Tyler Durden's picture


                      Cpn    Bid      Offer   Chg from Close  Factor

PrimeX.FRM.1   442    99-16  / 101-16      -2-060      0.47               
PrimeX.FRM.2   458    86-08  / 88-08       -4-020      0.49               
PrimeX.ARM.1   442    93-08  / 95-08       -3-280      0.41               
PrimeX.ARM.2   458    81-00  / 83-00       -4-040      0.44


Precisely a week ago, a fringe blog had the temerity to warn that PrimeX could very well be the next coming of Subprime (and make those who got on board early very, very rich). A week later, those who got in early may not be very, very rich... but they are richer (there is time for the very, very part), while PrimeX is the worst weekly performing fixed income product in the known universe. Today, following Jeff Gundlach's presentation to David Faber which agreed with the ZH outlook that PrimeX is substantially overpriced, the entire PrimeX rack has seen its biggest plunge yet. At this rate, by Monday even the most sturdy PrimeX FRM1 will be trading below par. At that point it is Sayonara, Sam. Oh, and for those who don't realize that European banks which are now entering asset liquidation mode, are substantially pregnant with exposure to both synthetic and unhedged cash product (recall which entities were stuck holding ABX on the wrong side of the trade back in 2007) we have one thing to say: "European banks which are now entering asset liquidation mode, are substantially pregnant with exposure to both synthetic and unhedged cash product." Have fun spinning that as a function of liquidity (which for some odd reason none of the structured and synthetic product "experts" out there appear to not realize that notional outstanding can and will soar overnight if there is sufficient client demand - a bank can write $10BN or $100BN of product in a second) when the bottom falls out. Lastly, once contagion spills out from the synthetic product to cash, have fun trying to ramp stocks to unch for the year on nothing but the most recent short covering spree. Oh, and remember: the basis trade is different this time...

The latest market blast:

                       Cpn    Bid      Offer   Chg from Close  Factor               

PrimeX.FRM.1   442    100-08 / 102-08     -1-140      0.47               
PrimeX.FRM.2   458    87-08  / 89-08       -3-020      0.49               
PrimeX.ARM.1   442    94-00  / 96-00       -3-040      0.41               
PrimeX.ARM.2   458    81-16  / 83-16       -3-200      0.44

And visually. Compare to October 7.





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Debtless's picture

Forgive my ignorance here: Exactly WHO is losing the money/value on the other side of this X trade?

mirac's picture

From an earlier ZH article...


But you won't hear about it anywhere else, because if the market understands that in addition to a global solvency crisis, America has another Subprime contagion on its hands actually being expressed in the markets as we type, and potentially costing banks, pension funds and various asset managers billions in losses behind the scenes, that may well be the last straw.

Smithovsky's picture

Tyler, how can we trade these PrimeX CDS thingamajigs?

jeff montanye's picture

me too.  i'm only an mba, cfa with 15 years managing trust investment portfolios (out in '96) so much on this website is way over my head.  does the etf srs have a part to play?

Long-John-Silver's picture

OT but this is important.

Obama sends 100 US troops to Uganda to help fight rebels


john39's picture

No problem, the US can afford a few more wars, oh wait...

AustriAnnie's picture

"additional forces will deploy over the next month."

Of course!  

spartan117's picture

Libyan rebels?  Wait, I thought they were on our side.

jeff montanye's picture

hey, lighten up on obama guys.  he said, explicitly, that he wasn't against wars, just against dumb wars (like irag).  apparently once he got the much better information flowing to a u.s. president, as opposed to that available to fringe bloggers, he found out how much smarter these new wars would be so he started them.

porrannor's picture

How would one trade it? is there any ETF representing this trade? SRS does not seem to reflect this deep... 

slaughterer's picture

SRS is 2X inverse a portfolio that makes up the Dow Jones Real Estate Index (9% SPG, 8% NLY, etc.).  You are not going to get much direct exposure to PrimeX. 

porrannor's picture

Thanks, So, how would you trade it?

GittyUP's picture

get a bloomberg terminal.  Or find a broker willing to put the trade in for you.  prob need a few million minimum to get that kind of broker access. 

TheGameIsRigged's picture

I agree w/ Debtless....HOW DO WE TRADE IT???  I apologize for my ignorance.  I thought this was a site of mutual advancement ??  Please help the huddled masses....

Scarlo's picture

This is a site of REAL financial news. You need to figure out how to play it. I don't think anyone wants to hold your fishing rod for you whilst you snooze in a hammock drinking tequilas.

jeff montanye's picture

you can snooze or you can drink tequila.  not even you can do both at the same time.

kaiserhoff's picture

Short the banks who are most exposed, but I would only do it with options.  The volatility in this market scares the shit out of me, and that will get worse before it gets better.  Follow Reggie Middleton and try to ignore the grammar;)

Roark_4_Prez's picture

anyone who took the other side of the short the main b/d's put on. even if b/d's need to mark down their books, they don't care because they are partially hedged here and it is not a complete 1:1 mark down cash:synthetic.

