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Response To The "No Eurobond" Announcement - "The Theme Of The Market Being "Broken" Continues To Play Out"
From Peter Tchir of TF Market Advisors
Europe is shaking off yesterday's seemingly disappointing Merkel/Sarkozy press conference. I can't find anyone who is particularly bullish about it, but the moves in the hedge products have to be respected. XOVER is 26 tighter, back to 584. Main is 7 tighter at 139, and even SOVX is 5 tighter with Spain and Italy leading the charge. That is in spite of relatively neutral moves in the bond markets. It seems like Europe must have had bigger and larger hedges than I realized. The pain in trading books there is palpable today. Bonds are getting marked marginally tighter, index shorts are getting marked a LOT tighter. Investors are scrambling to get on side, and are using to the move in indices as an excuse to shift to "risk on" mode.
The theme of the market being "broken" continues to play out. This time market is gapping tighter on what if anything, seemed like a disappointing announcement - No Eurobond, No new increase in EFSF, and Yes a new tax. BAC CDS is already at least 20 bps tighter this morning. Anothing shining example of a crowded (and possibly longer term correct) trade getting squeezed.
Gold is doing well again. It is not getting dragged down in spite of the shift in mentality. I have to believe that is because everyone is becoming more convinced the only way out of this crisis is to print money.
Nothing has particularly changed in the past few days, if anything, data has been weak and Europe is running out of bailout willpower, but this move is too strong to ignore. With limited data due out today or even tomorrow, the rally could continue. The market has also now grown scared of missing the Jackson Hole rally. It seems that we are constantly afraid of missing the next rally, only to be disappointed, but c'est la vie. Maybe one more grind higher is what the market needs to suck everyone fully back, to set up for the next downleg. It is shocking how quickly the market seems to be forgetting the fear of last week when SPX was heading to 1100.
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Short Spain till intervention
And then short it with both hands!
dont you guys know that in my country you can only go long..
that is one crazy avatar. I'll admit trying to smack the bug. :-)
ORI
Me too lol
no to the eurobond
yes to the eurobong
also yes to sloppy facelicking and kissing between sarkozy and merkel.
yuk yuk yuk.
http://azizonomics.com/2011/08/16/sarkozy-and-merkel-call-for-euro-governance/
smack me, bug me, squish me, crush me, kill me, stomp me, break me or shatter me
i'll still be there. My binary reincarnations will keep haunting you..
i sprayed you with alcholic cleansing fluid, and was just about taking my mini to the repair shop...then I read ORI's comment.
geewez, you haunted me alright.
Thanks for sharing.
to infinity, right?
Is that a eurobug? Not a bug, but a feature?
What is XOVER?
Posted it in the other CDS thread... iTxx Crossover index. 40 various EU corporate CDSs bundled into 1 for extra liquidity when making CDS plays.
Yes, I saw it, was going to post here that you already explained it here.
Thanks a lot again, seems that everyday I learn something from you.
It's one of those myiad of synthetic ways to make money, unlike actually making something in a productive manner. Breaking down ZeroPower's explanation into its component parts requires way too many steps to explain for something like that to be a "normal" investing vehicle -- in my lowly opinion. Financial three card monte.
I had the same question and found the answer elsewhere but thanks also for your succinct explanation.
Popping market zits can be extremely satisfying.
POPPING the markets higher on no volume can be extremely lucrative for Whore Street!!!!
BUT NOT THIS YEAR BITCHES!!!
The markets are starting to crack
And Europe is leading the pack
To placate the Whore
We need to print more
It's time for a false-flag attack!
I love the Limerick King.
Would you be interested in doing a longer piece for me? Or maybe a bunch of short ones with a theme? Have your people call my people. :>)
zhcognitivedissonance at gmail dot com
:-) What? You want him to write longer limericks?
I propose a series of well-known epic poems, re-cast as limericks.
The Limerick of the Ancient Mariner
A Mariner, ancient and hoary,
Stops one guest as he reaches the party,
"Old man, give it a rest!"
Said the frustrated guest,
"Why the heck are you trying to stop me?"
LOL
I think the man deserves a wider audience. He's much more talented than I so why not use and abuse him, then spit him out the back.
I get my inspiration from Goldman Sucks. :>)
There was a young man from Racine....
Oh, you were looking for something else.
It would be my pleasure sir...
I've sent you an email with the prefix I mentioned.
TLK.
I've gotta say I consider you one of the major talents here on ZH. Just yesterday I was wishing for a compilation of your prolific output.
Back off Buckaroo. I saw him (her?) first. :>) And yes, s/he is a major talent that I hope receives a wider audience.
ZH seems to be a celestial star nursery and I really do think we need to encourage the hidden ZH genius to come out of their burrows.
Hey, we can share! :D TLK writes enough to keep us all laughing.
The CDX index consortium also announced that it is introducing a new 35-name index called the Crossover (XOVER) index on the day of the roll. Criteria for the new index will be a triple-B rating from one of S&P or Moody’s and a double-B rating from the other. One credit derivative strategist says: “We expect the crossover index to be very liquid and to become the main focus of index trading, with a five-year spread in the mid-170 basis point range.”
http://www.creditflux.com/Glossary/Crossover-index/
Hey! How come I can't buy a fire insurance policy on the home of my alcoholic neighbor who smokes in bed? That's criminal not to allow me to buy insurance on his house. That's not a free market!
Maybe the half woman, half goat Merkel, and the French midget Sarkozy already scheduled their next emergencny meeting!
Beware of the dreaded '9:45 flameout.'
Long is wrong.
Well, ECB is again buying the Italian and Spanish toxic waste today so there's your explanation why SOVX is tighter.
