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Treasuries Close Below 2.9% As Stocks Reflect The Reality Of The Twilight Zone
Stocks continue to represent all the reality contained within the confines of the Byron Wien twilight zone. The decoupling between stocks and everything else is getting even more laughable than before (and it was damn funny then). A simple weekly chart shows that the divergence between stocks and bonds is worth about 35 ES points alone. Extend this three months back, and stocks are about 100 points rich. Throw in the carry trade (cause with no money from mutual funds, stock buyers would at least need the benefits of currency funding arbitrage, as otherwise the whole all too relevant question of just where the money comes from to buy up all these stocks may be asked by someone) and the EOD ramp, in turn, becomes painfully obvious. All in all, if one is trading stocks at this point, one deserves to lose it all. We reiterate our advice from last summer when the market went batshit for the first time: take your money, and go to Vegas. You have much better odds, you won't be frontrun by an Atari 2600 while playing craps, and if you lose it all at least your stay will be comped.
Intraday ES-UST divergence:
A longer-term chart of the divergence:
And the carry divergence:
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Cardinal Climax ~
Seems like ol' TD read my owning stocks analogy yesterday: "I would rather play russian roulette with a five-bullet-loaded six shooter than own stocks".
I just got word. They discovered antigravity. Their problem is that it is in the experimental stage.
Terminal velocity though has already been proven. It does not end well.
Good lord, man. That explains it! Has anyone else noticed that the rise in stocks corresponds 100% to when they are running the Large Hadron Collider?
Actually, I really wish they did discover anti-gravity. Just think of all the new jobs! Cheap space travel. Sigh.
Would someone please take the pro-gravity position...For balance, or dare I say it, levity...
Twilight zone? You rant all day long about the upcoming QE2 and various govt plans and you call this twilight zone? THe markets reaction makes complete sense. As a matter of fact, if we get 10% tomorrow you can BOOK at nice run. The more negative she gets the great the table is set for what is coming.
The market is actually starting to make sense
Yes! It does make sence, but it is very dangerous. Here is my analogy; sailboats always have the right of way in open sea conditions. Would you however, keep your collision course with an oil tanker knowing that you have the right of way?
You fail to mention the kamikazi the can pick you up and change the direction of your sail boat at any moment and at will. The devine wind across the globe will be there for a "long time."
True. but my sailboat also has a reliable diesel
Mine has AIS !!
Whatever, TD. Does it even matter?
How bad does the "news" have to be at 8:30 tomorrow to justify a selloff? 10.1%? 10.5%?
Who cares? Liesman, Gross and whatever assholes help to populate the obligatory CNBS penta-box or octa-box will undoubtedly proclaim the report as "signs of a slowing yet vibrant recovery" worthy of a 200 point Dow rally. They'll buy the $ and short gold, all before 10:30. That way, they can beat the traffic on the LIE and have their feets in the sand before 1:00.
There are no more bad news. Any news is good news. Or so it seems these days anyway..
Market refuses to go down on 'bad' news..
That's because they've pumped so much cash into the system that it CAN't go down. That's why interest rates are low AND stocks are roaring while commodities are going through the roof. It's not an either/or world anymore. They have so much cash floating around that everything can go up at once.
"Stocks are roaring"??? That is the WTF comment of the day. Why don't you look at a YTD chart of the Dow or S&P500. I would call this a "range bound" market. Roaring was the good old days in the late 1990's.
Look at a chart for the last 30 days...8% a month is still roaring
why do people refer to bubble vision as CNBS? what does the acronym stand for? I see this all over.
Instead of CNBC it is CNBS as in CNBullShit.
CNBC == Cock n Balls for Chumps
(edit: am i the only one who finds the capcha math wholy unsolvable? Am I handicapped by my math education here or what?)
25- x 16. sometimes putting the minus sign registers as error. You got here or did you have help? That would be shameful LOL
Use Excel
The unemployment rate will likely decline to close to 9.1% as 1m individuals had their extended unemployment benefits expire between the reference weeks of July and June. A sizable number of these individuals could be classified as 'out of the labor force' & therefore structurally unemployed, and not classified as actively unemployed.
The devil will be in the details tomorrow.
+1 for Turd's initial post.
BP right now reminds me of AIG last summer. That was not a ramp for the disabled! GFL!!
Complete crap, I'm doing fine, and will do so until the November election. Just watch and learn. This market is rigged to the upside till the election. Dems have complete power, and will use it to fluff up everything in sight. Seen this all before, so make so free money.
so the question is...what happens THEN (after the election) assuming GOP wins the house but not senate ... at what point do i start loading the boat w/spx puts ?
