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Stocks Tumble As No Hail-Mary Rumor Materializes

Tyler Durden's picture


With the S&P closing -2.5% led by another financials sell-off (-4.3%), the long-hoped for late-day-rumor failed to appear and save the knife-catchers. The major credit indices modestly outperformed equities today although the after-hours (Greek govt is not collapsing) rally-monkey dragged ES (up to VWAP) closer to credit's performance as stocks closed back to 10/21 levels while credit held more in the 10/24 region.

HY underperformed IG and saw its curve flatten significantly at the front-end - significantly negative as both underperformed intrinsics. IG (now 12bps wider from Friday's close) has seen intrinsics underperforming - especially financials and high beta - as we suspect managers are looking to simply derisk the more worrisome credits than overlay any more broad (and basis ridden) index hedge for now.

For some context, financials were horrible in credit and equities today. MS +41bps and -7.6%, GS +18bps and -5.5%, and BAC +20bps and -5.6% as secondary bonds saw considerable net selling in Barclays, SocGen, BofA, and major US insurers. We wonder if the long-suggested underweight US Insurer credit, overweight IG credit trade is being dusted off once again as a low cost long vol trade with decent beta to HY underperformance. HY and HYG stayed very much in sync today - suggesting little technical fund flow - though secondary HY bond trading was more active than we expected. Is the hot potato being passed on to retail?

Another huge day in the TSY complex saw the 30Y rally around 15bps (back under 3%), 10Y drop back under 2% and major flattening continue as 2s10s30s collapses further. Almost the entire sell-off of October has now been retraced - especially in shorter-dated maturities.

FX markets were dominated by EUR's referendum-on / referendum-off volatility as the dollar maintained its strength which was ignored by Gold which managed to rally while commodities and silver generally lost ground today. Implied Vol and correlation spiked as macro protection was bid in equity markets but notably, secondary bonds and CDS saw major regions of net-selling as opposed to blanket protection demand - suggesting credit has reached its limit on second-guessing and is derisking at the individual level (as opposed to macro hedging).

Charts: Bloomberg


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Tue, 11/01/2011 - 16:29 | 1834077 Mr Lennon Hendrix
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This is going to be the biggest blowout ever.

If the Fed comes into the market tomorrow and says something about currencie swaps, inflation will gain huge traction.  Bernanke would love to buy Greek/Italian debt right now.  If they don't equities could crater back to Dow 10k.  This would crush inestor sentiment, and consumer confidence; housing would surely tank this winter.

That's why I see further easing....who knows.

Tue, 11/01/2011 - 16:31 | 1834100 The Peak Oil Poet
The Peak Oil Poet's picture




Oh gosh it's so exciting!
to watch the "Great Collapse"
to see so many freaking out
so many people speaking out
it makes me want to scream and shout
"hooray hooray hooray"


Tue, 11/01/2011 - 17:18 | 1834169 TruthInSunshine
TruthInSunshine's picture






Some leaders in Europe, through anonymous spokespeople, said they're going to solve their massive debt crisis despite lacking the economic, financial, credit worthiness, or ability of any kind or on any level, to do so, "someway, somehow, just as long as people - and creditors - don't lose confidence, are willing to wait for an extraordinary length of time, possibly to exceed their own lifetime, are willing to throw calculations based on fundamental arithmetic out the window, and are willing to forgive ongoing accrual of interest on already compiled debt."


In other news, there were whisper rumors on trading desks of a proposed 99.9% haircut on PIIGS+French+UK (PIIGSFUK) sovereign debt today.

--Reporting by Steve LIESman & Bob PissOnMe



Tue, 11/01/2011 - 16:35 | 1834126 homersimpson
homersimpson's picture

Further easing will arrive if the DJI is near 10k. Otherwise, it's risk-off if the Greece thing falls apart (not that it's viable in the first place, but algos don't care).

Tue, 11/01/2011 - 16:46 | 1834184 FinalCollapse
FinalCollapse's picture

Maybe this time around someone will remind the lemmings at Fed that their mandate is NOT to support the stock market prices.

