This page has been archived and commenting is disabled.
Stock World Weekly: Europhoria
Stock World Weekly: Europhoria
Excerpt from Europhoria, the week ahead section:
The markets enjoyed this week’s eurozone announcement, with its expansion of the EFSF, the 50% “haircut” for Greek bondholders, and the recapitalization of European banks. But the Europhoria was not universal, and many remain skeptical. For a well-done glimpse into the inner-workings of the eurozone’s latest plan, watch this Xtranormal cartoon. Zero Hedge’s take: “While it is not the bears doing the explaining in this latest all too realistic summary of the European non-bailout, it is the next best thing.” We agree; we cannot find a better way to communicate the pure confusion.
One obvious problem is the political and financial fallout from the “voluntary” 50% haircuts being agreed to by Greek bondholders. Now that Greek bondholders have been shorn, what will keep Italy, Spain and Portugal from asking for the same deal to help them out of their debt obligations? German Chancellor Merkel is already warning against this. She declared, “In Europe, it must be prevented that others come seeking a haircut.” It is possible that the finance ministers of the eurozone have accomplished nothing more than to prevent fiscal contagion by exchanging it for a pandemic of debt forgiveness, as nation after nation lines up to ask their creditors to similarly accept 50% haircuts or perhaps even more.
If these bondholder haircuts are deemed “voluntary,” then their credit default swap (CDS) insurance won’t pay out, because the event would not be considered a default. How this strategy will play out remains unknown. Jennifer Lee of BMO Capital Markets surmised,“Enthusiasm, so evident yesterday with the huge market rallies seen around the world, appears to have taken a backseat to the question ‘How on Earth is all of this going to work?’ The details, or the implementation of the grand plan, will be extremely difficult to carry out.”(Indexes in idle mode: Stock rally fed by Europe deal slows)
Lee Adler of the Wall Street Examiner closely follows the Federal Reserve and Treasury markets. He recently wrote to subscribers,“Investors sold Treasuries and bought stocks this week. The Treasury market took some heat due to a big slug of new supply, and a continuing buyers’ strike by foreign central banks (FCBs). $48 billion in new Treasury supply settles on Monday. It’s not clear whether there was enough liquidation of Treasuries last week to cover the bill. I suspect not, given that it looked like all of the cash was dumped right into equities. The dealers may still have a ton of Treasury inventory to get rid of, especially the 7 year note auctioned at the peak of the carnage on Thursday.
“FCBs are in a short term cyclical upturn in their buying pattern, but this turn comes from an unprecedented level of weakness and the numbers coming off the low are pathetic, and still deeply negative. If this is the up phase, I can’t wait to see the next down phase. It will be ugly. But we probably will not have to deal with that for at least another 6 or 8 weeks if typical timing holds for this buying cycle.
“On the other hand, unless the FCBs step up to the plate much more than they have in the past couple of weeks, either the Treasury market will collapse, or the stock market rally will fizzle, or both. We’re not there yet, but if these trends continue, make no mistake, the balance will tip. For the time being, the theme of one market rallying at the expense of the other can continue, but that’s a limited term proposition. Once the FCBs go into their next normal retrenchment period, probably around the turn of the year, the situation should deteriorate. The rise in yields will become intolerable, and stock investors will probably start liquidating as a result. At that point, the Fed would be forced to step in to attempt to stave off financial collapse.” (The Treasury Market Will Collapse)
Summarizing his outlook for next week, Phil wrote, “We take a series of BALANCED trades – SELLING as much premium as we can so that time (theta decay) is always on our side. We take our profits off the table and, when we have to, we take our losses. However, we try to adjust the losing sides of our positions with the expectation that the markets will remain in a trading range and make the occasional reversals. We continue to play that range while the Big Chart is below the +10% lines. We will get MORE bearish as we move higher but we BALANCE our trades. Our bearish expectations are based on possible Yentervention by the BOJ, negative analysis of the EFSF over the weekend, and LACK of additional stimulus by the US, China and Japan to match the strong but Globally inadequate EU contribution.”
JW Jones's of OptionsTradingSignals shared his perspective with us. “In addition to the unknown factors impacting the European ‘solution’ next week the Federal Reserve will have their regular FOMC meeting and statement. There has been a lot of chatter regarding the potential for QE III to come out of this meeting. While I could be wrong, initiating QE III right after the Operation Twist announcement would lead many to believe that Operation Twist was a failure.
“With interest rates at or near all time lows and the recent rally we have seen in the stock market, it does not make sense that QE III would be initiated during this meeting. It is possible that if QE III is not announced the U.S. Dollar could rally and put pressure on risk assets such as the S&P 500 in the short to intermediate term. If this sequence of events played out, a correction would be likely.”
