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Disquietingly Calm End To Calamitous Week
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).
Before considering global risk assets and US markets specifically, it seems appropriate to reflect on the movements in Europe that were so critical to this week's risk appetite globally. Spain ended the week 80bps wider relative to Bunds as it appeared the ECB was focusing all its buying power on France and Italy. French 10Y bond spreads miraculously ended the week unchanged (after being over 50bps wider early Thursday) and BTPs rallied 70bps (in spread) from early Thursday to end the week a mere 10bps wider. EFSF spreads were clearly soaking up this risk transfer ending the week 20bps or so wider (and peaking over 200bps at their worst). 10Y TSY-Bunds spread compressed 14bps on the week also (and over 20bps from their wides) as Bunds dramatically underperformed TSYs - this is noteworthy as it was not rotation from peripheral debt to core but from Europe to non-Europe.
Using CONTEXT as a proxy for global risk-assets, US equities generally tracked very well this week with three notable moves. The orange oval shows US equities were sold aggressively but not supported with generalized risk-asset selling, however the next day (red oval) was marked by a very broad-based derisking across every risky-asset class. This morning saw Oil and TSYs cause what would have been expected to be a more significant sell-off (green oval) in US equities but notably we did not (as European spread stability and OPEX vol compression perhaps enabled stocks to halt the fall for now). Risk assets strengthened and reverted back in line with equities by the close and we note that it looks like FX carry (EURJPY specifically) and TSY 2s10s30s that are the bigger driovers for now of any potential down-leg.
With the USD rallying around 1.6% on the week, it is perhaps not totally surprising that Oil and Copper lost around 1.6% on the week (despite all their volatility). PMs underperformed with Silver rallying off liquidation lows today ending the week -7% and Gold -3.7%.
JPY remained the only major currency to strengthen against the USD as AUD (carry / high-yielding currency) was on eof the weakest against the USD. A 1.5% gain in the USD overall was trumped by EUR's 1.7% loss against the USD - as we suspect given the divergences in swap-spread-based models for EURUSD that reptration flows stalled a little later in the week.
After considerable divergence mid-week, US equities sold off back in line with credit - especially HY (though remain expensive on a medium-term basis). The end of the week saw a clear risk preference for IG credit as HY and stocks (and HYG) largely sold off in sync while IG spreads managed a small compression.
And rather interestingly equity sector performance shows the high beta Materials, Energy, and Financials clustered very narrowly around -5.6% on the week while Staples and Utilities outperformed.
Charts: Bloomberg
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It's official.. I exited FAZ. It was a good run. I can't take the chance of seeing 10% losses on Monday because some Euro eediot decided that printing money is good for an economy.. But I shall return!
I exited everything..., except for my physical.
Me three.
I wrote a new piece at my blog, "Everybody Knows", based in part on two stories (big time thievery) here at ZH yesterday.
Everybody is about to know what is about to come down. If you would like to take a look at my blog, drop me a gmail at my name, promise me you will behave, and I will send you the link. I write under my own name, so I ask those interested to jump through this hoop.
"Everybody is about to know"? Hmm, I find that hard to believe. I know only two other people who are watching things unfold. (okay, my wife is number three, 'cause as nuch as she dislikes it, I won't leave her ignorant). The rest are carrying on as usual, oblivious to the looming financial crisis.
I'm not trashing you DCRB, just saying in my opinion, the majority are oblivious, and if they read your blog they already know.
That's why I'm here. I want to know when it starts to come down, three days before J6P realizes anything has happened, standing there with the deer-in-the-headlights look on his face.
I guess I should check out your blog to understand better...
http://youtu.be/9F8QM3tjkTE
Staying in TVIX over the weekend with my fingers crossed.
Bought a stack of maples earlier this morning with some of my winnings from the past two days.
Same here with the same logic. Im not risking my butt on some euro coke head with to much ink.
I am reposting this from last story (hope that is o.k. Tylers).
Nice profits on CRM puts today. Options very expensive now, but Salesforce is garbage and the CEO is a liar. Look for a melt up, then short it to $50.
Just waiting for the lockup expiry to blow up LNKD next week. Mo mo to the moon.
And now, a trade for my friends: look at AMR's preferred shares, AAR, selling way below par with 20% yield at these prices. If AMR strikes a deal with the pilots, those preferreds will snap back something nice, and you can either sell or hold for the yield. Yes, risky trade, could fall much lower, but I think a deal will be struck, plus AMR has cash on hand.
At least AMR is a real company, not some bullshit .com like Pandora (snicker), and holy cow are the short plays on GRPN and P mighty expensive. So, here's to hoping AMR makes it, employees keep jobs, and we all make money on their underlying securities.
Hey, at least give me 30 seconds before the bad arrow.
crm to 50 is a bold call...i covered friday but good luck...don't touch airlines myself but agree for the most part on lnkd...i guess we'll see
Pffft- touting an airline? Get a job....