Tue, 11/01/2011 - 18:18 | 1834600 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Gold stayed strong through the route the last two days.  I think Bernanke kept his powder dry.  Look for Bernanke to ease tomorrow; gold will drop to $1650 because if he eases that is Fed speak for "The Fed has leased gold to other Central Banks who will keep playing in the Fiat Pozi".  If he doesn't, it will take an emergency meeting, or it would mean waiting for the next Fed meeting, and at this point, and if Bernanke doesn't step in, markets will fall hard and fast, proving everything he has done up to this point has not worked.  It would mean game over for Economics 101.

Tue, 11/01/2011 - 16:44 | 1834161 Mugatu
Mugatu's picture

Just Heard The New Rumor if we need +200 points tomorrow:

Aliens have landed!  Martians landed and their first words were "take us to your fiscal leaders".  Martians want to invest in the EFSF leveraged fund.  

They figure that this will help destroy our planet and they can then take over.  


The rumor for +400 points tomorrow is the Martians plus the Chinese teaming up to fund the EFSF.  You can't beat the coming Sino-Martian Alliance.


Tue, 11/01/2011 - 16:53 | 1834209 drink or die
drink or die's picture

According to Krugman, it would be more beneficial for the economy if the aliens were to attack us rather than invest in the EFSF.  Thus, any alien landing should be met with force from our end to help instigate a galactic war.

Tue, 11/01/2011 - 16:59 | 1834251 Comay Mierda
Comay Mierda's picture

dont hold your breath on easing, the bernank will only print when the populace begs him to print. that means a few more MF Global's will have to happen but this time with retail deposits

Tue, 11/01/2011 - 17:11 | 1834306 Roland99
Tue, 11/01/2011 - 16:27 | 1834079 oceanview76
oceanview76's picture

Did anybody watch the interview on CNBC earlier this afternoon with the Greek official?!?  He said 50% is nowhere near enough of a haircut on the privately held bonds as their GDP will never be able to cover it.  He said, it needs to be substantially more to be realistic.  He also said that they were doing everything they could to not CALL it a default, because then it would be more troublesome for the entire system, so they won't call it that, even though it really is.  WTF?!?!?!?

Tue, 11/01/2011 - 16:32 | 1834108 john39
john39's picture

objective facts don't matter.  as long as no one important says "default", then its not a default. 

Tue, 11/01/2011 - 16:59 | 1834241 TruthInSunshine
TruthInSunshine's picture

Krugman said that the only way his neoclassical Keynesian model will allow for the salvaging of the global economy (i.e. kick the can for a few more years) is if banks are forced to loan $250,000 to each of the world's 7 billion people, in order to allow them to build Alien Proof Safe Rooms in their homes/apartments/trailers/earth-underneath-their-feet.

Prepare for the invasion, bitchez. It's the patriotic, debt-serf thing to do.

Tue, 11/01/2011 - 16:28 | 1834084 DormRoom
DormRoom's picture

the shape of things to come.

Tue, 11/01/2011 - 16:33 | 1834112 nwskii
nwskii's picture

Maybe Clif High wasnt so high after all

Tue, 11/01/2011 - 16:28 | 1834086 Tsar Pointless
Tsar Pointless's picture

Everything zooming up in AH trade.

S&P back above 1220, to around 1225.

Tomorrow Chairman Ben calls for the entire helicopter fleet and this time, he will mean business.

Tue, 11/01/2011 - 16:30 | 1834094 surf0766
surf0766's picture

ZIRP will be in place for an extended period. 500 pits down  will not allow him to QE. 2500 maybe.

Tue, 11/01/2011 - 16:31 | 1834102 junkyardjack
junkyardjack's picture

We need more QE, markets only ran up 10% in October. Obviously it was missing a zero

Tue, 11/01/2011 - 16:32 | 1834103 Belarus
Belarus's picture

The ref must be off again. Or Jamie and Llyod know the skinyy tomorrow. 

Tue, 11/01/2011 - 16:32 | 1834105 homersimpson
homersimpson's picture

I've seen it too many times - knife catchers try to kick in the the first hour of AH, then get their arses handed to them by the next AM. Who cares what happens right now.. what the ticker says when you can trade AH the next morning is more important.

Tue, 11/01/2011 - 16:33 | 1834109 lizzy36
lizzy36's picture

Ahhh Yes Bernanke.

Well meaning, and harm inducing Ben.

