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And For Today's Market Ramp Rumor We Have...
Yesterday's rumor that global central banks may, just may, respond to a Greek exit from the Eurozone, which would send the world into tailspin sent stocks higher. Because without said rumor nobody, repeat nobody would possibly imagine that there could be a coordinated response to an event that would send global risk down over 20%. Today, it gets even dumber:
- ECB MAJORITY SAID TO OVERCOME CONCERN ON CUTTING DEPOSIT RATE.
- ECB POLICY MAKERS HAVE OVERCOME A KEY CONCERN ABOUT TAKING THE BECHMARK RATE BELOW 1%
At least yesterday the source was some discredited G-20 member. Now it appears that the media has a front-row seat to ECB deliberations. Fascinating. And what is even more fascinating is that the market continues to fall for these rumors "breaking news" and rumors time after time after time...
More from Bloomberg:
- Likelihood that such a move would also involve cutting rate the ECB pays banks on overnight deposits from 0.25% is no longer an obstacle for a majority of Governing Council
- NOTE: Deposit rate traditionally moves in tandem with benchmark; policy makers have been reluctant to take it to zero out of concern it would discourage interbank lending
And the kicker:
- A rate cut isn’t certain, the officials said
- ECB spokeswoman declines to comment
So... things may or may not happen depending on what happens? And this sends stock spiking?
Sigh
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Over/under on the fade?
When shit does hit the fan, my Hit List is just getting bigger and bigger. Will need to double my ammunition stockpiles.
Just cut rates to ZERO and get it done, already. Why all the drama?
The "key concern" is that it will do nothing for the economy, as in the US, and show them to be powerless.
Understanding JPM loss in very simple way
I have been reading about the CDS Indices and how they trade, but i have to say that they got rather confusing, its almost similar to the CDS index but with a little twist. So i have decided to write a small piece so that whenever we read about the CDS trades that cost JP Morgan $3bn at least we understand what the hell was going on. after you read this piece i want you to "correlate" what has happened to JP Morgan chase "Iksil" trades.
Ok i want to make this as simple, you have to understand that there are two things in the CDS indices, CDS Global Index (The global CDO pool with 100, 125 names IG, HY) & CDS Index Tranches.
!!!Correlation: represents the spread movement, time to maturity, and the tendency for default, recovery and correlation with other indices.
1- CDS Index Tranches
The tranches are synthetic collateralized debt obligation (CDOs) based on a CDS Index, they are standardized and they represent different segments of the CDS Global Index. They are split into the following.
1- Equity 0-3% (The most Dangerous shit)
2- Junior Mezz
3- Senior Mezz
4- Junior Senior
5- Super Senior 50-100% (Less Risky)
Now understanding the wording is the most important thing, on the tranche you can have those two possiblites:
<1> Long Correlation: Means that you are long the Equity Tranche ( Selling Protection on equity) and you are ready to take the default risk OR (not and, its not a hedge with another tranche) You are Short Senior Tranche (Buying Protection on Senior)
<2> Short Correlation: Means that you are Short Equity Tranche (Buying Protection on equity) OR Long Senior Tranche (Selling Protection on Senior)
Its exactly like short selling (you are expecting the prices (correlation to drop) as the economy is going to improve or you like long buying (you are expecting the prices to rise) and expecting the economy to be worse.
So, JPM where Short Correlation on Super Senior (expecting the economy to get better, and it was getting better due to twist and LTRO) means $$$$
2- CDS Global Index
The index represents insurance contracts covering the entire pool of credit (i.e all the 125 names listed lets say on IG9).
The global index (all the pool of the CDO's) works like the bond prices, when the spread moves for all the 125 companies, the price changes exactly like bonds price / yield it also pays coupon.
again, understanding the wording is the most important thing, on the Global index, you have two possiblities:
<1> Buy or Long the index: Means you are selling Protection on all 125 names in the entire CDO pool
<2> Sell or Short the index: Means you are buying Protection on all 125 names in the entire CDO pool
3- The Delta
The delta measure the spread sensitivity for 1bp change in spread or DV01
Delta = MTM change or (Dv01) for CDS Index Tranche / MTM change or (DV01) for the CDS Global Index
From Merril Lynch example, lets assume those are JPM Super Senior Tranche DV zero- one, if DV01 for the CDSIT is = $2107 & DV01 CDSGI = $4,540 then you have a delta of (2,107/4,540) 46.4%
4- Hedging & Leverage (Delta Hedge or trying to achieve Delta-Neutral)
If you are long/short a tranche and you want to hedge it you hedge it with the CDS Global Index, if you do then its called "Delta Hedge Portfolio" and it has a size.
