With quarter-to-date volumes at the NYSE 20% below Q4's average, we wonder just how much bank's earnings will be impacted as today saw the credit derivative index market 'disappear' this afternoon also. IG and HY traded (or at least were quoted) in an extremely narrow range post the European close (as ES also traded in a 2pt range for two hours post Europe before making a slightly bigger move). Stocks (and HYG) outperformed IG/HY today but ES has not been levitating as much as credit post OPEX. EURUSD rallied post the Europe close (as for the 4th day in a row, European equity and credit markets reversed direction pre- and post-US day session and then EUR reversed direction on Europe's close). The EUR-implied USD weakness did nothing to drive risk assets too much though HYG (the high-yield ETF) was active and positive on the day as we see HY credit and stocks as close in 'value' as they have been in almost 8 months. It seems obvious that between AAPL earnings (down today), the SOTU, and a Greek fiasco any moment that most 'traders' are either fully positioned and biting their nails or simply in wait-and-see mode. Copper outperformed on the day as Oil, Gold, and Silver all fell on the day (with Silver in a frenzy last evening). Gold and Silver are lower from Friday now and while TSY yields did drop into the close, they remain3-4bps higher on the week. The modest rally to almost unch in ES into the close was not supported by broad risk assets which were stable to modestly lower after holding high correlations all day.
Amid the lowest NYSE volume of the year (-24% from Friday - OPEX) and pretty much the lowest non-holiday-period volume in 9 years based on Bloomberg's NYSEVOL data, ES (the e-mini S&P 500 futures contract) ended the day almost perfectly unchanged underperforming 5Y investment grade and high-yield credit indices on the day as both moved to contract tights (their best levels since early August last year) even as their curves flattened. There has been lots of chatter about how the steepening of the short-end of the European sovereign bond markets (Italian 2s10s for instance) is a sign that all-is-well in the world again, well unfortunately the flattening of the short-end of US IG and HY credit markets sends a rather less positive signal than headlines might care to admit (as jump risk in the short-term remains 'high' relative to bullish momentum in the medium-term). At the same time, vol markets are showing extreme levels of short-term complacency as 1m VIX is almost at record low levels relative to 3m VIX (and diverging today from implied correlation). Broadly speaking , risk assets rallied into the US day session open only to sell off into the European close (with Sovereigns leaking back the most). The afternoon saw risk rallying as the path of least resistance appears to be up all the time there is no news. Stocks ended well off their highs of the day, in line with broad risk assets, as TSY yields rose 3-4bps higher, Oil and Copper 1.5-1.75% higher (outperformed) while Silver and Gold hugged USD weakness at around a 0.5% gain from Friday's close.
By his own admission in an interview today with Bloomberg TV, Barton Biggs is "elderly and not as sprite as he used to be" but for our purpose he is perfectly placed. As the almost-perfect contrarian call (bullish into August here and bearish in September here for example) notorious flip-flopper Biggs is now both "terrified he is not long enough" and yet "fears that an apocalyptic end to the Euro could occur within the next 3-6 months". According to Bloomberg, Biggs is net-long around 65% equities and noted he is "terrified I'm too long if the apocalypse is coming in Europe." Yet another canary in the seemingly 'ever-more-full-of-canaries' coal-mine (but now perhaps post OPEX and facing IMF/Greece/IIF reality we will see contrarianism at its best).
GroupThink! GroupThink! GroupThink!
The real outlook of Monetary Easing vs Treasury Yields
While much will be made of the spurt in volume today - to its highest of the year - we present without too much comment the comparison to last January's OPEX volume. Today's volume is an incredible 27% below the January 2011 Option expiration volume...
Gold and Silver Mining Stocks Offer the Best Value of any Sector in the Stock Market By Far and By a Wide MarginSubmitted by smartknowledgeu on 12/07/2011 08:07 -0400
Today, gold and silver mining stocks offer the best value by far of any sector in any stock market anywhere in the world. Due to the recent massive volatility that bankers have introduced into the PM stock sector, and the fact that commercial investment advisers worldwide have erroneously re-educated millions of people with the concept that volatility equals risk, the majority of people worldwide will miss a massive opportunity in gold and silver mining stocks over the next several years due to their misguided belief that gold and silver mining stocks cannot escape the throes of banker manipulation.
The middle of the week appeared to be the storm before the quiet of today before the potential storm of next week with aggressive action by the ECB this morning seeming to calm fears (and raise hopes of more) as risk assets were generally calmer today. Amid dismally low volumes, ES ended the day very marginally lower (led by Tech and Energy), commodities were mixed, IG credit outperformed TSYs and HY credit, and FX vacillated back to unchanged in general capping another week of strengthening USD vs the Majors (except JPY). US equities shrugged off a broad risk-off shift early in the day (driven by Oil and TSYs mainly) as OPEX seemed the focus of controlling intraday vol with CONTEXT and ES closing the week in almost perfect agreement (leaving cash S&P -3.3% YTD vs Gold +21.3% YTD).
While little has really been said or done this week with regard to solving any of the structural issues facing Europe, macro data globally has hardly been encouraging, and micro (earnings) have not aggressively beaten earnings, the equity and credit markets have ripped higher. While many have talked of short squeezes, which obviously are at the heart of every trend turn (whether micro or macro), we thought it useful to get some context on this move to judge when/if it will ever stop.
Did Reggie Middleton's BoomBustBlog Best Wall Street's Best of the Best In Guaging The True Value of Google? We Have To Think More Like An Entrepeneur & Less Like A Wall Street AnalystSubmitted by Reggie Middleton on 07/19/2011 15:57 -0400
OTM Google calls purchased a couple of weeks before earnings returned roughly 10-20x the original investment. How did practically the entire Sell Side of Wall Street miss this opportunity while we screamed on the undervaluation of Google since last quarter? Well, you just can't plan or measure the domination of mobile computing 3 months at a time (and of course, front running clients make for more profitable trades)!
Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!Submitted by Reggie Middleton on 06/13/2011 12:08 -0400
Summary: As our research illustrated in explicit detail 5 months ago, Facebook’s growth is slowing after an outrageously rich offering of private shares. Now, I’m sure that GS can put on the ole’ shuck & jive show to garner enough interest to cause an initial IPO pop, but then you are basically gambling on - I mean,,, investing in Goldman’s marketing talents and not the fundamental prospects of Facebook, no?
HY credit reached its widest level of the year today as IG and HY intrinsics are now unch YTD! Significant decompression since mid Feb in HY spreads, increasing amounts of net selling in secondary bonds, and a clear preference for up-in-quality and up-in-capital-structure leaves equity valuations looking precarious.
Bottom-up saw equity underperform credit but the S&P seemed to have a mind of its own into the last hour (as credit closed near its wides and stocks at their highs). Low beta outperformed in stocks and credit. Most notable was the huge jump in USA protection costs in the last two days!
Activity in spread land was very muted today with only a handful of names really making any moves. Equity outperformed credit but single-name credit was disappointing as up-in-quality continued. Primary issuance dominated thoughts today as 2s10s30s seemed to run S&P futures nicely up as credit ignored it.