You get a +1 CRM is crap, Oracle will take their business. The cracks in the armour are beginning to show, they're done
You get a + 1 on your little nugget.
Thank you. Tough crowd, though a smart one. Also, did you catch the outrageous Nomura rec just hours before CRM imploded? http://tinyurl.com/83laohd Freaking whores.
Tough crowd, though a smart one.
Tough crowd (that is, a smart one).
Fixed it for yer.
salesfarce.com
crm puts were completely underwhelming. fucking IV drop murdered them... luckily I was also selling uncovered calls that worked out great. Agree with the sentiment on CRM. I have a feeling it WON'T pull an amazon and melt-up too far. Looking to retrench position at 115.
LNKD is such a fucking POS. how the fuck can the stock be trading at above the second offering price given the end of the lock-up plus the announcement by at least one prominent fund that they are liquidiating their 100M position. Lnkd too has a date with sub 50.
don;t know about your airline play. I usually just ride on planes. And I'm only shortin gthis mrkt. Probably bad karma to hope that an airline stock falls out of the sky.
And now, a trade for my friends:
That line is the mother of all red flags. Are there no more steamrollers on nickel street?
It's always quietest just before you die.
I've heard that it is quietest after you die.
What? I can't hear you.
My mining shares are getting ass raped. Eff this Mega Banking Cartel.
libertarian86.blogspot.com
Even a ship on a pitching sea will have a few seconds of flat, calm water between crashing, destroying surges.
But it just keeps coming. Until something really huge runs you up and crashes over the bow, taking out the steering room and all the rigging and the rudder, and suddenly you are no longer a ship but a submarine.
But of course, you are already dead so you don't notice much.
Have a great weekend ya'll!
Don't forget.
It may be quiet, but it's still all fucked up.
It's Friday, so that might not be a bad way to go. Quietly get all fucked up, I mean.
I've got a half bottle yet of spiced rum on the shelf that just read that comment and is already pestering me about my obligations therein.
You're welcome.
show me a 10 year number of every options expiration Friday EVER and it'd look like this.
I should add before a holiday shortened week, no less.
2-digit moves in the DOW have become quite the rare animal over the past few months.
SPY is wound up for a huge break one way or another.
Sitting right on the 50-day.
I made this for you: It's Like 2009 Again
I think the quiet....is an important indicator....people are scared...and watching...
...and thinking what's next....
And starting the weekend early.
any1 have an educated guess for sunday? will euro opens with the gap? up or down?
i kind like to take the risk over the weekend.
Up if more bailouts/printing is announced. Down otherwise.
It is the feeling that has been pervasive for the past few years; just one more week...
Ha- The top ad banner had a "learn to trade stocks with Jim Crame" add... That was the funniest thing I have seen all day
Down
Held my 1.3586 shorts into the close...
What if all the sudden people everywhere just say fuck this crap!
Bankers, Blankfein's, Pyramidal Masons, Black Cubists, Holly Rollers you name it.
Everybody wakes up from their self imposed trance and discovers how amazing
every breath we take is. Just check out the sky and suddenly become greatful for the time you've
already been given no matter how long, how fleeting, how terrible, how great.
We are all truly loved by something greater than any of us can imagine.
Maybe we can try to carry that with us every moment and stop harming eachother.
Either that or blow the living fuck out of the entire planet because there's too many people.
What the hell? the Georgia Guide Stones said thats the way it has to be.
Jimmy Carter thinks so too. Then go hit an underground bunker and be greatful you're kissing
Kissinger's ass while your family is cremated and your entire civilization is vaporized.
Happy Thanksgiving.
<=====Do more shrooms
<=====Start the meds.
Sounds like he has already abused the shrooms.
Buddy,
It's Friday. Go have a drink. You'll feel better.
Ever preview your posts?
Why kill everyone?
Just pick a single bankster and blow his head off. Watch the market return to sanity within ten minutes.
Did you hear that some guy tried to blank Obama by sending some rounds into the Reflection of the entire visable spectrum House? (Don't want to type certain words that would send up a crimson flag to the all knowing .gov spy prgoram) It is actually a pretty amusing story.
@walcott
Your thoughts are not far from mine and yeah, I think the stress is showing. It's the tilting on the edge but never falling over, for fucking ever, that is really doing a number on my perspective lately.
I'm going to have to pick a date on the calendar by which time, if the shit has not hit the fan, and the European charade is still dangling the entire global market by its short and curlies, I'm going to have to turn away and stop following this shit.
It will be difficult cause once you're awake, you can't return to slumber. But I gotta do it because I don't like what I've become - the joy is seeping out of life. I'm an anxious, fearful, worried, mess.
I'm already out of the market and intend to stay out. And the NWO steamroller isn't going to stop suddenly. We are all going to get flattened - so why worry? Why give it another second of my precious life? The people around me sure don't lose any sleep over it.
The worst part is the near shunning by my family and friends when I try to shine a little light. It's becoming a burden and an obstacle to a "normal" life. I feel like a pariah.
