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Waiting To Exhale

Tyler Durden's picture


Via Peter Tchir of TF Market Advisors

You can feel the tension. Traders with one eye on European bonds prices deteriorating and the other eye watching the headlines, hoping for some positive news.

Without a doubt the situation in Europe has deteriorated. Spanish t-bills priced above 5%. Greek bonds at new lows. French and Belgium debt under pressure. The banks are struggling too. The desperate pleas and self-righteous demands for the ECB to do something have reached a crescendo. The market is clinging to hope that the ECB or IMF or China or anyone will step up and do something or anything.  With bond markets under pressure and stocks well off their "Grand Plan Europe Gets It" rally highs, I suspect that Merkozy and crew are working on some ideas to talk the market up.  I don't see unlimited ECB printing being a realistic option here. Some softer tones out of Germany and maybe a surprise rate cut along with the ban of some naked shorting tool wouldn't surprise. I don't think that would do much as they have lost credibility and fast and sleepy money would try and sell into any rally.

Realistically Europe needs to do something "big" to start a meaningful rally. The problems at the country and bank levels are just too big for anything other than unlimited printing or a huge infusion from BRIC's to have a meaningful impact. Yet, for once calmer heads may prevail. For as much hue and cry as there is for printing there is also a growing chorus who seem to accept that defaults (at banks) and restructurings (for countries) is the better longer term solution.  It finally seems that some people with power are actually pausing and trying to figure out a real endgame and not just a short term "fix" that creates more problems and spreads the risk further and deeper into the system. Germany gets that they risk dragging themselves down, and even some French people - with some prodding from the bond market - are questioning how wise it is to save other countries and the banks.

Saving the banks seems to be finally getting some definition. For too long "saving the banks" seemed to mean keeping bank share prices where they are or higher. Now, defining saving the banks as "protecting depositors and senior lenders" is gaining some traction. The task of saving the share price is Herculean. The task of protecting depositors at all banks and the senior creditors of the big banks is much more doable - without printing.

We may still get a print it all rally, but I am getting more hopeful that Europe will finally do the right thing and take some near term pain to create a sustainable rally and economy. Maybe in a year they will be able to tell Geithner and Bernanke that more Lehman's not fewer a re the way to go and that manipulating the money supply and yield curve in extreme amounts does more harm than good for the economy.

There is still hope that economic data here would save the day, but it is really only okay and shows more signs that it could get weaker than it does that we are on the verge of a break-out to the upside on the economy. The super committee failure doesn't help - unless you are a defense industry lobbyist - where you have over a year and 100's of billions at stake to get paid on.

The last leg that was supporting the rally was the "price action". So many people were touting positive price action as "confirming" the Grand Plan and Economic data legs of the rally. That seemed circular and feeble at best and is long gone.  Now people are just hoping we are oversold. It really was strange how many people were buying and saying that prices going up made them want to buy more - it is rare for that too be used as an excuse to be long as often as it was in the past few weeks.

I don't like IG or HY bonds right now. I think rising yields in Europe will siphon off some money with Spitaly appealing to some vs HY and France competing with some IG corporates and Financials struggling. I keep hearing how these are cheap on a spread basis. IG ex fins doesn't seem that cheap - the financials are driving the spread, and I don't know anyone who buys hy bonds on a spread basis. The convexity for hy bonds still works against you and make spread a somewhat irrelevant number. On a yield basis, both IG and HY seem to have hit a virtual floor.  Due to capital requirements the insurance companies in particular can't chase yields much lower as it doesn't generate a good return on capital.


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Tue, 11/22/2011 - 09:44 | 1902087 HedgeAccordingly
HedgeAccordingly's picture

and there goes the GDP... spooz and CL both dove...

Tue, 11/22/2011 - 09:45 | 1902090 GeneMarchbanks
GeneMarchbanks's picture

''We may still get a print it all rally, but I am getting more hopeful that Europe will finally do the right thing and take some near term pain to create a sustainable rally and economy. Maybe in a year they will be able to tell Geithner and Bernanke that more Lehman's not fewer a re the way to go and that manipulating the money supply and yield curve in extreme amounts does more harm than good for the economy.''

That is the most batshit paragraph of the week. The level of naivete is disconcerting.

