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Market Snapshot: Financials Flop, Credit Collapses, S&P Closes At 2011 Lows
The S&P cash made new lows for the year as we aggressively probed lower into the close and penetrated Doug Kass's bottom from Aug 9th with cash and futures closing below 1100 back to 13 month lows, with the pain spreading wide following rumors of hedge fund blow ups. Financials led the dance and just could not get a break all day despite the early perfectly fadable cheerleading from Cramer et al.
Credit markets were a disaster with red everywhere and notable gaps suggesting some desperate reaching for hedges/unwinds as index overlays started to disengage from single-names. IG closed over 5bps wider at 149.5bps (while underlyings popped notably more) and HY cracked 50bps wider to around 900bps! Tail names were crushed as IG9 (the short-dated but most exposed to high tail risk and correlation traders) widened 14bps to 164bps and CMBX and ABX tranche prices all blew lower with seniors underperforming juniors (which represents more long correlation/systemic risk bets).
Source: CMA
We have warned that sooner or later, managers/traders will need to sell/unwind longs as basis risk in the hedges/overlays becomes too much and the moves today suggest we are getting there (especially in financials) as it was the widest names in IG that cracked the most ( absolutely) even as low beta credits hugely underperformed relatively as traders grabbed at whatever was low cost protection with some market exposure (e.g. insurers). Insurers have been one of the best low cost long vol trades of the year as buying protection on a basket versus IG was very low carry and had excellent beta to HY (as these names are basically over-stuffed HY new issue soaks - they need the yield).
We have discussed the financials extensively today but while the chart and table above shows both stocks and credit getting sold aggressively, we thought it worth noting options activity and the front-end of the CDS curve. While counterparty risk is obviously significant (what else is a major trading partner to do when he sees this kind of market action?) the moves in the 1Y CDS today were dramatic in MS (and the other TBTFs to some extent). We opened 580/630, pushed wider, then flattened at 640/690 for much of the day until the last hour or so when the offer side got lifted aggressively to 650/725. At the same time volume in OTM puts was very large with $5 strikes most notably. While the stock and CDS weakened very significantly into the close, the $5 strike puts did not continue to push too much higher from their midday levels. The point is that we suspect with implied vols north of 200%, that capital structure arbs were in play, selling 'expensive' equity puts and buying 'cheap' protection (we discussed this rather complex idea a few times in the past - most notably here). We bring this up as it helps explain the moves at the front-end of the curve but while this may reduce some fear, the action in bonds and the rest of the credit-equity complex were horrible.
TSYs saw an enormous day as 'Twist' started with 30Y -19bps and 10Y -17bps and both investment grade and high yield bonds were net sold - something we have not seen for a while. Financials were the most net-sold corporate bonds (didn't we warn that the buying last week was basis traders and not 'real' money?) followed by Communications names. What was also worrisome - but in line with the huge flattening in TSYs - was the rush to net sell anything with duration/risk as 3year and above maturities were net-sold while 0-1Y was the most net-bought on the day
Instead of its normal sideways plod after Europe closes, FX
markets continued to weaken dramatically against the USD with only JPY holding stronger while EUR broke to a 1.31 handle and closed at its lows of the day as DXY managed to trade at its highest since Jan 13th 2011. Gold and Silver managed decent gains (the former outperforming the latter) as oil and copper lost 2-3% on the day.
As we closed broad risk assets (CONTEXT) and the S&P managed to reconnect - with ES overshooting a little after cash closed. While relative to credit we still see 20-30pts of downside for the S&P (based on current HY levels which obviously can deteriorate), we need to see further weakness in carry FX and oil as well as strength and flattening in TSYs (more 2s10s30s compression) to really 'enable' this sell-off to reach Janjuah levels - but given the momentum into the close, nothing would surprise us.
Charts: Bloomberg
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Doug Kass can't be happy right now.
james altucher cant be happy either
Frankly, I'm not all that fucking happy aboutg today either.
I did trade down into some of that spread blow-out. We'll see.
my agro stocks took a big hit but i also bought three 100 ozt JM & Engelhard bars over the weekend. holding them is so empowering!
feels like 2009.....
no safe haven except money markets.
How can Ben not committ suicide. Look at the carnage he has caused by running IWM up last year. Now 87 to 61 in 2 months. Nice price stability Ben. Go fuck yourself. Hope you all didn't get burned
Today's markets have given us lehmans, but there's still no way to make lehmanaide out of this technical, across the board, chart break. My screens are pointing way down 5% plus.
Would love to see Goldman go under.