I'm really no fan of the Democrats at all but this notion of the Republicans surging in November is, I predict, not going to pan out as expected.
It's nice that you're doing fine. Many of us are. A nimble "trader" can make money regardless of market direction ("investors" are basically fucked long term). But this is really not the point. However, you seem to be of the ilk that simply says "If I'm fine then all is well". Perhaps that type of selfish delusion will serve you well in the short term, but as you yourself admitted "this market is rigged"...and you seem fine with that notion...however, in my opinion, to be well adjusted to a sick society (or a rigged market) is in no way a sign of good mental health and in fact suggest a rather sad moral and spiritual bankruptcy.
It is what it is.
good luck.
i thought on zerohedge truth would be respected, junkers must be morons
Yea, that must be it.
You never know who visits.I bet the Theivo-Matic algos are doing well too.
Like doing well in a moral sewer is a good thing.Stealing other peoples money...it's the new productivity!
"fluff up everything in sight"
+999 for fluffing
Nice still. Wish I could find a kettle but there scarce.
The stock market seems really bulletproof right now. A nuclear armageddon is probably price in, so anything better than that will take markets higher.
Yep, after complete distruction there will be no one around to sell. Prices higher!
+1
Ah, The Twilight Zone is the best analogy yet. "To Serve Man...it's a cookbook!"
Tyler-
Your missing the point. EVERYTHING is going up-stocks, bonds, you name it. It's MONEY PRINTING IN ACTION!!!
This is textbook what the initial stages of a currency crisis looks like.
Large amount of confusion, overall lack of trust among common members of society, erratic pricing in basic commodities and metals, etc.
I think you hit 43 Steelie, something is a brewing. Is the Euro finally going to find its true value at 0?
textbook, what textbook?
Sorry to say but this is a win-win for the government.
Commodities / Equities - up to show all is well and keep hopes of 401k's, pensions, unfunded liabilities alive...telling stories housing recovery to follow equities.
Bonds / dollar down - funding the debt is back to '03 or '04 levels despite the doubling of debt.
What's not to like if you are running a ponzi?
I think you hit the nail on the head. Underfunded Pensions. What is the Government going to do with all of the underfunded pensions. The only thing they can do is to pump the Market.
What will they do or what would they do with all of thoes Pensioners without sufficent money to survive? Government would have to take over the pensions at a great cost to taxpayers and lower benifits to the Pensioners.
Less costly to pump the Market to assure their Retirement is in tact.
FU
FU = Fired up? Fantasy Unlimited?? Federal Unrestraint???
Anyway, glad to see people's of ZH haven't quite given up (not yet) and still don't appreciate a financial system based on ever greater government intervention and propping to avoid any semblance of independent balance. What will it take to get you and your kind to join the "borg" and realize reality is what they say it is...not what you independent, think for yourself, mathetically capable, blog reading, un-Americans think it is :)
FU = financially unsustainable!
Fiscally unfathomable???
http://a.imageshack.us/img683/4879/dow1930todow2010.png
All it means is...time to get short, as reality is about to bite!
the graphic is gorgeous... nice job
beautiful chart.
it looks like it, feels like it.. it is a Depression.
Maybe. Or maybe "8" does not happen until October. Or January. Who knows?
"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930
I'm probably missing something, but based on the charts, it seems that stock values actually correlate inversely to bond yields, which makes sense since bond yields are used to discount dividends and earnings for valuation purposes. I'm not saying this isn't a bubble about to pop, but we will need to see real yields increase (whether because of inflation concerns or sovereign risk in a deflationary environment) to finally deflate stocks. I think the key is in the TIC data, which seems to be getting just a bit more tepid of late.
http://www.youtube.com/watch?v=NzlG28B-R8Y
Or, if you prefer
http://www.youtube.com/watch?v=a1sf2CzEq0w
Picture if you will, a highway that leads to the shadowy tip of reality: you're on a through route to the land of the different, the bizarre, the unexplainable...Go as far as you like on this road. Its limits are only those of the machine itself. Ladies and Gentlemen, you're entering the wondrous dimension of imagination.
Wasn't that the same highway that Hayek called The Road to Serfdom?
Well seems someone is getting pissed by his short ES margin call....