He is running out of bullets. If he blows them all tomorrow, he will have nothing left when the shit really hits the fan in Europe.

Horrific monetray policy got us here. I wonder how "unconventional" horrific monetary policy will get us out?

Tue, 11/01/2011 - 16:35 | 1834118 Belarus
Belarus's picture

Agreed. He's going to hit things are "deterioting" and that they are closely monitoring the situation and will gladly step in if the economy, I mean---errrrh, stocks need some help. They won't let stocks and housing fall at the same time. 

Tue, 11/01/2011 - 16:37 | 1834138 Mr Lennon Hendrix
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But he can print as many bullets as he wants!

Tue, 11/01/2011 - 16:57 | 1834238 earleflorida
earleflorida's picture

classic - the boy crying wolf [wall street] has fallin upon deaf ears [the fed] - the red-herring has lost its scent

Tue, 11/01/2011 - 16:31 | 1834095 Cassandra Syndrome
Cassandra Syndrome's picture

Tumble Bitchez

Tue, 11/01/2011 - 16:32 | 1834097 The Peak Oil Poet
The Peak Oil Poet's picture





Oh yes i know it's grim

the consequences dire

but panic seems to be so "in"

it's time i think to sink or swim

to stock up with a case of gin

and sit and watch the play


Tue, 11/01/2011 - 16:31 | 1834098 RobotTrader
RobotTrader's picture

Yet another "shakedown" by the PigMen

Some new records broken today:


Two back to back closing TRIN readings of 3.0, today and yesterday

44 consecutive days of back to back -1000 TICK readings, with -1250 or worse on 5 out of the last 6 days.

5-day ARMs closed over 10 today

Bears better brace themselves.

Tue, 11/01/2011 - 16:34 | 1834116 homersimpson
homersimpson's picture

More like bulltards better find an arm brace for beatdowns the past few days...

If the market magically goes up tomorrow, it'll only because the referendum was somehow legally dismissed or Banan Ben injected a lot of US taxpayer money in the Euro bailout.. and DEFINITELY not because of some technical indicators.

Tue, 11/01/2011 - 16:36 | 1834134 czarangelus
czarangelus's picture

God I love your posts. Don't ever change.

Tue, 11/01/2011 - 16:50 | 1834200 Mugatu
Mugatu's picture

Robotrader Inverse indicator is full green - he was a raging bull three days ago and that is when I went short.  I am glad to see he is still bullish.  Tell me when he finally gets bearish and I am closing all short positions.

Tue, 11/01/2011 - 16:31 | 1834101 Manthong
Manthong's picture

PPT working overtime.. S&P +11 pts in first 15 minutes after hours.

Tue, 11/01/2011 - 17:02 | 1834260 unununium
unununium's picture

I checked a dozen symbols and none of them were up.

Tue, 11/01/2011 - 16:32 | 1834107 Börjesson
Börjesson's picture

The lack of rumour is because of a timing mishap. Europe reset clocks to winter time this weekend. The FT has forgotten that the US didn't do the same. Hence, they'll deliver the rumour at the usual time, which will be one hour too late for the S&P...

Tue, 11/01/2011 - 16:34 | 1834114 RobotTrader
RobotTrader's picture

Lots of ferocious dip buying today

Performance Anxiety setting in.


Notice how the CANSLIM junkies were buying the top - ranked retail stocks hand over fist today:







Tue, 11/01/2011 - 16:44 | 1834170 chet
chet's picture

"LULU" is my favorite.  Only slightly less faddish than crocs.

Retailers started Xmas advertising a week or two before Halloween this year.  Hardly a sign of confidence in the coming holiday sales.  I'd wager sales will fall year-over-year.

Tue, 11/01/2011 - 16:37 | 1834131 dwdollar
dwdollar's picture

Anybody still counting the >100 point daily DOW swings? I wonder what we're up to now. Price stability bitchez!

Tue, 11/01/2011 - 16:36 | 1834132 tmosley
tmosley's picture

What, they need another rumor about a BRIC bailout?

Just send them this BRICroll with a nice description of how it lays out a plan that will save everyone with no pain for any Westerners:

Tue, 11/01/2011 - 16:36 | 1834136 RobotTrader
RobotTrader's picture

I mean really?

What kind of disaster will it take?