Biggest Blatant HAIR ON FIRE day in a long time. Insert WB7's Jamie LIFE cover here. Total BS.
Your right.
I expect the very same headline as this article, repeated for several days this week. ESPECIALLY the part where it says S&P closes at 2011 lows;)
I would expect most people on ZH would be happy today--since gold went up 2.22% and silver went up 1.74%.
i heard he likes having his bottom penetrated
Here's a bottom that got penetrated today
CRAMER on Morgan Stanley
http://video.cnbc.com/gallery/?video=3000049092#eyJ2aWQiOiIzMDAwMDQ5MDM3IiwiZW5jVmlkIjoiQ2E5TkVtcnA0TlUwdFlrNGdZU1V5QT09IiwidlRhYiI6InRyYW5zY3JpcHQiLCJ2UGFnZSI6IiIsImdOYXYiOlsiXHUwMGEwTGF0ZXN0IFZpZGVvIl0sImdTZWN0IjoiQUxMIiwiZ1BhZ2UiOiIxIiwic3ltIjoiIiwic2VhcmNoIjoiIn0=
A douche in 2008. A douche today. Some things never change.
http://www.youtube.com/watch?v=gUkbdjetlY8
LOL!
"Nothing could surprise us.."
It is nearing time for another short-covering rally.
I wouldn't be surprised if we see a slow hypnotic grind lower into the 1st circuit breaker followed by a 2nd day of slow grind down into another circuit breaker (this time loading the bear trap) In the 2nd lock up they announce printing where upon we don't even bother to open as we re-lock this time on the upside.. by the time real trading takes place all Bears are boiled alive.
Financial Weapons of Mass Destruction finally arrived.
banksters (aka. financial terrorists) already detonated it, but Fed tried to contain it with paper dollars. Well that failed and now we have clusterfuck of a society.
Lone superpower self destructs from her own stupidity.
or his ass.
<Hey is that Liesman up there?>
We penetrated his bottom?
whose we?
so after all these QE the us dollar is still the strongest currency in the world, it didn't lose that much, it isn't trading @ 0.5 euros
fiat vs. fiat.
compare fiat vs. metal
DXY should be a basket of commodities, it would be a lot more meaningful.
No kidding. Comparing failing fiats to other failing fiats is just stupid.
It's like the people on the stern of the Titanic saying, "Those idiots on the bow are really in trouble!"
S. O.
Beautiful, standard oil would be the biggest company in the world if you were to put that humpty dumpty back together again. I love that story, PS its about DIVIDENDS.......
The US Economy is fine.
/jimcramer
Cramer shoudn't take a triple-dose of crack + meth ice + caffeine before he goes on. He looks like his head is gonna explode from blood pressure.
That would be the only reason to watch that garbage program.
I like Cramer because he tells you WHAT NOT TO DO.
You know he is a shill for banksters who are either trying to unload at highs or load up cheap.
so when Cramer says to buy BAC, wall st. insiders are trying to unload their positions.
When Cramer says to sell BAC, insiders know bailout is coming and they are trying to get in lower.
I'd be curious to know what is the alpha on a portfolio trading on exact opposite of Cramer's recommendations VS. another portfolio on all of his recommendations.
He is a journalist btw.....talker/entertainer speculator. Real traders trade and hide their secrets even within firms.
Tyler! BIGGER AVATARS!
I'm thinking that with Operation Twist, there is also an "Untwist" ala the hedge overlay unwinds. Potentially, some violent traps are gonna snap in here.
Intended or unintended consequence?
Why are health care stocks getting slaughtered? Doesn´t make sense to me. They should be holding up like consumer staples...
If this is indeed the big implosion, you expect any equity to be spared?
Your avatar is awesome. If we implode, Ron Paul will be elected President.
They're liquid and can be sold. Offsets for things with less liquidity.
Really ugly 1st of month and quarter. Doesn't auger well for rest of year, though there will be some brief spectaculr dangerous rallies.
What's more liquid than Tbonds? Where's the most profit?
335 of 500 S&P stocks now pay more than the 10 yr Tnote. That's 2/3's.
SPY pays more than 10T, XLU pays 1.5x 10T, IYR for chrissakes pays 2x 10yrT AUGH!
how can the gov or individuals pay for outragously expensive (and largely useless) healthcare if both are broke?
Hospitals and such--they carry huge amounts of debt and Medicare reimbursement rate cuts have screwed their business model. Then you can see why they aren't going to be leasing a $10 mil/year robot surgical suite. It all rolls downhill.
all equities and even bonds are taking a hit. also commodities, except gold/silver and for some reason Nickle (up 5%)
economic depression (aka. reality without Fed)...portfolio asset rebalancing...
even funeral parlors (SCI) are down....