I am not aware of the fact that somehow stock market has to be pegged to treasurys.. Correlations work until they don't.. Why do you think that stocks have to go down on any given day and from these levels? Have you thought that perhaps market cant go down due to lack of sellers? Seriously these posts exhibit some kind of a dumb emotional bias that lacks any intellectual basis
Uhhh, it does not have to be, but usually is. See, were markets normal, treasuries would rally and stocks would sink when forward economic conditions blow.
But that's the key...stocks are still betting, rightly or wrongly, that economic conditions will not "blow" because massive monetization (reflected in low bond yields) will ultimately reflate the economy. The necessary corollary to the post's correlation hypothesis is that stocks will rally when real yields increase, which is just not the case. It's the old "don't fight the Fed" argument. When and if the market becomes convinced that monetization has failed, either because it proves to be inflationary or induces unacceptable sovereign risk, then real rates will increase and the stock market will decline.
If our questioning of the lack of cash needed to buy up everything in sight: stocks, bonds, commodities, all the while the carry trade is underutilized (and in fact is also a use of cash), is a dumb emotional bias, then most certainly so be it. Please provide the intellectual basis for this explanation.
You clearly have no idea what you are talking about.. I am as downbeat on the macro environment as anyone but tell me why is s&p500 the right place to express that view? If you are questioning the lack of cash - don't. Just look at the numbers.. Corporates have 1.8trln on their balancesheets.. Supply/demand conditions hugely favor stocks purely on the basis of announced m&a and buybacks.. Corporate profits are only 10pcnt off all time highs.. P/E rations on blue chip large caps imply 8-9 % earnings yield and earnings have been rock solid.. To quote intel "best quarter ever". Yes the economy sucks and being long treasurys us the right way to bet on that.. But s&p is not the economy.. Revenues of s&p 500 represent less than 15% of total corporate revenues in the us and 25-30% of that comes from abroad.. Small and medium companies are getting slaughtered as they have little access to credit but large blue chips have no problems accessing the bond market.. IBM raised 3yr money this week at 1%... If I am intel's CEO and I see best business e vironment for my company ever I would be borrowing at 1-2% in the bond market and buying back my stock yielding 9% (p/e of 11) all day long.. So let me ask you again, who needs to sell at these levels? And what is the intellectual backing for your emotional view? As far as I can tell you have been bearish ever since march 2009 rally.. Clearly the wrong way to be most ofthT time
Clearly your idol, Goldman Sachs (is it safe to assume your team derives 95% of its investing choices based on Goldman research?) has no clue what they are talking about either: http://www.zerohedge.com/article/just-five-months-go-stocks-are-90-short-meeting-goldmans-full-year-equity-inflow-target
As for all your other delusions, they shall be promptly debunked this weekend when we do a full spread of the S&P cash. Stay tuned- if you are actually managing money you would be well advised to. On the other hand, feel free to read bullish posts on the S&P, which validate your opinions, at other more appropriate venues for your mindset: cnbc.com, federalreserve.com, oops, federalreserve.gov, sec.xxx, and propaganda.whitehouseblog.gov are a few that come to mind.
You clearly dont have anything intelligent to say aside from some ad hominem statement linking anything I have to say to your ach-villain Goldman Sachs.. You asked for my intellectual arguments - I provided them.. Yet, instead of coming back with well researched arguments and numbers (which you should have ready assuming you have done good homework to support your views) all you have to say that I am delusional while admitting that you are yet to do your own homework.. Who is delusional now? For the record, I am bearish on risk but only lightly positioned and largely in the FX world as of this week.. I understand bullish arguments well enough not to fight the equity market but you clearly don't, hence emotional tirades against "manipulation" or other conspiracies any time equities dont cooperate
Okay Alchemist, answer this please. Do you believe the PTB is buying stocks or futures? Very simple explanation. No attacks. yes or no?
Yes and is this why the Fed so fierecly resisited a FULL audit or investigation into their activities ?
Earnings yield is a bullshit statistic that would only be relevant to an investor if companies were turning over their entire earnings over to stockholders as dividends. It sounds a lot like the ridiculous Fed earnings model or whatever it was called.
have you heard of retained earnings? Have you ever seen a balancesheet?
Yes, but what are they doing with those earnings? Are they paying them out to their employees as bonuses? Well, that doesn't do me the investor any good. The only thing I care about as an invester are dividends and possibly reinvesting earnings in the company if it will increase the dividend at some future date.