Our trade ideas this week are from Phil’s White Christmas virtual portfolio. One is to buy the SCO November $45/48 bull call spread, currently at $1.10. SCO ($44.94) is the ProShares UltraShort Crude Oil ETF which corresponds to 200% of the inverse of the daily performance of the Dow Jones-UPS Crude Oil Sub-Index. The premise behind this trade idea is that the price of oil has gone up a too quickly and is due for a pullback. Other ideas from the WCP are as follows (note: many bullish trades that worked were taken off the table, leaving those that didn't work - the bearish trades):
- DXD ($15.91): Buy Nov $16/17 bull call spread at $0.50, now at $0.30.
- DECK ($117.66): Sell Nov $105 calls at $7.50, now at $14.
- SCO ($44.94): Sell Nov $42 puts for $1.60, now at $1.55.
- DIA ($122.04): Buy Nov $119 puts at $1.52, now $1.38.
Click on this link for a free trial to Stock World Weekly.
»
- ilene's blog
- 5309 reads
- Printer-friendly version
- Send to friend
- advertisements -
Investors will need to get scared back into treasuries from stocks again this week. The Fed can't have the rates trend up. Risk off by Tuesday at the latest.
talking about the QQQ :
I will be very surprised if this next week close above 2635
I will be very very surprise if november close above 2493
I will be very very very very ... etc if 2011 close above 2388
you will see what is a strong bear market coming now
good trades for every body
french touche. 11.30.2011
New 'Reality Show' "Hang a Banker" on pay-per-view with the proceeds going to forclosure fraud(?)
Just hang em?... That will never fly, go medieval or go home.
depends what you hang them with and what you hang them by.
Greece gets its debt ears lowered, but the barn door is now closed and no one else can....wow seems so fair and all.
If Ireland decides to pay 50% of what it owes there is nobody that can prevent that, because if they were seriously challenged over giving themselves suck a Greek hair style the response will be OK make it a 60% haircut, anyone want to go for 75? It is a slippery slope and the 50-61% number I have been seeing bandied about is nothing but an initial number to soften the blow, the way you might tell your kid Mommy went on a very long trip to see her Mommy.
Make belief scenario : If the Eurozone basically says to the US markets :
Fukk you markets, we don't believe in your rules. Either you play by ours or else its financial armageddon all around. And then our Euro meltdown is a small fry in comparison with WS/US economy meltdown. So its a head-on Euro-US markets frontal contest. Who chickens out first?
How will this play out? If its lose-lose, then US economy burns even bigger. As the derivatives bubble is unknown in size but allegedly mega-godzilla huge, maybe the Euro governments feel the US banks won't want to take on an accelerated race to bottom. As their down side just mind boggles even print to infinity FED/BB.
looks like Euro insanity in this construct is based on some mega desperate rational construct on these lines.
And, Merkozy siren play to China is a way of asking them to join the Euro party at the expense of US economy as the only solvent big guys in town.
Not that its not all insane, 'cos in any case, the end result is same : we all go down, but in what order? In what time frame?
That seems to be all that they can do to maneuver, on either side of the pond, in this mad stand-off.
Euro Titanic sink vs USD Hindenburg Zeppelin burnout.
The Dow is back over 12K even without QE. I'm not sure QE is doing as much as people say it is.
Tow groups of people need to get it n the side of their head; those that promised the world (politicians) and those that sold the world on interest (bankers) to the people that could not afford the loan.
When the "haircuts" start, those that are losing the money will be very angry, and those are the tow targets.
Look for "contracts" to be put out on bankers and politicians throughout the EU Zone.
tea for tow.
The problem is that in every case where this kind of thing started it resulted in a reign of terror that ends up hurting everybody. I used to be very worried that we would reset to zero and a new currency would get issued and it would be George BushCo who determined what the values would be, and setting the value of the "new" dollar, or Amero, or whatever you call it would mean setting the value for you of everything you own, everything you ever will own, your labor, the relative costs for the expense categories in your life, bad enough it is Obummer but had it been a neocon the revolutions would already be over by now. Not the suffering, just the bloodletting.
I still say that what is happening in finance and economics cannot be explained by any of the headlines we are fed, or any of the theories here and at other websites dedicated to finance.
When I apply Occam's Razor to the problem, to look for the simplest explanation that all variables fit into, what I come up with is either a planned extermination event known to a few, or an unstoppable disaster also known only to a very few. And I note that there have been no really major building projects in the USA in the last decade, no real new significant infrastructure investment, as if such investment is not to be done because it is just going to get destroyed next year anyway. They did not even bother to build a new payload lifter for the space program.
moved to right spot
The 50% haircut on Greek debt does not end the EZ problems, it opens the door for
much larger problems because it sets a bad example for the other PIIGS. Debt forgiveness
sure looks better to them than austerity. This may be the misstep by the EU that starts
the chain reaction toward collapse and break-up of the EZ.