Get Low about a funeral party
http://www.youtube.com/watch?v=NVR6-HnKtM8
"people are dying in bunches everywhere but here"
"What are the odds of a funeral home going broke?"
"You have a business that everyone on Earth needs. If you can't make that work, it's you, right?"
One sentence summary: "It's the end of the world as we know it, and I feel fine."
Battlestations!
Latest rumour:reverse split for Citi
Tag: Investment Grade
Right.. countdown there.
Good thing I bought SPXU yesterday.
banks/insurance, MIC, Health care, all govt supported all in trouble.
Any update on how the Fed will inject the 400 billion. Specifically will this be more POMO or some other event that we can front run?
4 trading days until Anon takes out the NYSE
very, very suspicious them targeting wall street, an attack on the NYSE plays right into the federal govts hands while doing no damage to them. it helps no one as the NYSE is already sinking like the titanic anyways and all this attack would achieve is not allowing us to watch it go under.
an attack on a major civilian institution will strengthen the feds position on "cyber terror" and will pave the way for further internet censorship, control and regulation all in the name of security and safety.
I would like to believe anon is legit but this casts to much doubt..
I call false flag.
+10
Not to mention that as it turns out, many of the "Invade Wall Street" crowd are Soros-funded Obama supporters whose shallow philosophy fails to extend much beyond trivial class warfare & envy. The fleabaggers if you will. Why they think re-electing the same dude who has been asleep at the wheel is going to help anything is beyond me, but there you have it.
Name your source.
Yeah red-pill. Let's see your source. Or are you talking out the same end as many others who want to undermine the protests.
marcusfenix
I call it JUST what the Dr. ordered..........I am seeing the looming huge hand of FASCISM creeping into our homes.
Bottom Line: Event Horizon,pre-planned by the PTB.
If it hasn't already failed by then.
Surely this MUST be bullish: we have hit the bottom! From now on it's only UP UP and UP
(for PM:s)
Dennis Gartman couldn't pluck a hemorroid from from " Big Bens ass", he's been calling the euro fall> for ever!
Fore ever, is right up there with Asteroids!
Is unwinding contagious?
ETF's are. Run .Run , RAPUnzel.> drip, bwirp?
v Overlays x The { VIX/ XLF} , says it all!
I'm tired of these CNBS ass holes stealing my trading ideas!
But the Wall Street Protesters are still there! Read this and while you channel a little John Lennon:
Over at TakiMag, the ever-helpful Jim Goad spells it out for them:
The multicult left likes to imagine no countries -- and no religion, too. They imagine all the people living life in peace. They see themselves as dreamers.
But what they don't realize is that they're not the only ones.
Goldman Says "Almost" Zero Bonuses
Now you Occupy Whore Street protesters move along and go home... Nothing to see here...
Problem Is
"Almost" Zero Bonuses
Translated, for a select few, a WAD that willl choke a horse.
+1 DosZap...
BTW: Mongrel -- 11 Weeker
Me thinks me found another TBTF corporate whore sock puppet...
Check that IP address, Tyler...
Obama to order the confiscation of ALL GOLD.
really?
So let me get this straight. He's the most incompetent meat puppet to ever hold the office of POTUS but he's intelligent enough to remake the whole world into everything you hate?
Why don't you quit your irrational whining and buy some silver?
Very Bullish for Dentists!!
Bullshit Barry: The Bitch of Wall Street
Barry Soetoro to read the teleprompter and do exactly what the 'prompter tells him to do...
Somebody's gonna kill Cramer.
That'll be a sad day. He's hilarious.
Not all. Some see themselves as LEADERS too. The dreamers are just convenient tools
i guess the doomsayers here will finally be satified when there is complete economic collapse, and there are no police to come when you dial 911, some people on here are unreal with their desire for armageddon, i hope YOU get it on a micro level in your life, like fucking brain cancer....
Let me guess, long BAC?
Kornholio, grow up.
fuck you and all the people like you that only deal in worst case, conspiratorial, bull shit, lots of people struggling right now and fuckers like you calling (wanting) more misery, dont tell me to grow up, you grow the fuck up dick shit, you can get fucked.....
No room on the Ark for you...
Fate
I already am IN the Ark.
no fucking such thing as the ARK, you bible thumping hypocrite....
kornholio
doomsayers, or truth tellers?.
WE are in the middle of this shitstorm like every one else, there are no special tickets.