No one should sell equity at these levels if they believe : a) the hidden bad debt ponzi in worldwide financials can continue unabated and without catastrophic worldwide consequence ( born March 2009 ); b) the unserviceable debt of developed countries, pension funds and US States is manageable; c) past performance predicts future performance; d) QE redux is a near term lock for US and Europe and that BOTH will not be forced into austerity; e) the invisible hand does not exist.
Personally I'd love to join you on an equity adventure foreign and domestic. I'm long Treasury and fixed and PMs and sitting on 12.8% this year hoping it holds up.
So give me more than the rear view mirror. The stim and QE economy is about yesterday. I'm serious.
Tyler- Dollar down 10%, market up 10%, it's all been commodity-led, here's chart
http://stockcharts.com/h-sc/ui?s=$USD&p=D&b=5&g=0&id=p00768620015
http://tinyurl.com/28fsku3
Any resurfacing of PIIGS problems, Dollar bounces even more from oversold.
"I am not aware of the fact that somehow stock market has to be pegged to treasurys.. "
Actualy, you are prob. not aware of much given that statement.
At least the sell-side can make a halfway bullshit explanation that stocks are a better yeild- the problem is that history doesnt suggest that. Only people that dont trade make stupid irrational statement like that...
I know you are a trader and all, so you must look at charts alot...to my uninformed eye, just looking at these charts, it looks like the es declines every time rates spike, and vice versa. In other words, just the opposite of what the post contends. Could you please share your views on the proper way to interpret these charts? Thank you.
It is proper to look at that chart and say: Hmmm, money that is being printed is being loaned right back to the government. There is also some mysterious inflation of the stock market in the face of horrible forward looking macro-economic data. There is an obvious main stream media spin. In otherwords we have a dog and poney show. A stock market crash of epic proportions is coming. It will start with a mutany amongst the greed monsters. Could be tomorrow. Could be in a week. Could be next year. Someone will jump ship. It's human nature.
its not about charts, its about money flow.
FYI, I am a macro PM at one of the largest hedge funds with 13yrs of track record behind me.. Unlike day-trading monkeys, I dont blindly follow correlations but try to understand the macro factors and relevant fundamentals and flows driving them.. Correlations exist until they don't.. Up until 5 months ago swap spreads used to widen when fixed income sold off - no more.. usdjpy used to go down in risk off environment - no more (jsut andother usd cross now), gold used to correlate with inflation expectations - no more; Treasurys used to be inversely correlated with risky assets - that is now broken too for the time being.. if you dont understand when and why regime changes - you will blow up.. run along now, rookie..
Actually 16 yrs here, and i dont day trade. I too manage a hedge fund...
If you dont understand money flow...
Used to be (like um 5 days ago)
Dont lie and say your a PM, when you say comments like "relevant fundamentals"
your comments betray your ignorance...
Let me guess....you are a PM at a long only mutual fund.
Please, tell me which one. I want to be on the opposite side of every trade you make.
wrong
i bet it is a "value fund"
how much do you want to bet?
http://www.financialpost.com/China+poised+gold+market+alight/3362739/sto...
Market Data Firm Spots the Tracks of Bizarre Robot Traders
http://www.theatlantic.com/science/archive/2010/08/market-data-firm-spot...
I agree totally.......vegas you know the odds and the amount the house gets to keep.
A fine machine the 2600, I used to love playing Defender at my friends house, although I bought a commodore 64 myself, it had that extra 32k of ram that made all the difference.
The baltic dry looks damn close to making its second death cross in as many months though probably not quite
http://investmenttools.com/futures/bdi_baltic_dry_index.htm
of course that doesn't mean anything bad as there are a lot more ships coming on line apparently, some 50% more then at the end of last year going by the baltic dry and nearly 600% more since the peak in 2008.
Also the Aruoba-Diebold current conditions which has a pretty good record of predicting recession, aside from confirming the fact that this "recovery" was nothing more then inventory re-build and was never really a recovery, shows we are comfortably sitting in double dip territory. It also comes from one of the crazy horse fed gang members so if its saying things aren't good.........
http://www.philadelphiafed.org/research-and-data/real-time-center/business-conditions-index/
Why do we need these charts aside from very pretty? The market is very simple. The market goes down, Bernanke presses the Ass button, The market goes up. What the fuck is so hard to figure out?
It isn't my money swirling around in the bowl. Aside from the complete disconnect of common sense, the risk/reward balance just too skewed to make the equity markets a desirable investment option. The game is rigged in favor of the insiders, and I don't have $40 million to buy a fiber optic connection and 53,000 lines of code.