assume Tranche notional of $20Mio
Delta Hedge Portfolio = Tranche Notional X Delta
= 20 X 46.4 = 231.85
Leverage = (Delta hedge portfolio) / ( Tranche Notional)
= 231.85 / 20 = 11.6X
so if you buy Super Senior Protection and you want to hedge it against Spread movement you have to to Buy 11.6x the index.
So what was JPM doing? I dont know exactly, there are so many opinions out there, but am guessing that they were:
1- Short Correlation
2- Long the Index
this explains why they were making money when the LTRO/Twist came to existance and why the Hedgers (Protections buyers) where getting burned because JPM were not hedging with the Index, on the other hand they were Buying the Index with the above leverage (for example)
So when the credits got worse, they started to get burned and then they started to unwind.
I think there hedge was (Buy 5Y CDS Tranche) which could helped to reduce some of the losses, but who knows.
Now this is the most important thing i want to know, who was on the other side of the trade, and who made $3bn, those are the guys
1- Weinstein's Saba Capital Management.
2- Blue Mountain Capital.
3- BlueCrest Capital.
4-Lucidus Capital Partners.
5- CQS III
Benefited from taking the opposite position to JP Morgan...
Hope that helps, cheers
P.S hope this helps you to clear the confusions, but this is how shit works, wording is important
July 12, 2012 JPM reports earnings and on the call, will explain to shareholders the total losses and current situation.
the fuu-fighters fade line for the respose would be:
over/under minus 5 minutes
[yes, this does indicate the SNB 2B today's rumor source. again L0L!!!]
Everyone's flat for the weekend . . . fade to grey.
No fade today I guess. That rumor was not priced it.
Thank you. This helps out a ton. I've read the ZH articles on JPM/IG9/Iksil a few times each and still didn't have it all clear in my small brain.
This is why ZH rocks; articles and analysis you can't find anywhere else plus ZH commenters are the cream of the cream (even the trolls, troll well!)!
you are most welcome, i wrote this on the fly....
i just wanted to add a couple of things is that the Leverage (above 11.6x) if you multiply it by the tranche notional you get how much you need to hedge in the Global CDS Index (11.6 X 20 = 231mn) , so for you to protect the spread movement you need to buy/sell that much on the CDS Global Index (by the way i used global just to simplify things up)
In addition, if the leverage on Super Senior was 11.6x, then on Equity the leverage will be 30.5x because it's more dangerous (30.5x is a hypothetical number)
so after sometime, it just becomes easy so you can say
1- i sold protection on tranche and bought protection on the index
or
2- i bought protection on tranche and bought the index
or
3- i was long the tranche and i hedged it by selling the index
so you dont need to use the short/long correllation.
if you want to dig further you can take a look at the following:
http://en.wikipedia.org/wiki/2012_JPMorgan_Chase_trading_loss
http://www.seasholes.com/files/Credit_Corr_Trading_ML.pdf
http://www.mathematik.uni-ulm.de/finmath/confpage/papers/elmorsalani.pdf
https://www.quantnet.com/forum/threads/index-tranches.1527/
https://www.quantnet.com/forum/threads/index-tranches.1527/
http://www.bis.org/publ/qtrpdf/r_qt0503g.pdf
Bingo. The govt. can't be shown that they are out of ideas and are powerless. Then people will look to others for leadership and so the end of a nation.
Isn't that almost their last and final arrow, beyond the printing and rigging and lies and propaganda, fake wars etc etc?
I can visualize the future conversation of people going into banks:
"OK, so how much do I have to pay so you hold my money here?" <sarc off>
As Marc Faber would say (as he laughs menacingly in the face of a Bloomberg reporter-bot during an interview), it's time to find out if Bernanke is a true money printer or just an amateur.
Marc Faber laughing his ass off to Bloomberg Reporter while calling Bernanke a "liar."
Bernanke "Is a Liar"
I need Banzai's mad skillz for this one; anyone seen Banzai around, and maybe The Limerick King?