Probably need a giant meteor to hit the earth in order to get these REITs and retail stocks to go down.

And yet another world record 3-day advance in TIP and TLT today to drive interest rates back to rock bottom and re-invigorate "Animal Spirits"

Tue, 11/01/2011 - 16:39 | 1834146 dwdollar
dwdollar's picture

Fuck Robo, you almost convinced to go out and buy an underwater house.

Tue, 11/01/2011 - 16:58 | 1834242 Smiddywesson
Smiddywesson's picture

Yup, and that giant meteor is called the US dollar.  When all the major fiat currencies reach their debasement targets, and the central banks have enough gold to back their currencies without foreign currency reserves, the green light goes on for End Game.

End Game will come when there is war, or enough social unrest, or gold and silver decouple.  GLD is about to implode, so I put my money on scenario #3.

This is a week of remarkable events.  One that impressed me was the rock solid floor in gold prices at $1600 disappeared in just a few days and we seem to have support at $1700.  What's will it be next week, $1800?

Tue, 11/01/2011 - 16:40 | 1834150 RobotTrader
RobotTrader's picture

Fleck comments on today's smackdown


"With stocks tanking and gold and silver investors throwing away their gold shares in sheer panic, today King World News interviewed Bill Fleckenstein, President of Fleckenstein Capital to get his take on where we are headed from here.  When asked about the action in the metals, Fleckenstein responded, “First of all gold was down in dollar terms but it was up in terms of many other foreign currencies.  Sometimes people will say how can gold be down given what’s going on, a lot of chaos.  So if somebody has to liquidate their account because it’s related to MF Global or some other problem related to losses in another market, when there is this much chaos on any one day, what a market does on any one day doesn’t tell you that much.”

Tue, 11/01/2011 - 16:43 | 1834165 RobotTrader
RobotTrader's picture

Gold up in most other currencies today

Chart pack below:,GLD:FXY,GLD:...|D

Stock market bears better be careful, more QE might be coming any day now from Europe.

Tue, 11/01/2011 - 17:15 | 1834329 Spastica Rex
Spastica Rex's picture

You're out in force today.


Tue, 11/01/2011 - 17:38 | 1834455 doggings
doggings's picture

dont know why theyre negging you for this, i thought this was a useful comment.

exactly, its primarily just FX downdrafts on Gold today, and everybodys gonna print, not just Ben again.  

& the US stock market generally goes up fast on the days its not crashing

Tue, 11/01/2011 - 18:04 | 1834552 chump666
chump666's picture

Forget it.  QE globally hasn't done anything.  You are stuck in a trading range, that's a good sign?  Nope, with HFT's running on thin liquidity and most players now risk averse.  If a major event happens you'll see any long positions go short and see the market just go short.  i.e major stock collapse, busting the Aug/Sept/Oct supports.  This market is going way lower.

We had our Oct meltup. Now prepare for the endgame

Tue, 11/01/2011 - 18:11 | 1834572 TruthInSunshine
TruthInSunshine's picture

Well, QE did usher in massive inflation (40% in basic food prices in emerging economies) around the globe, and utterly decimated consumer discretionary purchasing power in developed economies, as well, with the added bonus of absolutely crushing margins of small and medium sized businesses not having international market exposure and reliant on commodities to produce their goods.

There are other perverse, demand-destroying affects created by The Bernank's lunacy, not ot mention ZIRP, but alas, I'd be writing all night to give The Bernank the credit he so richly deserves.

Suffice it to say that The Ben Bernank Broke All Markets (creating massive bubbles, malinvestment, disinvestment, and misinvestment in the process), and the comes the rooster.

Tue, 11/01/2011 - 16:43 | 1834166 rosiescenario
rosiescenario's picture

Why doesn't GS buy Greek, Spanish, Italian, and Irish debt, mix them all together, have Moody's bless it, and then re-sell it as AAA stuff to the Europeans? After all, it worked in the past, maybe it was long enough ago???