It's return OF capital, not return ON capital that frames the risk profile of the individual investors I work with. If housing is still your core store of wealth, and it's depreciating, then cash at 0% is still a more attractive option for the time being.
Yes, cash at 0 is better than losing principal. That is why most Retail Investors are out of the Market. They can sleep at night knowing they have their Money. Even if it is their mattress.
I agree that the best place for your money is in Real Estate although Rental Real Estate is a challenge in this economy. At least you have a hard asset and income. Most of my Real Estate pays these days about 3 to 5%. But, it is true that the Citys and Countys try to encroch on that profit thru Property Taxes, licensing fees etc.
"if one is trading stocks at this point, one deserves to lose it all"
If that's the case, I'm well ahead with only a %20 loss
WooooooHooooo?
TD, we need to see that deer in the headlights picture again soon. So appropriate...
The really cool thing about systems that get out of fundemental balance is when something goes SPROING! and everything flails around until the energy equilibrium is restored. And by cool I mean the ending bit of most Myth Busters Episodes.
The market is so dead, it's not even funny anymore. Not just the market though. Seems like business has taken off for the months of July and August.
It feels like 2008 but worse. And that's my honest opinion. Nobody I talk to is busy. Not even remotely close to what it felt in 2009.
The inevitable was just delayed.
I don't expect QE2 to happen. The debt is too big and the players are all tired of it.
Batten down the hatches.
Just back from a business trip to Asia (S. China and Thailand) - factories (consumer goods) were completely booked and over capacity...also, factories couldn't find enough workers to fill their lines and trying to offer bonus, higher pay, other goodies but still short (reason to be a little worried bout inflation coupled w/ rising commodities). Factory owners think things have turned around and are gearing up for the "V".
If this is the tail end of the US inventory rebuild being signaled by the LEI's (mostly for inventories to hit pre X-mas), then the inventory build here and overcapacity there should provide quite a nasty whipsaw catching plenty leaning the wrong way.
I concur - the slowest July & Aug. I have seen in 20 years ...
God and RenTech’s black box
The firm’s advantage is in its willingness to trade what doesn’t necessarily make sense…
http://blogs.reuters.com/felix-salmon/2010/06/25/god-and-rentechs-black-...
Renaissance Founder Simons, Computer Trading Pioneer, to Retire
2009-10-09 04:01:00.25 GMT
By Saijel Kishan and Katherine Burton
Oct. 9 (Bloomberg) -- James Simons, the billionaire founder
of hedge-fund firm Renaissance Technologies Corp. who helped
pioneer investment strategies that use computer models, plans to
retire as chief executive officer by the end of the year.
Bob Mercer and Peter Brown, the current co-presidents of
the East Setauket, New York-based firm, will take over as co-
CEOs on Jan. 1, 2010, according to a letter sent to investors
yesterday. Simons, 71, will stay on as non-executive chairman.
“I have led the organization and its predecessor for 31
years, and it is definitely time to pass the torch,” Simons
said in the letter, a copy of which was obtained by Bloomberg
News. A spokesman for Renaissance confirmed details of the
letter and declined to comment further.
Simons, a former military code cracker who uses statistical
models to buy and sell securities, options, futures, currencies
and commodities, built Renaissance into one of the largest
hedge-fund managers by 2007. While his Medallion fund, which
invests employee money, gained about 80 percent last year as
financial markets collapsed, he lost money in two funds for
outside investors that he started over the past four years.
Renaissance ranked as the ninth-biggest hedge fund in 2008,
managing $20 billion, according to Absolute Return magazine. The
firm managed more than $30 billion in 2007.
Professors, Engineers
Before founding Renaissance, Simons was chairman of the
mathematics department at Stony Brook University, part of the
New York state university system. He abandoned academia in 1977
to start what would become Renaissance, hiring professors, code
breakers and statistically minded scientists and engineers who
had worked in astrophysics, language recognition theory and
computer programming.
In the so-called quant funds that he helped make popular,
scientists mine data from financial markets looking for
relationships among stocks, bonds, derivatives and commodities.
They search for signals that will foretell whether a price is
likely to rise or fall.
Some forms of computerized trading that use high-speed
orders to exploit tiny price swings have drawn scrutiny from
policy makers who argue they undermine fairness and
transparency. Nasdaq, the second-largest U.S. stock market, and
Bats, the fourth-biggest, stopped offering so-called flash
orders after Democratic Senator Charles Schumer of New York
urged the Securities and Exchange Commission to halt the
practice.