Tue, 11/22/2011 - 09:53 | 1902127 j0nx
j0nx's picture

Agreed. These sociopaths will run it straight off the cliff, kicking and screaming and insisting that everything is ok all the way down until impact. Believing they will do anything else is disingenuous to history. Once the impact happens then they will all say, "who coulda known?" and instead of the proles dragging the criminals into the streets and hanging them from the nearest street light, they will cry for a 'leader' to save them and make it all better, which leads us into a new Hitleresque fascism.

Tue, 11/22/2011 - 10:15 | 1902219 El Viejo
El Viejo's picture

Have you ever noticed how addicts continually lie to themselves and discount the truth?

Tue, 11/22/2011 - 10:26 | 1902262 GeneMarchbanks
GeneMarchbanks's picture

I recognize what you are getting at but I'm refering to something that goes deeper. Clearly there is or are people who still won't give up the illusion/hope. I'm not here to convert or impose my point of view but this type of thinking is completely foreign to my sense of happenings.

Tue, 11/22/2011 - 12:24 | 1902719 i-dog
i-dog's picture

Well said. Wishin'n'Hopin' never fixed anything ... only action will.

However, the debt-based system is well beyong repair. Only a new paradigm of individual freedom based around local associations and real money will defeat the globalists.

Monarchy failed. Dictatorship failed. Communism failed. Democracy failed. Technocracy failed. It's time to finally put faith in one's own ability to manage one's own life and affairs. However, very few have the interest in doing so.

Tue, 11/22/2011 - 09:48 | 1902099 imsaul0968
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For those of you who invest in an IRA or for long term goals, theres a better approach than buy,hold,hope. Stocks follow the economy so analyzing the economy, specifically the factors that are "leading indicators" and having exposure to equities only when the economy is headed in the right direction and avoiding equities in favor of safe haven baskets is a much more logical approach. And missing the major drawdowns is the only way to help ensure meeting your goals.  If you are interested in investing in a portfolio that tactically invests in equity and safe haven baskets via ETF's automatically, please email me at:

and I'll add you to the weekly market commentary & portfolio update distribution list.  Its free to add you and you can follow along our model and our views.  We have been RISK-OFF since 6/30 so have missed all this wicked volatility. Currently invested in short duration treasury baskets as flight to safety drives interest in our debt. 

Tue, 11/22/2011 - 09:59 | 1902156 The Turdman
The Turdman's picture

So, is it as simple as no one wants to star in the upcoming movie, "The last Bagholder?"

Tue, 11/22/2011 - 09:59 | 1902157 hourglass86
hourglass86's picture

''but I am getting more hopeful that Europe will finally do the right thing and take some near term pain to create a sustainable rally and economy.''


Cool story bro.

Tue, 11/22/2011 - 10:09 | 1902198 centurain
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Best comment I have read in a long time!

Tue, 11/22/2011 - 10:10 | 1902204 SheepDog-One
SheepDog-One's picture

'But I am getting more hopeful that Europe will do the right thing and take some near term pain to create a sustainable rally and economy'

Yea sure, the maniacal world bankster smack junkies will now go do rehab and cold turkey and put down the free heroin needles 'for our good' now....riiiiiight.

Tue, 11/22/2011 - 10:37 | 1902300 FutureShock
FutureShock's picture

If the EU, ECB or whoever prints like a mother you know our banks were heavily exposed to bonds and CDS and we could be behind it and a crash would be too severe than governments are prepared to deal with. 

Tue, 11/22/2011 - 10:22 | 1902244 THE DORK OF CORK
THE DORK OF CORK's picture

World trade is dysfunctional because of overvalued western currencies - if they refuse to destroy deposits they must devalue.

Heavy Industry based in Asia will then flow westwards again.

Tue, 11/22/2011 - 10:31 | 1902275 FutureShock
FutureShock's picture

Trading is survival get in and get out day by day which is not the way it should be. Good training for life though, life itself migh be like this. Think I will hit Sam's Club soon.

Tue, 11/22/2011 - 10:34 | 1902290 I only kill chi...
I only kill chickens and wheat's picture

And the MSM carries on also:

Fed & ECB: Stop Dithering. Do Something. - Adam Posen, New York Times

Tue, 11/22/2011 - 10:41 | 1902318 SheepDog-One
SheepDog-One's picture

PLEASE do SOMETHING! Throw us some more free crack rocks we're jonesin' out here man!!

Tue, 11/22/2011 - 10:39 | 1902310 slaughterer
slaughterer's picture

Now that the super committee event is over, PMs will want to make their year.  Europe will be swept off the media, and Santa rally exciters delpoyed.  With a little help from EuroRumorMill-Beta™ all will be well.  