Tue, 11/01/2011 - 16:44 | 1834176 Smiddywesson
Smiddywesson's picture

Somewhat off topic, but I would like to call everyone's attention to this article, entitled "D-Day Near for Gold."  I think I found a link to it on Turd's site, so hats off to Turd (again).  Anyway, the article describes how the Prospectus in GLD caps administrative costs, but that cap lapses on 11-11-11.  This would allow the Custodian and Sponsor to ramp costs, and to sell any physical gold held in the "trust" to meet expenses.  The author believes that the GLD will commence a sell off of physical gold to itself (HSBC) to cover these costs and time these sales on the dips so that it receives the maximum benefit and its shareholders receive the maximum screwing.  

My take on this is that, above and beyond the decades long game to hold down gold prices, there is going to be a huge incentive for HSBC to drive down gold prices as of 11/11/11 IF THE FUND HAS ANY PHYSICAL AT ALL.  Inasmuch as the prospectus doesn't require them to HOLD ANY GOLD, that may not happen.  What is certain is that anyone who holds GLD is about to get a royal screwing.  They will probably stream out of GLD, so the decoupling event we have waited for comes one step closer next week.

Tue, 11/01/2011 - 17:04 | 1834264 devo
devo's picture

If they drive the price of physical down people will just hoard more.

Tue, 11/01/2011 - 17:24 | 1834374 s2man
s2man's picture

Thanks, Smiddy.  That may cause the dip I'm (we're) looking for.

Tue, 11/01/2011 - 16:46 | 1834183 Graabein
Graabein's picture

See Athens News - the Greeks seem to have just overthrown their military leadership and replaced Chief of Staff, Heads of Army, Navy & Airforce...

Tue, 11/01/2011 - 16:52 | 1834213 s2man
s2man's picture

"the dollar maintained its strength which was ignored by Gold"

Yeah, I watched that all day.  Jerk Gold.  Was hoping it would reach previous low 1600's on the dollar strength.

Why don't people listen to Ben when he says it is a worthless relic?  I like to collect worthless relics.

Tue, 11/01/2011 - 17:02 | 1834259 Smiddywesson
Smiddywesson's picture

A lot of the weak hands were shaken out.  I doubt we pierce and stay below the $1700 level. 

It's all one manipulated market, but gold seems to be breaking that correlation to other markets.

Tue, 11/01/2011 - 16:56 | 1834233 JimBobOMG
JimBobOMG's picture

Don't expect any more easing through march 2012. That's when many government rollback programs end (of course it won't be enough)...

Tue, 11/01/2011 - 16:58 | 1834247 jelyfish
jelyfish's picture

Just speculating (unrelated to topic)... No public court info on MF bankruptcy because of fear it will expose how much leverage MF used. 

Tue, 11/01/2011 - 17:06 | 1834287 max2205
max2205's picture

AH up 1% on IWM from the close....fucktards

Tue, 11/01/2011 - 17:07 | 1834290 GOSPLAN HERO
GOSPLAN HERO's picture

Lots of female dogs on ZH.

Tue, 11/01/2011 - 17:15 | 1834332 trampstamp
trampstamp's picture

Check again ;)

Tue, 11/01/2011 - 17:20 | 1834347 common_sense
common_sense's picture

So new rumors are being cooking now in hte FED kitchen... about miracoulous agreement between european countries, i mean, france-germany, to push up next week the markets... this week is just a correction, but next will be very optimistic...

This time, lehman brother has been hidden behind rumors and rumors and rumors, so any time need printing money if they don't want anotrer terrific down.


Tue, 11/01/2011 - 17:21 | 1834350 ChiefJohnRutledge
ChiefJohnRutledge's picture

What does a non-default that is really a default mean for people like Kyle Bass who own CDS on Greece?   Where does he go to get his payout?

Tue, 11/01/2011 - 17:36 | 1834443 Cluelesscitizen
Cluelesscitizen's picture

S & P futures up, wait till they call today a "breather" tomorrow

Tue, 11/01/2011 - 17:48 | 1834498 chump666
chump666's picture

We are now going into a major sell for November, once the markets WILL price in a major CDS/bond blowouts for EZ.  But again Copper/Spot metal prices were selling prior to the EU endgame trade...yes China again.

Tue, 11/01/2011 - 17:48 | 1834501 Dingleberry
Dingleberry's picture


Tue, 11/01/2011 - 18:03 | 1834548 clones2
clones2's picture

Futures are up - and banks are up in Europe pre-market...

However - volatility only down slightly from close.  Shorting volatility over night.... Im thinking gap open higher tomorrow...

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