TPTB could drag this thing out for another ten years, propping up the status quo with ZIRP and printing. That's another ten years down the crapper waiting for the next shoe to fall.
Maybe the NWO isn't really what will bring us to our knees anyway. Last I heard, the radiation is still wafting around the entire world with no end in sight. Can't "duck and cover" from that beast. Gradually, that has to take its toll. Even the elite cannot escape the invisible poison that invades everyone, everywhere, regardless of their pedigree. Even the Rothchilds have thyroids and lungs that are all too human and vulnerable.
Life is too short. Grateful is how we should feel. I'm going to work on that. Happy Thanksgiving.
Smelled like BenBank all day...
Tanks for this- very handy to get a perspective of the relative shifts over the last week.
And yes: eerily subdued end to the week, but I think the USD will gain traction from here with oil remaing bid. I expect there are some bad wounds from the massive Brent/WT spread collapse.
Have a great weekend Tylers all.
Propper trading for me tomorrow: paper for gold and silver-always feels good.
Reads like...You're off to the mall...Holiday fever?
Money, burning a hole in the pocket?...Itch, you gotta scratch?
It's, Ok!
Calm? You must be kidding. The market is extremely nervous. Expect signicant volatility next week. Apparently, dollar liquidity shortfall is still a very big problem.
It was a pitiful volume maniac algo driven mountain range market today. Every time I checked the charts it was up or down .5%. That chart today looked anythign but calm.
So the grand idea of the world is that Country A has too much debt, so Central Bank B needs to print money to buy Country A's debt, so that Country A can lend more money to Bank C, because Country A bought Bank C's debt and Bank C can no longer lend to Consumer D who without access to credit cannot purchase Country E's products, which used to buy Country A's debt but can not anymore because Consumer D can no longer afford to buy the products of Country E which is what led us to the systemic global collapse that can all be remedied by Central Bank B printing money and nobody will care to look at the books of Central Bank B which is now on the hook for all of A,C,D, and E's debt which will never get paid back and somehow that doesn't matter.
Giving money to banks doesn't fix the problem because it does not address the fact that it is the citizens of each country that are saddled with too much debt and can no longer finance the level of consumption the global equity market requires to show the constant growth that supports the overinflated values of the equities. Bailouts of any kind do not fix anything because they force losses to be absorbed by the population and increase sovereign debt burdens.
Cutting interest rates is the answer that could have fixed part of the systemic debt problem, but interest rates were cut for banks instead of citizens. Forcing banks to cut credit interest rates on outstanding balances to 2% while at the same time freezing the credit accounts of those who took the offer could have saved us from much of the current problem. The banks would have been guaranteed repayment of the lent principal plus a fair amount of interest and tapped out consumers would see a substantial increase in disposable income. Being frozen out of credit expansion consumers would be forced to make frugal choices and live within their means.
The problem with this solution is that banks collateralized and sold off consumer debt as securities supposedly netting a high return on investment that could not be realized if the underlying consumer debt was forgiven in any way. That and inflated equity prices of the global ponzi can not be sustained if consumer consumption drops to levels within the means of true national income.
Helping the consumer trashes the equity market without the expansion of debt, so world leaders have decided the expansion of debt is the only solution because it keeps the stock market value high and therefore the net worth of the top 5% intact because their wealth is tied directly to the performance of the stock market.
I think I even lost myself on that one...
Jane get me off this crazy thing.
It's like quietly watching the tide drift out beyond the horizon before a tsunami. Time to pay the tab and get out of that seaside bar.
The last time we had a -100 point intraday swing was 10/28/11 (friday). On Monday 10/31/11 the dow tanked 274 points. An ominus sign? we'll find out on Monday
Maybe. Seems these days the manipulation and back-room deals occur under the cover of darkness that is the overnight hours and weekends. How many times lately does the appearance of rational market movements revert between closing and opening bells of the US markets? Just sayin' the leprechauns might be on duty the next 48 hours...
The tell will be Monday when the ECB releases how much periphery debt it bought last week plus all the t+3 that cleared from the week before. As of 2 Wednesday's ago, the ECB was sitting on 194b Euro in their SMP program. That Wed, Thur and Friday were huge days in terms of intervention. Practically the whole market was selling into ECB bids.
And just to remind everyone, the Germans capped out their contribution (pledges with some cash) at 211bEuro for the ESFS. ESFS has total cash and pledges of 246b Euros presently. Therefore, when the SMP will go over these two thresholds, it will effective not be in a position to take the ECB's SMP portfolio in its entirity. And since the SPIV is for all intents and purposed dead, this will be the last step before the next phase, i.e. ECB monitization.
Don't you think the upcoming holiday might have something to do with the quiet volume. I think next week will be pretty smooth because of Thanksgiving (not sure if Europe or Asia has any type of holiday).
It's the Monday after that I think the real panicking will begin.
Jeremy
Common Sense Capitalism