And, to put the cherry on top of the surreal policy sundae, the proposed haircut on the Greek debt still doesn't go nearly far enough. It still leaves Greece with debt at an unsustainable 120% of GDP a few years down the line. What good is that?
What is the answer - debt forgiveness being a mistep that will lead to more, and austerity being a plan that can't work either?
The ANSWER is: ALL Piigies will get free vacation weeks in Grease in return for not fucking whining their asses off to one Neo Nazi Merkel. Except for blocked out RED WEEKS that will be needed to clean the shit up from the peasants in Athena burning a few cars up. Very simple, and fair too don't ya think....:)
everthing's gonna be OKay. They're workin on IT. Kinda like "Trust me", Change WE Can Believe In", "Jobs For America", and Yadda, Yadda, Yadda, and all the other socialist fucking lies from our Great Leaders of the Country in perticular, and the rest of the shit for brains Liars of the World in General. BURN IT ALL DOWN AND START OVER. iT'S GONNA HAPPEN SOONER OR LATER ANYWAY. Maybe some of YOU intellectual Baboons can come up with another "scheme" to save the 99%ers. good luck on that. Lock and Load for you guys who have been THERE!
Seems like group insanity to me, making sure the most possible damage is done to all, before even thinking about facing reality in any way? If this type of decision making was done in group sessions in a Physiology 101 class, I would have been given an F.
So in reality what they have to be doing is planned self destruction, making sure its 100% complete and total. And Im frankly sick and tired to death of watching it day to day.
The think the mistake you're making is that you're assuming our illustrious 'leaders' are actually looking for a solution. The reality is that they are simply delaying the inevitable collapse as long as possible to allow them and their owners to loot as much as possible from the peoples before it all caves in.
Next stop, one world fascist government. Many have been writing about it for decades now. Collapse of the existing system is a necessary step in the grand plan.
Exactly right conclusion in my opinion FMB.
If someone was really looking for a solution, what could they do towards that goal?
What are the accepted solutions to:
ponzi schemes?
infinite growth on a planet with finite resources?
... answer these and you've got your answer to the current problems.
My solution would be:
Scrap the current systems completely, no matter how painful this would be, hang every 'leader/politician/FED member/Rothschild/JPMorgan et al' in public view as a clear message to the future that this cannot be allowed to happen again and create new honest systems that don't revolve around the same systems a scamster would use (i.e. ponzi schemes, confidence tricks, shell games, etc).
Pol Pot in Cambodia and you are the Kemer Rouge, that worked well (killing fields), so your suggestion leads to 50 years of poverty and rampant child prostitution. Or maybe, we will give it a little more thought?
Fuck Yes
The French tried that, and ended up with Napoleon. Only marginaly better than Hitler.
Not bad, except I wouldn't hang anyone. Clawbacks, and trials for fraud in cases where crimes were involved, yeah.
Clawbacks? You think all the money that has been stolen through inflation, illegal taxation, pensions stolen, fractional reserve scams, etc from you and your family will be returned to you?
Trials? Hmmm... i think justice is required for trials, and justice disappeared from the system a long long time ago.
I'll stick with the public hanging method, history has shown this has some degree of success.
"You think all the money that has been stolen through inflation, illegal taxation, pensions stolen, fractional reserve scams, etc from you and your family will be returned to you? "
No, I'm sure not. But still completely against convictions without trials, and public hangings.
Make a public holiday to celebrate the event. All over the world. Lest we forget.
The credit default swaps insurance contracts, what is the language in them that a 50% minimum default is not deemed a default? Not that I feel bad for either the issuers or the buyers, but how can this NOT be a default? And not only is it moral hazard for the rest of the PIIGS, their respective governments will have to go demand the same thing for their people or they are simply not doing their jobs, but who in their right minds would invest in any government debt at this point? Eurozone nations debt back by the AAA credit rating of the EMU itself was considered risk free just a couple years ago, US debt has been downgraded and watched with a negative outlook. Why would anyone risk their money on the lies that all is well? This is just insanity, to me it says the investors in debt (and equity for that matter) are institutional and governmental and not individuals acting on their own self interests.
I was in Safeway yesterday to get something, the prices I saw were so shocking I walked away with nothing, and this is only the begining. I did go to Wally World and bought three cans of Yuban and plan to make it by the cup from now on rather than by the pot of which half usually gets thrown out. There might have been a ginned up GDP report but as people like me are told near 40% food inflation is actually tame and under 4% there will be no money left to participate in the economy. I saw gas back over $4 for regular today too. Must be the liberation of Libya. God help us if they were still at war.
Trials for fraud? Nah, much more than mild wrist slaps is needed for these elites bloodlines who have been at the core of all the worlds misery for centuries.