Antonov An-225 Mriya Bernankehttp://1.bp.blogspot.com/-yMNjEftfB-4/TZVmjmcI3oI/AAAAAAAANC4/uTPDTD1d07...
http://4.bp.blogspot.com/_ja676MG45Zg/TEa1o1O483I/AAAAAAAAEPg/qcIg4z9p6n...
TIS, the AN-225 is an amazing aircraft. Nice pics.
Indeed it is. It would be nice if the people stormed the central banks, burned the fractional reserve banking ponzi shackles to the ground, and got their economies back to a point where making tangible things of inherent value was rewarded moreso than 'engineering devious, wealth shifting & destroying, financial instruments."
At such time, the true value of bankers would be revealed as less than zero, and the value of competent engineers with true skills in terms of making actual value-accretive goods would skyrocket.
Here's the link to the hilarious Faber interview (only 10 seconds of it): http://www.youtube.com/watch?feature=player_detailpage&v=2gBV8ihVTH0#t=326s
The theft has been a couple decades in the making. Righting the wrongs will take a few years of proper education and understanding. Too many people grew up with the propaganda.
My wife and I do what we can to put our kids on the right path. They're being schooled at home for starters. We grow our own food including livestock. Kids are involved and learn "hands-on" what is important in life. Social environment is carefully monitored as well. I have a thing for the Amish but we're not there - yet. In due time and after SHTF the transition to Amish life will be easier for us.
I love that big old aircraft. Typical Russian, bigger-is-better. There are some excellent videos on You Tube, of this thing performing low to the ground during air shows. I'd link a few, but have to head off to work for the night, working on aircraft. It's an amazing aircraft, for sure.
Double-tap and glitch in the Matrix.
El Oregonian,
I think for many financial institutions that's the present.
Because if they put it at zero and it still doesn't work then everyone with an IQ over mud will know that they are out of bullets.
Hugh Hendry's going to be rich if they do.
DavidC
I hope it doesn't stress him out.
I would doubt anyone who pre announces hes going to be rich soon. Unless you intend to grow rich by finding enough buyers for something you want to sell, otherwise known as "offloading."
Fear can make you do strange things...
Ty- u gotsa get off the doomsday train- its a fukking election year and the S&P yields 50BP more than the 10yr
Oh, ironic humor. Funny! +1
The whole world goes the Japanese way.
I'm turning Japanese right now with all these rumors and ramps
Why we are not going Japanese,
While the Japanese were going Japanese, the rest of the world was still growing (USA BRICS) and they were selling shit into that growth and collecting USD allowing them to continue to support their debt..We will have nobody to sell anything too. It will be just print and buy like we are currently doing until we can't. It will not take a decade. 2 years at most.
and another generation of retards works at JPM , GS , etc and buys into all the catch words and propoganda
i've been following markets all my life and i'm baffled at the daily gyrations
Boy who cried wolf, people keep responding, still no wolf...
"....some said" some said.
-modern reporting.
"According to anonymous source."
"According to unconfirmed source."
"According to unconfirmed reports."
So in other words, everything is bullshit?
Nah, trust your corporate news source.
"So in other words, everything is bullshit?"
"Some people" say that.
Come on.....crash and burn, already!
You forget:
Buffett purchased Bear Stearns 47 times before it finally went Tits Up.
Greece and Europe will have at least 30 more rumors to go INCLUDING Warren Buffett saving them.
3 of out of the last 4 comments here have been by someone toting a V for Vendetta avatar. I know Im in good company when my two favorite books/comics/movies (Fight Club/V for Vendetta) are represented in such a predominant fashion.
The gadsden flag comes in a close second.
Thanks ZH.
Edit : yes, the ratio of 3 to 4 is going to change as people continue to post, but you get my premise.
Yes, it indeed will change.
:)
“The newscaster announced that “the stock market had fallen 100 points on news that an asteroid was heading to Earth and all life would be destroyed within 24 hours… before recovering on word that the Fed had increased QE to infinity.”
Lifted from jsmineset.com
This market wants to rip
“Prices, like everything else, move along the line of least resistance. They will do whatever comes easiest, therefore they will go up if there is less resistance to an advance than to a decline; and vice versa.” - Jesse Livermore
Here is another one: stuff goes up when there are more buyers then sellers. And vice versa.
Also, never confuse this long-dead concept known as the "market" with Brian Sack/Ben Bernanke.