Roark_4_Prez's picture

or short the mtge reits to play

hambone's picture

Perhaps the destruction of SRS / DRV (nearing all time lows again) is simply a 2nd derivative play on the impending bailouts of the REIT's???  Short CRE / REIT's is definitely not working out so far (down 99%+ over past 3 years).

jeff montanye's picture

looks pretty good since late july.  the fifty day moving average just crossed the 200 day from below on significantly higher volume.  the weekly chart looks instructive as well.  recently had a reverse split.  see what you think: http://stockcharts.com/h-sc/ui?s=$INDU  (except enter srs and update) 

there are probably worse times to buy an asset than when it is "down 99%+ over past 3 years" and the fundamental case (slowing growth, increased solvency pressure on financial sector, central banks leverage starting to round to 100 rather than zero, etc.) appears to be turning.  oh and it looks increasingly like the credit cycle really did end in 2008 and all this since then seems more and more like a bear market rally (of epic proportion, admittedly).  when the bullish case is endless central bank bailouts, the bullish case is weak.

Yamaha's picture

I have done some research - thanks Tyler - I now get it. Very important.

RobotTrader's picture


Does this mean "Risk Off" implosion is coming soon?

And are investors about to dump everything and flee back into Treasuries and the Mighty, Mighty, U.S. Dollar?

Are we going to hear Tom Keene squeal on Bloomberg Surveillance about how the "10-year is now the new 90-day T-Bill?", and Ken Prewitt sit there in slack-jawed amazement?

LawsofPhysics's picture

Tune in Oct. 26th-28th to find out.  Especially you goldbugs.

tmosley's picture

Why?  What is happening then, other than the usual OpEx smash?

macholatte's picture


I thought October 15 was "End of the World Day". Has it been moved? Did I miss something?

tekhneek's picture

Oh do tell.

I love predictions.

slaughterer's picture

3 rhetorical questions from Robo-trader, obviously.

oddjob's picture

How does this affect your Netflix?

FunkyMonkeyBoy's picture

PrimeX is going down faster than a protester punched at the Wall St rally:


Seriously, when are the citizenry going to say enough is enough, USA is turning into the soviet union daily.

Mike2756's picture

Right in front of a bazillion cameras, too. Not wise to do that in the middle of a crowd.

FunkyMonkeyBoy's picture

We both know there will be no justice and the filth will get promotion.

Dr. Richard Head's picture

The sad thing I hear from the Mainstream right and their devoted followers is that the "Police should open the hoses on those damned hippies."  Fucking retarded comments. Bunch of inmates cheering for their own continued life in a fiat cage and they don't even know it.  I pity and loathe them at the same time - the people cheering for the repression of the 1st amendment that is.

Dr. Richard Head's picture

At least now the masses of people are gathering for something of importance rather than an iPhone or some shit.....wait what?  Ohhh, people were doing gathering for that too?  Priorities, priorities.

TuesdayBen's picture

If we're going Soviet, let's hope that comes with thinner women.

SheepDog-One's picture

The women will soon be thinner, but less of them...lets just hope our soviet USSA also has free rotgut vodka to numb the senses.

Ivanovich's picture

I'll settle for the women of today's Russian Federation.

DosZap's picture



Seriously, when are the citizenry going to say enough is enough, USA is turning into the soviet union daily.

When the people that are punched,send the SOB to the hospital.

No way a cop punches a citizen(unless he's being punched/kicked/bitten,physically violated).

scatterbrains's picture

That cop was probably being called a lazy fat pig banker goon when he went off swinging... I'm surprised how docile the crowd was.

Executioner's picture

Soon we will know what people fear the most?

A punch in the face or letting the evil-doers plunder his house, families and rest of their lives?

Mike2756's picture

Euro jumping, must be bullish.

hambone's picture

Still think it's interesting that the PrimeX plunge coincided w/ the generational lowest mortgage rates...almost like every ARM, every refi, every home purchase will only get more expensive while home prices fall in the face of this sad reality. 

No more levers, no more games, no more stimulative tax policies.  That is Game.Set.Match. for housing.

mynhair's picture

PrimeX is contained.  Timmah has it under control.

EscapeKey's picture

And the US will avoid a recession.

Iam Rich's picture

..and this story perfectly times a late day "sshhhwing" in the RUT.  Must be some good news coming out of the G20 this weekend!  BTFR!

slaughterer's picture

When does the PrimeX plunge get so bad that some IB has to call a fire sale on its jumbo MBSs?

Manipulism's picture

WTF is Primex???