Tue, 11/22/2011 - 10:43 | 1902324 SheepDog-One
SheepDog-One's picture

So theyll just re-deploy the unicorn farts and we'll float along sucking up the Hopium for a couple weeks...and then what?

Tue, 11/22/2011 - 11:03 | 1902402 slaughterer
slaughterer's picture

Rally til reality returns.  

Tue, 11/22/2011 - 12:17 | 1902682 Ragnar24
Ragnar24's picture

Yeah, I keep hearing theses "seasonal" reasons for investing, and it makes me assume the imminent collapse is going to be far worse than what "fact-based" traders even realize.

I don't care how much a PM "needs" to make his year, he won't be able to wish a rally into existence -- widespread panic and no liquidity will decide his year for him.

...and the fact that these guys haven't already reduced their risk is what will make matters worse when they finally capitulate.

Tue, 11/22/2011 - 10:46 | 1902335 GMadScientist
GMadScientist's picture

"Traders with one eye on European bonds prices deteriorating and the other eye watching the headlines, hoping for some positive news."

The hungry sheep look up, and are not fed,
But swoln with wind and the rank mist they draw,
Rot inwardly, and foul contagion spread ...

Tue, 11/22/2011 - 11:22 | 1902477 scratch_en_sniff
scratch_en_sniff's picture

Someone was soaking up lots of Euros yesterday, and a big trade went through on Euro last night on the long side, a few big ones today as well. Im beginning to suspect the IMF might be about to clear the way to start tapping the market - there were already suggestions floating around about them re-jigging they're FCL and PCL so that their allocation criteria are less rigid (i.e let IMF staff have the final say on the matter)- i just get the feeling something dumb is about to be announced.

Tue, 11/22/2011 - 11:23 | 1902481 PulauHantu29
PulauHantu29's picture

China's RE in serious trouble:

""The number of property transactions in China’s largest cities has fallen to dangerously low levels, according to regulatory documents obtained by the Financial Times.""


Makes sense one of their Ministers said they will Flood $1.7 trillion into their markets....more then 2x the last "stimulus."

Watch oil, food, PMs take off, I suspect.

Tue, 11/22/2011 - 11:25 | 1902489 Cone of Uncertainty
Cone of Uncertainty's picture

"Realistically Europe needs to do something "big" to start a meaningful rally."

Start a meaningful rally?

Are you fucking kidding me?

There is no such rally coming today, tomorrow, next week, next month, or next year.

It's fucking over bro, 2012 will be the year that the euro dies(officially) and Europe and the rest of the world face a global depression of epic proportions.

The only business being taken care of right now, is who gets the gold and who gets elevated or demoted as part fo the power structure re-shuffling.

Everthing else is academic dokey crap, know-nothing, brain cell killing, shit talking, idiotic commentary that means diddly fucking squat.


Tue, 11/22/2011 - 11:42 | 1902573 OutsideTheBox
OutsideTheBox's picture

Even if you are right and 2012 is the year the euro dies, what happens till then? A year is a long time and if you think the end game is coming in the near-term you are out of your mind. How many times have we heard that there are tools available to inflate the markets? It's going to happen!  It's not a solution to any of the problems the economy faces. It is a solution for the banks. But, nontheless,  there will be money to be made in pretty much any asset and people will jump into markets like the sheeple they are. Boom. . .. there is your rally.  After that, I agree we are probably in for some shit. 

Tue, 11/22/2011 - 12:47 | 1902782 i-dog
i-dog's picture


"there will be money to be made in pretty much any asset"

... until, one day ... "'s gone!". The Gerald Celente trade, in a nutshell.

"probably in for some shit"

"Probably"!?! "Some"!?! You're an idiot.

Tue, 11/22/2011 - 12:43 | 1902778 terryfuckwit
terryfuckwit's picture

i think the big question is ......can the banks cover deposits??

Tue, 11/22/2011 - 12:48 | 1902796 i-dog
i-dog's picture


Tue, 11/22/2011 - 12:51 | 1902803 terryfuckwit
terryfuckwit's picture

lol and it would make a lot of sense asking those aldridge prior fuck pig liars

Tue, 11/22/2011 - 12:45 | 1902785 terryfuckwit
terryfuckwit's picture

where the fuck would we be if nature wasn't so kind as to provide us with real money...

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