banks. A couple trillion Euros of QE in concert with yet more money printing by Bennie Mae could still be a powerful short-term force. Yet there is the sense that all involved now know their terrible crime is already a failure. In the short-term, Spanish sovereign bonds may prove to be a decent indicator as to the bias of the U.S. stock markets, (unless they aren't!).
I will be surprised if we do not see something from the CB's prior to the open Sunday night. I think they will want to stabalize Europe and give the new week a chance to get off on the right foot. At this point, a 2 or 3 day dead-cat equity bounce (into Tue-Wed) would be a much appreciated gift.
Aristotelian logic is telling me Warren Buffet gave the May 6th crash the green light, or a push in the direction, what have you.
Warren Buffett Still Selling Procter & Gamble Shares in First Quarter:http://www.cnbc.com/id/37027303
I appreciate the numbers and theories. I use statistics and it is a good tool for making projections based on historical data. Historical in the sense of it happened within the past 5 years.
But the projections do not take in the fact that it will take 90 days or more to stop the oil leaks in the gulf. Does not apply the probability of a nasty war 6 months after Israel bombs Iran. Does not apply what will happen to the stock market the next time someone goes Boo.
It is obvious from the presentation that the cost of liquidity is volatile over the next 3 years. The positions of the post make sense and will probably happen as they are projected.
It is just hard to get into my mind that I should apply the embedded theories during a time the world is just so fucked up.
Looks like a there is a good probability of spikes in volataility (V) in smaller time frames over the next year, at least. A long term bet on V by buying dips in V when it dips below standard deviation lines seems like a high probability bet.
You just summarized why market forecasting never has, doesn't, and never will work. There are too many unknowns.
You can solve for X when
X + 2 = 4
You can't solve for X when
X + Y = 4
No matter how good you are at math.
+2468
well put.
X = 4 - Y
Done.
:p
Y=4-x
x=4-(4-x)
x=x (ayn rand would be proud)
yes it can
if X e N then X=1 or 2 or 3 or 4
f X e Z then X=Y+4
X has a solution set in binary implication with Y if X e N
X=Y+4
the solution does exist, but the problem is not defined well.
I had a good day up over $1K on Friday but was lucky w/ some skill. Only have 2 open positions, paying 8-9% yields.(like MGF) Trading SDS & TWM, as long as we don't gap down Monday moaning, I'll look to short the Russell (TWM or TZA) Sold Fri, at the lows as soon as the IWM hit 650, I was out. It held. Watch the IWM$650, if it breaks on volume next stop is 625, then 600 is certain if we crash again. I would not be surprised AT ALL to see 550, 500 on the IWM, as small companies double-dip. I wasn't seeing the liquidity coming into IWM as the squeeze it's been the whole way up, those guys banging it aren't pushing it up, that easy trade is dead, according to Friday I watched.
Also, tried DXD twice, and bailed because keep keen eye on DIA, someone defended 103, (Dow 10,300 was defended w/ 50 & 100Ksh blocks, so DXD got no traction.
Comment about steel hanging in on Friday concurs with Mish saying the Euro is at support and 97% traders short Euro means a bounce, so oil & steel will bounce as Dollar pulls back to 84, at least for a day or 2.
O/T: this inside info on the oil leak is frightening, as the Gulf could be a "dead zone"
http://www.opednews.com/articles/BP-Insider-Massive-Dead-Z-by-Rob-Kall-1...
It's banana time in the monkey cage!!!
Let's be honest b n g's, no on really knows. If you do do not have a plan b you are foolish. That rip down, whether a 'fake' or prop desk, it happened. Finger pointing asside, Themis was is right I think, it will happen again and no telling what the end will be. 2000 pts? I am up tonight because I am worried the goofs in Euro/social land are mia. And basically, ours are no better. Get wise.
Here's Brian William's take on what happened Thursday, and his outlook for the future:
http://www.youtube.com/watch?v=SRNrl-858qA
I'm continually torn between wanting to read every post and comment on this site, and having some semblance of a life.
I've settled on the former myself.
You have to solve your biggest problems first. Focusing on the small stuff only keeps you busy without changing anything.
+1
financial porn...
while i usually stop in for a swig or two during the week, i can't take my eyes off this convergence of flack.
i think this is unprecidented... but i fear i'm also a bit like the deer in the headlights. not good.
best of luck getting a life back asap.
I find these studies interesting in showing the evidence of history. I have been around long enough to note that, every now and then, the future is more obvious (spikes etc) but that the pace of history is not predictable at the micro level.
I do know that we are not witnessing contagion. We are witnessing the acknowledgement of reality. Events are compressing at a rapid pace, but to think that this is contagion is not the right analogy. More like sending the carts round Europe to pick up the dead after the great plague in the 1600's.
Of course, this time, certain US states are comparable in size and econometrics as European countries. The only difference is the use of a common language. California has a bigger economy than France; France is in a bigger (and unmeasured and unacknowledged) hole than Italy and Spain. European federal institutions have yet to tap the trillion dollar bail-outs already handed to Fraudie and Funny. The swap lines extended between the Fed and Europe accomplish nothing. Why should it be viewed as a positive that the Fed and the ECB just lent each other half a trillion euros/dollars. They are both dealing in game theory with no practical use for main street other than to pretend they have any kind of relevance. Bleh.
C, FNM, FRE, AIG : the 4 horsemen of the american apocalypse
End game - Extend and Pretend. Over to you Sovereign Arbitrage.
I've uploaded a new DOW chart.
http://www.zerohedge.com/forum/latest-market-outlook-0
http://stockmarket618.wordpress.com
Thx, Grand. Good work. We'll have to see if the Fed intervenes to prop here in premarket futures. Maybe Euro strength, but won't last like you say. Dollar strength means oil lower, $70 is next support. I don't mean to be o/t, put the Gulf oil story and economic affects are MUCH bigger than being reported. The well 12in pipe thats left is eroding, which could leave a 24in gusher, and the opednews article says the psi is 135-165,000psi at the wellhead, this is 1million + gallons PER DAY.
The entire Gulf could become a "Dead Zone"
http://blog.al.com/live/2010/04/deepwater_horizon_secret_memo.html
Other events -
Dome still not in place.
Ash resumes plumes.