Overtaking Paulson
Simons, who overtook John Paulson as the world’s best-paid
hedge fund manager last year with an estimated income of $2.5
billion, according to Alpha magazine, will remain the firm’s
main shareholder. He has no plans to reduce his investment, said
a person familiar with the firm.
Simons’s $5.5 billion Renaissance Institutional Equities
Fund, known as RIEF, fell 9.5 percent this year through
September after losing 16 percent in 2008, the person said. The
fund seeks to outperform the Standard & Poor’s 500 Index of the
largest U.S. companies by between 4 percent and 6 percent on an
average rolling basis. This year is the first that the fund
underperformed since it was started in 2005. The S&P 500 index
has gained 17 percent this year through September.
Simons’s $2.5 billion Renaissance Institutional Futures
Fund, or RIFF, gained 1.6 percent this year after losing 12
percent in 2008, the person said, while his $9 billion Medallion
fund has gained about 12 percent this year through June. Hedge
funds globally have returned 17 percent this year through
September after posting average losses of 19 percent in 2008,
according to Chicago-based Hedge Fund Research Inc.
Language Technology
Hedge funds are mostly private and unregulated pools of
capital where managers can buy or sell any assets, participating
substantially in the profits of the money invested.
Brown and Mercer were both hired by Renaissance in 1993
from the IBM Thomas J. Watson Research Center, where they were
language technology experts.
Simons was born in 1938 and grew up in Brookline,
Massachusetts, a suburb in Boston. He graduated with a
bachelor’s degree in mathematics from Massachusetts Institute of
Technology and completed his Ph.D. in math from the University
of California, Berkeley.
If it truly is not manipulation, what could it be? Somewhere out there, someone thinks something is about to die and they don't want to own it. They'd rather own anything but it. Since it is US Treasuries and stocks, then it is most likely an escape from some other foreign currency. China? Japan? Europe? Russia? Who knows? I don't. I still think there is a pump going on because Greenspan pretty much said so and the Fed is definately buying Treasuries.
tomorrow may turn out to be one of the fastest short squeeze in the last few years.
I am a die hard bear, but agree with you, the YEN and 10yr could be too crowded
hey don't forget about BDI falling.
and about JPY.
oh and latest ECRI.
lol.
can you spell B U L L M A R K E T ? :))))
yawn..
When the ES - UST divergence breaks above the 2/10 spread lemmie know since the corner wager at the roulette table will be crowded by those that tried to play on the hop at craps and lost
This market is way overbought, regardless of the reason, and due for correction. Will it be the Big One? Not on your life--just a mild buzzkill, until the PPT brings the new batch of coke. I think a leveraged short bet, right about now, is a great trade--just don't bet the kids' college money...
I wish I could work with Tyler to model the entire forthcoming "landing" :)
You clearly dont have anything intelligent to say aside from some ad hominem statement linking me to the big bad Goldman Sachs.. You asked for my intellectual arguments - I provided them.. I dont see yours.. For the record, I am bearish on risk but only lightly positioned and largely in the FX world as of this week.. I understand bullish arguments well enough not to fight the equity market but you clearly don't, hence emotional tirades against "manipulation" or other conspiracies any time equities dont cooperate
If you have derivatives and control the risk, then buying/selling a stock comes at no cost. The HFT is set to 'permanent buy.'
Very likely the credit default swaps are held in escrow at the Fed, leaving nothing but CD's to trade up in price.
But that's about to change. 'Bad Banks Are Over' sez Cramer, and GS is taking steps to set up a derivatives exchange. So likely a library's worth of corporate paper gathering dust in bad banks are going to see the light of day soon.
But you would need to trade in negative repos to wash that whole backlog away.
Howevah, central banks in the UK, Canada, and the Eurozone have all seen their short term rates rise, and all are betting on a rise in interest rates.
Nobody believes in the efficacy of negative interest rates. C'est la vie.
What concerns me most about this entire situation is at some point all the money that has flooded the bond market, pushing yields to these lowly levels, will be shifted into equities and energy, sending the markets into a parabolic pattern. Just a concern.
JYU0 at 116.50 ... USU0 at 128.5 ... ESU0 at 1123. This insanity makes it look like the world has ended all common sense.
The only thing that I conclude is that you better not be short right now, cause nothing seems to make this market go down. Bears usually don't hibernate in August, but I'm looking for a cave.
116.5 and 128.5 make sense.... how else do you play the carry trade w/o the 116.50??
Interesting SP500 chart ...
http://stockmarket618.wordpress.com
There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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