We will all be scroomed equally.
Not a soul here (American at least), wanted ANY of this.
I sure didnt ask for it.Had ZERO say in it,way I see it, these bastards ruined the rest of my life, my kids, and their kids.
You think WE ARE GLAD for that?.
BS,grow the FU.
we have had shit storms before and this will not be the last one asshole, you chicken shits pray for the end of the world, I hope you get it on a personal level if thats what you want, just leave the rest of us the fuck out of your biblical ending, yall build your little bunker and get you some shit food to eat, and kiss my ass...and after you are through kissing my ass YOU grown the fuck up....
See, that's the difference, we knew Dooms Day was baked in the proverbial cake in '08 when Banks were put on life support, TARP was stolen and a little programe called POMO was enstated, so ultimately, there is no other direction to go but down. It was the indication of a hostile take over of America, because ultimately, the Americans are on the hook for all their bad decisions.
Kornholie, Dooms Day has been a foregone conclusion.
As for your 911 call, I handle all my own domestic 911 and I don't rely on anyone to keep me and my family safe but me. I don't need a big daddy to tuck me in at night and tell me everything is going to be fine tommorow, I make my own destiny, as you should.
Carry on..
The Bad Guy..
I'm very pessimistic about the immediate future, so I guess you'd call me a doomsayer (although I'm very hopeful for humanity in the longer term). I consider myself realistic, based on what is happening right now in the world, but...whatever...
That said, I only expect to dial 911 after an incident or to report a traffic problem. I have zero expectation that the police would respond to any threat at my house before I had to deal with it. "When seconds count, the police are only minutes away". I also have the very real concern that any police interaction will make any situation worse.
And...just because I'm expecting trouble, potentially catastrophic trouble, doesn't mean I"m wishing it to happen. Where as you....Wow! who pissed in your cheerios enough for you to want strangers to get brain cancer?
good one mark
That's not Mark, Agro-boy.
I may be new here, but I can read.
hey, schmuck! you seem to be paying attention
i think you should have an avatar
i put the google on "beltway baby" and got this: b.baby.1 & this: b.baby.2
your choice! L0L!!!
the only way to get the cops to respond to something is to say to the 911 operator 'I HAVE A GUN AND I'M NOT AFRAID TO USE IT'. but, only say this in the event of a real threat, as the cops will be there within minutes if not seconds of hanging up the phone.
dammit beavis!
i think tyler's gone a whole day w/out mentioning QE III!
shhh! ..., ...don't tell him, for pete's sake!
another cocktail after the market porn snapshot, mr durden? ok!...another double over here for tyler, stat! stats?
double stats, BiCheZ!!!
new zH drink! someone make up a recipe, quick~~~i mean stat! oh, wait! i know:
and make that a double, stat!
slewie's triple double! enjoy!
The 2011 lows aren't in yet... we still have three months to go.
Now I understand Operation Twist..... It's TARP II
The banks are going to have to raise capital... Going to sell all their agency depand bonds to the FED
FED will try to keep long rates low for awhile
Bond Market to big for the FED
Going short HARD!
Buying Gold and Silver at end of month after more redemptions
Now I understand Operation Twist..... It's TARP II
The banks are going to have to raise capital... Going to sell all their agency depand bonds to the FED
FED will try to keep long rates low for awhile
Bond Market to big for the FED
Going short HARD!
Buying Gold and Silver at end of month after more redemptions
We posted this here before.. learn from history!
Examining the past – Déjà vu Again?!http://www.bostonwealth.net/2011/09/24/18958/
...but what the fuck do I know!
http://www.bostonwealth.net/2011/09/30/ranked-in-the-top-1-83-of-all-tra...
Tyler: Are you going to make (or dust off) ZH "S&P 1000!" hats??
BTW: "just could not get a break all day despite the early perfectly fadable cheerleading from Cramer et al ..."
What was that 10am ramp job?
perhaps we can get more gamma from our 11K chapeaux due to hi beta...
...hi beta gamma, BiCheZ!
credit markets, copper being slaughtered...ah sh*t we are going down.
obviously this means that the 'markets' will have a great rebound tomorrow!
well, two massive down days, i went long 20 /es at 1086, see if the plunge protection team might show up and make me some coin. if not i have a stop loss set
I don't understand what Credit they are referring to. We have officialy closed all credit cards and are cash only. No longer will we participate in the ongoing fleecing at 29% or higher interest. (We have been paying 7 but enough is enough.)
I think people will really begin to bail out of the market on January 2,2012 knowing they won't have to pay capital gains for another year and a half. IMO
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