Agreed, with so many people short there are a lot more buyers than sellers in this market. Also if Brian Sack and Bernake are manipulating the markets it can't go down, I don't actually believe that they are but with that argument there shouldn't really be so much confusion as to why the markets are going higher
One word. Hopium.
"I don't actually believe that they"
making money these days its so easy ... just wait for Ben to say Print / No Print
Enjoy
<------ Ben says "we are stimulating the economy" on 6-20-12
<------ Ben says "The FED is actively doing all they can" on 6-20-12
I always salivate when I hear the music from the ice cream truck.
"I want chocolate sprinkles on top."
As I've gotten older I've become suspicious of Ice Cream Trucks...
. . .you never know about those chocolate sprinkles.
Alex Jones is suspicious of Warren Buffet eating an ice cream cone.
I want silver and gold jimmies on mine, a thingamajig to eat it out of, and a spiderman towel for clean up.
Ten points for tying together several absurdities from the last few weeks. Alas I can only give you one up arrow.
Bravo!!!
I am declaring an emergency Festivus for Therestofus holiday for the next 29 weeks.
I green you for a Something about Mary icon and a Seinfeld reference.
I actually watched Drago's speech this morning. It sounded much like The Bernank while makinga meata-balla sandwich, until the last minute or two.
Up until then, he was calm. When he started talking about countries giving up more sovereignty to gain more sovereignty, the paper he was reading from started shaking. The more he talked about it, the faster he talked and the more nervous he sounded.
He damn near sprint-talked through the last paragraph, and then looked up and gave a cheesy grin, almost like he was looking for the guy holding the gun on him to say "Gee, I did good enuffa, yah?"
All in all, very shitty acting. Didn't have his heart in it.
I forget, just who crowned him again?
That's because he and everyone else who matters knows that the whole plan is stupid. A bankrupt country putting billions into a European fund to support its own banks. Had the country money to do it, they would have supported their banks. If they have the money and not willing to support their own banks, they sure as hell won't give the money to the ESM to support their banks and other banks.
Draghi is not convinced and therefore he can't be convincing. He's old school and where he comes from, you destroy and collapse and then buy it on the cheap.
And today's classic quote from Wolf Blitzer, waiting for the President's 1:15 pm address: "Apparently he's running a little late."
They just said he is expected to speak momentarily.
Wolf Blitzer just interviewed the sherrif of Maracaipo County, AZ. Before the interview started, he warned him that he might be interrupted by the president's speech. They had a lengthy interview. It wasn't interrupted.
and meanwhile the dictatorship of Obama continues unchallenged ...
http://abcnews.go.com/Politics/OTUS/immigration-back-obama-loosens-deporting-rules/story?id=16576677#.T9tvKs05bf8
the news media simply snickers. -- Obama 2012,2016, etc. --
Lemme guess, amnesty given in exchange for registering to vote, as well as opening an account at their nearest Wells Fargo (balance minimums apply).
Amirite?
I'm declaring a free day at your local waterpark next Tuesday. Tell them Frank sent you.
Thanx.
Do I need I.D.?
No, but please shower first, and no bath salts.
Good news = bullish
Bad news = bullish (it could be worse + more QE)
Neutral news = bullish (at least it's not bad)
they have made it vitrtually impossible to short the best shorting opportunity of a generation. im going to short this slop before the close. VXX and FAZ.
90% in cash the other 10% in TVIX.
My gut tells me it should have fell like a rock yesterday and today. My gut tells me the people who rigged it don't like my gut. Therefore the only safe bet is cash which is getting less valuable as the presses run.
What about PMs?
to be able to pump up the markets with the Eurozone going to pieces is a slap in the face ...
markets totally manipulated yesterday and today
There wasn't even a real dip today, just spiked up from the market opening and has kept spiking up on nothing but fumes, rumors and the promise of more QE, LTRO, bank bailouts, and the opportunity for TPTB to give the finger to the rest of the world.
It's so Gold outside. Is it a start of a new Ice Age?
The markets up? Hmmmmm, Let me confirm this... I will be back
banks said to step in. Markets go up. Markets go up banks wont step in. DOES THIS SEEM FUCKED UP or is it me. Short this one...?
deleted
Yea, Its up alright.