'Sterlised' Italiana and Spanish 'toxic' debt. As opposed to FED play of 'monetized' toxic debt with its own PDs. The ECB plays with tens of billions on sterilized basis, the FED on hundreds of billions basis in monetized printing. Nuance.
The only question is if push comes to shove and the bond vigilantes of US based HFs start making big moves in EU zone, can the ECB keep this up?
We all know the answer! The EU banking debt exposure is huge! On both sides of the pond...explosive molotov cocktail!
The 'no Euroband' status is interim play. The EU has no political mecanism to put a Eurobond of size in place. It needs revision of treaty. A long way to go. That is if the EU people want to go federal...Only the crunch of coming events will decide that! If EU goes federal it will take time and... a lot of more pain to learn lesson.
The market is no longer free. In fact it's more or less a system now managed by the central planners.
yeah, this move feels completely contrived
It hasn't been a market for quite some time. I think the major precedent for intervention and manipulation occurred after the 1987 crash. Since that time, manipulation has been the norm. Since March 9, 2009, it has been an everyday event. Now it has degraded to the point that most market action is a battle between the natural tendency to crash, and the manipulators stepping into low volume to clean up and replace the broken china in the cabinets. Anyone who says the market has to crash or has to ramp is ignoring three years of evidence that it crashes when it must, and it ramps each and every time when it can. That is not a coincidence.
Everything makes perfect sense if we accept that everything that is being done is to buy time. The sole thing not being done to buy time is central bank purchases of gold. Therefore, the gold purchases are part of their long range planning.
When ribbed for abandoning stocks, where he was regarded as an expert, for commodities, John J. Murphy said, "Sorry kid, I just went where the money was." Unless you are day trading volatility, stocks are not where the money is.
I'm really appreciating your perspective, Smid. Thank you.
Perhaps a tepid rally over the next few days/week to test the H&S neckline before the next shocking plunge.
Or not.
At the risk of sounding cheap, the misallocation of global resources rolls on bitchez. I can't help but fear that pride is blind, and Euro, US and China have maximum pride to conserve. It isn't planned centrally in my view, its a pervasive sickness that will be split under pressure.
Nouriel Roubini firing shots across the bow this morning, Tyler:
Thus bond mkt prices coming disinflation as UK double dips "@zerohedge: U.K. 10-Year Yield Lowest Since Bloomberg Records Begin in 1989"
Too bad he got it wrong: biflation will consume the low yields into oblivion. Disinflation is a Greenspan wet dream
Let's wait until it blows up in his face.
Germany And France Announce Plans For Single European Government As Solution To Debt Crisis
http://www.youtube.com/watch?v=jZQVnRgmz3c&list=FLjAWptc6azYo&index=1
1 World Government on the way!!
EuroBOND? joke, eh? No bonding in the EU. A forced marriage, splitting at the seams.
Here is a thought though. If we consider some history, who is likely to come out of this smiling, at the very end?
Europe with a few thousand year history or the US (which is a puppet state of course), with it's measly couple of hundred years?
I'd bet on Europe, or more specifically Germany/France/GB/Russia.
ORI
http://aadivaahan.wordpress.com/2011/08/16/pre-cursor-2-and-currents/
The people with gold, nobody else
Nonsense. They are cooperating in kicking the can and they are all buying gold. How then can you think that these coordinated worldwide efforts will not meet the same end? This will end with them utterly failing together or succeeding in amassing enough gold to institute a healthy monetary system. They are not acting in lock step without a reason.
I'll just say this much. They are acting in lock-step under strict guidance.
No, make that orders. Marching orders. Play by play.
I'd study up on the club of rome, all of the CFR/TC/Bbergers.......
Our belief systems are probably polar opposites, which is all right by me.
ORI
ORI, before i challenge you to a friendly duel, are we talking national/cultural/tribal history here or history of the land itself and that of its peoples?
Fight the tape but fixed income ain't flighty equity. Besides an overwhelming institutional bias the
market itself is of staggering size. IOW it can't be manipulated and those on the wrong side are just plain wrong. It also forces economists to take note: malfunction in the works. Call it the Magical Mystery Tour if u want to find out what it is.
Utterly, hopelessly, wrong.
All markets are manipulated, in all time frames, all of the time. If anyone believes, after the price action of the last several years, that the markets are not manipulated, they'll never get it. They want you to believe the markets are not manipulated. The game is to make you think it is a market and not just a game. The game is to lure the innocent little kids into one side of the trade and then to grab the rope and haul them through the mud. So sorry little kids, you lost the tug of war, want to try again? How about some other market "truths?"
Markets are rational
You can't time the market
Buy and hold is the only legitimate way to invest
Stocks for the long run
This time is different
1 world govt, when each individual country is torn apart by dual global and local mandates? Tough ask.
The prez yesterday opened the door for Eurobonds if you listened closely. Merkozy both said it, "...if necessary". What did you expect? Announcement in one day, implementation the next day? Not realistic.
Merkozy cannot say they are for it all of a sudden. Too much friction internally, especially with German coalition partner FDP. They will come around.
Plus, if eurobonds were out of the question, EFSF/ESM would have been increased. Plus, if there hadn't been any news yesterday, markets would have crashed today.
So the seeds of euro unity are slowly sewn "if necessary". The EFSF is still no bigger than 133% of German GDP.
i think people don't know what rumor to buy anymore...and, as for selling, what is "news" anymore anyway.
i think the assumption of qeiii hangs heavily in the air, and the market will sell on expectation that that's what the crybabys want in order to justify another round...priced in??? what the fuck are you talking about. what does price mean anyway?
i already know enough to never ask too many questions about price...at least till this world turns that sharp corner right ahead.
thanks, Mr. Tchir.