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Financial Stocks Catching Up To Their Recent Credit Weakness
While Fitch sees US banks having manageable exposure to the PIIGS markets and having cut their overall exposure, the reality of the contagion of further European banking system stresses (which we have been very vocal about in our discussions) is a concern. We have highlighted again and again that the credit market has not been as comfortable as stocks with the US financial sector for the last few weeks and today it seems reality is starting to sink in as BAC trades with $5 handle and $MS a $14 handle back to one-month lows. XLF is now down over 2% today alone as the broad HY credit market is collapsing this afternoon.
This shouldn't be a surprise to anyone who has been reading us for weeks now. Once again credit markets had it right!
Chart: Bloomberg
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This shouldn't be news, when financials are up THAT should be news.
Shame really...
TVIX anyone? Best thing since sliced bread since August '11.
Maybe I'm just an optimist, but I think a late day sell-off bodes well for my puts tomorrow.
I'm there with ya... The puts I have on looked great last Wednesday, but then Friday happened... I hope we dont get a repeat this week.
If the financial sector was a woman, she'd look like Rosie O'Donnell.
LONG FAZ.. but always SHORT financial corruption and stupidity!
Very strange that this happens late in the day....mysterious indeed. Something must have f--ked up in credit markets somewhere?
Watching B of A sink down lower and lower reminds me of a big rotten turd that will just not come out of your arse and lodges up there for a few hours, but then, whoosh, there she blows flying out all asunder! The B of A turd flush is almost here!
OT: I'd like to hear what happened to the markets at 3p.m. EST.
rumors on BAC/Merrill!
Thanks, sabra. I hadn't heard the rumors.
And no, RT, gold wasn't dumped like the equities.
Its been in "distribution" phase for a while now while the big boys unloaded. Well, it would seem that the music has stopped...
According to CNBS: Major Wall Street Banks Fall Sharply on Fitch Report on European Loan Exposure
Of course, gold and silver also get thrown overboard
Nobody wants to hold anything but U.S. Treasuries today.
Rather unfortunate call on selling oil there Robo...oh well by today youve removed that trade from your paper Fantasy Stock League portfolio by now Im sure.
In other words, you took a beating for going bulltard today and are trying to get off of the mat like Rodney King
I think that was a test and that it confirmed their worst fears. There are no natural shorts in the market to take up slack on the down stroke. When it starts to go it will be bidless in minutes.
Exactly right! There ARE no real shorts in the markets! The FED shorting themselves muaaah hah ha haaa!
Stocks go up, stocks go down. You can't explain that.
/Bill O'Reilly
Yea but mostly stocks go down...mostly.
Whats the DOW at now 11,800 area thats mid 1990's levels, not even factoring in 2X inflation and $100 oil? Sad.
Dude, TVIX is my ace.... Been BTD on it up and down the lasdt few weeks. Load up the truck! I like to diversify though with SDOW and FAZ and shorting everything.
124 about to blow on SPY .. I wonder if they'll take it down to the Oct. 3rd lows just as options expire?
Go gravity!
Another great day for our hedge fund as the banks get blown up in mass. Just love the glow of red on the Bloomberg.
was ready to throw in the towel and cover my puts and all of a sudden a sharp sell off...can't figure out why but i'll take for today
I was getting really tired of watching Stocks flatlining for the last 2 weeks.
So glad the Market is finally selling into the risk that is in the Market while Wall Street is in La La Land.
Remember that on Fast Money They said that Everyone is trying to make their Money for the end of the year and said that it could be to the downside.
Heaven forbid they would try to make their Money on the downside.
Had some good times in the last four months, but everything is drying up for this non-US trader. Playing illiquid shit and pair trades doesn't work with daily schizophrenia like this, and I don't have the strength to enter any more limit orders. Volume is too dry to play spreads without having SPX move 20 points in the mean time. (Plus the invisible non-consolidated quotes here mean you're pennied out of every limit order fill... by... a machine.)
Market makes no sense on any scale, fuck it. I think it really wants to go up still (lol), but that's only for the non-risk adjusted momo types. I've never been able to do that.
Capitulating... but to no side...
bank stocks are veddy interesting, but stupid:
http://www.youtube.com/watch?v=QczyNaIu9Mo
51 day of accurate gold(6 months) ,silver (8 moths) ,oil (51 day) forecasting:
http://www.tfmetalsreport.com/comment/88527#comment-88527
VERY NICE ENCOUNTER... FINANCIALS AND REAL SITUATION... AND IS NOT FINISH AT ALL.... HAPPY...
Don't worry tomorrow they will rally on nothing, again...
From Mish Shedlock....a good simple explanation of how srewed the banks are (net vs gross exposure wise):
Banks keep investors in the dark on trillions of dollars of derivatives risk by only reporting net exposure.
Here is a net exposure example to show what I mean. Suppose I owe my sister Sue $250,000 and Uncle Ernie owes me $250,000. My net position would appear to be zero.
But what if uncle Ernie is bankrupt or simply will never pay the loan back for any reason. I cannot tell Sister Sue, "I am not paying you back, collect from Uncle Ernie".
Net position reporting only works if counterparty risk is zero. In my example counterparty risk from uncle Ernie is 100%. So what is the counterparty risk at JP Morgan, Bank of America, Citigroup, and Goldman Sachs on tens of trillions of derivatives contracts?
The answer is no one can possibly figure it out, on purpose, because banks are only required to disclose "net" exposure.
These CDS will never pay a nickle in any way shape or form and no matter the economic splatter that comes. Don't believe me then you might want to investigate who is on the ISDA committee that decides default(s). You will find those same widely exposed banks.
Therefore, the banks are completely 100% exposed to soverign debt and will either be rescued or put down like a rabid dog in my humble opinion when these EU soverigns begin to fail.
Equities have plenty of cathing up in terms of downside price action in the days ahead. Here is a look at the SPX, TNX, DX, EURUSD, and AUDUSD. http://bit.ly/v5NKFO