Humanity has gone short on itself. It was bullish for a while but all god things come to an end. :)
well we are right now right at my weekly target top point, it is rather interesting as of course tbt hasn't mimicked the market and gone down instead. I tried to trade this and have done OK over time, but I can't do it anymore. was doing it to hedge my bond portfolio. bond yeeilds are too manipulated so I'm going to hedge with sso and forget about treasures. besides tlt costs too much a share with not bib vol so trading costs become an issue.
there was also a huge anaomaly in eev today where the securty went about 50 cents off baseline and deviated from what it is supposed to mimick on an inverse basis. the rogue algo's doing shit. for some strange reason for less than a minute the bid offe3r spread ran up to about 35 cents. If anyone can explain this manipulation I'd appreciate it. you put a stop out enough to make sure it doesn't hit. is this the market maker stealing my money, how does this happen
They peek at stops.
I kissed an Algo and I liked it. Always do it with someone else's. The needs of the one outweigh the needs of the many!
The weird algo driven pattern in showing up in the market tape again. This kept on showing up day after day last year when volumes dropped way down. A very curios almost timed 15 minute repeating pattern sending the market up .25% each time. There is a huge spike followed by a flat plateau for a few minutes, then a short drop down, and then another huge spike.
This pattern seemed to repeat for about a half hour and then it would take a break only to show up again later in the day. I believed it was the Fed buying baskets of stocks. People called me crazy last year, but now I don't look so crazy anymore.
"People called me crazy last year, but now I don't look so crazy anymore."
Listen to your peeps.
Of course a rate cut is certain. Their entire banking system is imploding. Bankers need free money. Bankers get what they want. It has nothing to do with the economy. Just banker needs and desires.
I gots the monies, the monies mine, I gots the monies.
In 2008 anyone see the DNA pattern in FX?
Hahahahah. Just saw an ad on my screen. $3000 or 0% financing for 72 months on a new Chrysler.
OH YEAH CAR SALES MUST BE GOING GREAT!!!!
Pretty soon every GM dealer is going to be offering the buy a Chevy truck get a Volt for free campaign.
Yesterday my credit union (aka "Ally Financial" (aka GMAC)) was down to 2.39% for 3 years.
Yet their parking lot still has 5-10 new repos every time I go there.
Well in the UK they want to give everyone around GBP 4500. That should work out well.
loan everyone GBP 4500
I'll take Hogans Heroes anytime over this EUro Comedy , which is really getting boring now.
This is all sooooo surprising. Nothing new under the sun here folks. The market will continue to rise until the end. You can't predict the end game but you WILL know it when it's here. Until then there is only one direction for this manipulated BS.
so if I got this right.
If consumers spend and jobs get better, market goes up, usa is back baby
If consumers dont spend and jobs dont come back, market goes up, printing is back baby
If europe folds under debt, market goes up, cause it print print print baby
OK I think I got it...
That is about right! Until it is not!
advance/decline still very weak considering the size of the move today. My gut feel is this gets sold into the close...but I am not participating either long or short in this crap. Leave that to crazy day traders.
stupid money filling the vacuum of ignorance
Rally warning continues...
SPX & EURUSD bullish daily charts dominate further.
As mentioned, shorts will be slaughtered next week.
I have been reading for a long time that the stock market outflows have exceeded its inflows. Does anyone have any figures for this?
If true, how can the stock market rise?
Don Levit
Don, the outflows you reference are probably the "retail" or non-institutional sector. The Muppets are learning that the stock market is not really a "market" anymore. It has turned into a wealth confiscation scheme to transfer people's investments to the people who are running the show.
How does the "market" rise? The Central Bank (the Fed) gives enormous sums of money (outright or through zero interest loans) to the Elite Banking Cartel club membes. This money is used to buy stocks.
thus, the "Market" rises on very little volume because the Insiders are using this funny Money to buy assets while the money still has some value.
Vince:
Thanks for your insight.
It seems that this part of the market is not computed in the volume, which I also have read for a long time, has been way down from prior years.
This seems to be a relatively new way to spike the market, through insider loans, as opposed to outright ownership of stock through investing one's discetionary income. I hope this does not set a precedent, for it appears to be a dangerous potential habit.
Don Levit
Markets going to surge Monday
New Democracy and PASOK to win majority
Short squeeze from hell!
just planting the seeds of destruction --- do it early and do it often,...
its like throwing shit at a wall - eventually the crust of it sticks