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When Hope Fades
At the end of a dramatic week such as this, when clearly the hope of a civilized world of buy-the-dip monetary policy-to-the-rescue 'investors' was somewhat dashed, we take a look at the decimation. Friday appeared a day of rest for everyone but margin clerks as 'safety' was sold but nothing appeared to be bought. Financials managed to hold their heads above water as hope remained that someone would do something this weekend but as we scan the asset classes - we note that investment grade credit was the best performer of the day - hardly a signal of strength - as volumes in equity markets dropped significantly.
UPDATE 1: The fact that the CME hiked margins after-hours seems to be as much a driver of the weakness in gold, silver, and copper and we note that after the equity close, we are seeing both silver and gold up around 1%. They also hiked 30Y which helps explain the coordinated sell-off we discussed earlier.
UPDATE 2: Here they come - Trichet: We Stand Ready to Supply Unlimited Liquidity (well that should help the USD?)
IG credit outperformed on the day as can be seen in the chart, followed by HY, and then a close-to-close marginally unchanged equity market. While all were well off their lows of the day/night, the moves in IG and HY were more driven by the macro-to-micro hedge rotation we discussed (as well as some light re-risking in quality investment grade (which saw decent net-buying today). Over the course of the week, there was a very obvious shift up-in-quality and up-in-capital-structure and while bond volumes in HY were nothing to write home about (we have talked about this dearth for a long time with the view that managers know to start to sell into this cash market is likely to start a rather nasty ball rolling down-hill rather quickly), we did see very modest net-buying relative to significant net-buying in IG bonds. The greatest net-buying was focused in the 3-7Y maturities with the twist helping as longer-dated corporates were net bought more than shorter-dated.
On the week, investment grade credit widened significantly with a long-run-based two standard deviation shift that is the largest since May of last year (and before that March of 2009). HY also widened notably on the week but had been moving before the week began so its relative shift was not as impressive. We do note that equities remain significantly expensive relative to credit still even though we have collapsed the relative-value significantly this week.
All stock sectors ended the week lower. Even dividend-heavy safety plays such as Utilities were unable to hold gains (though they were the clear winners losing only 1.7% on the week). Materials and Energy were the worst hit (which might surprise some given the constant chatter about Financials) which might help explain the dramatic drops in emerging market and commodity-producing nation stocks, credits, and sovereign spreads this week.
In terms of magnitude of move, TSYs were the initial choice as winner (though see further down for the Silver move!!) with the shifts post-Bernanke both shocking (given how telegraphed the 'twist' was) and violent. Making new records all over the place, 30Y (long duration) bond yields were smashed lower.
It is interesting though that not only did we see a relatively significant (for a normal day) sell-off in TSYs today, but 5Y shifted lower (yields higher) than pre-Bernanke and even the pivot 7Y started inching back towards unch. It was perhaps evident from our earlier discussion with regard TSYs and precious metals that today was more a liquidation of whatever you had left for some funds (or selling of the winners because noone likes selling losers eh DeltaOne).
Precious Metals, more specifically Silver, were the hashtag trending topic of the day. It seems when looking at stocks and sectors (and credit) that whatever caused this sell-off had the definite feel of forced liquidation/workout post a significant margin-call from the previous days. The moves in stocks/other-risk-assets today were simply not large enough to trigger such obviously forced selling and the stabilization - albeit at massively lower levels into the last hour or so suggests this was the case also.
The move this month in Silver is over three standard deviations from very long-run norms and is the largest since March 1980 on a percentage basis (on an absolute basis this month's sell-off is over 10 standard deviations from the norm!).
Of course, the losses in commodities and precious metals were not helped by the strength of the USD this week - which gained over 2% but can hardly be blamed (not even on a levered basis) for this pain. FX markets were very volatile but followed the similar chaos-pause pattern we see in the equity market with most of today/late-yesterday relatively stable (we say relatively because on a normal day a +/-0.5% shift in DXY is news).
All-in-all an incredible week that seemed to catch many unhedged and off-guard as we discussed was possible given options and credit skews implications. The market remain comfortable at this pivot point but we suspect that if we do not get any real action this weekend then Round II will start Sunday evening as it becomes increasingly evident that global growth is grinding to a halt and credit crises are once again spreading (having gummed up all monetary transmission channels).
UPDATE: The fact that the CME hiked margins after-hours seems to be as much a driver of the weakness in gold, silver, and copper and we note that after the equity close, we are seeing both silver and gold up around 1%.
Charts: Bloomberg
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If I don't input today's silver price in my excel sheet, it isn't real.
Same as RoboTraders trading style.
hah, ok that cheered me up a bit.
the fudge packing we've endured over the past few days was of course intentional and done with a purpose. this round was more even merciless than the may ream job.
must be one hell of a liquidity injection on the horizon.
More like liquidity ejection. Think along the lines of printing press diarrhea. They're just gonna shit trillions from Trichet's magic Orifice.
I purchased a ASE from US Coins for $31 shipped to make myself feel better. Worked like a pill.
The margin increases for PMs makes me laugh.
When the tech bubble was in full swing all Greenspan had to do was raise margin requirements on stocks. But, no, he wouldn't. "Wasn't necessary".
When the housing bubble was raging, changes to the size of downpayments or mortgage rates or % of gross income to housing costs would have stopped the bubble. But 'no one' saw the bubble. Besides the USA was going to be an "ownership society".
No problem seeing a PM "bubble". No problem finding the tools to keep this "bubble" deflated. Can't have an "honest money society".
This "bubble" is different than all the others. That's a fact. Why is that?
Because this bubble is a vote of no confidence, and we can't have that.
Rule49?
Go for gold, go for hope.
THis a pure attack on modern civilization. Maybe fucking madness, gone madder.
10 years ago, no one here could ever consider witnessing this clusterfuck.
Any trading strategy where ALL news, whatever it is, is taken as supporting - is almost certainly wrong! Whether the Washington Monument losses its erection or Obama's dog pisses on a telephone pole, the obvious implication is "buy gold"....molten metals bubble too!
Fiat is fucked! That is why all news is positive for PMs.
Thats exactly what I've been saying about stocks!
Greece is fucked, and the euro will be ruined to try to save it, what, twenty or more times in the news in the last ten days. Each and every time stocks go up.
16 banks in Europe are fucked, and the euro will be ruined to save them, stocks go up.
Once a day, and alot of the time twice a day, an announcment is made that some entity is financially fucked, and somebody else, usually 'taxpayers', will be forced to bail them out, stocks go up.
Awwwww. Your such a nice destroyer of civilization. (it's really one of your best qualities!)
Time to buy silver hand over fist.
http://silverliberationarmy.blogspot.com/
$27
you were warned not to get wrapped up in silver
Stay in your paper, it will keep you warm in the winter after all confidence is lost, thermal properties you know.
IMO the selloff and margin hike are head fakes. This is all about next years election. There will likely be a series of worldwide stimulus plans to be announced by March 2012. Mortgage lending standards will be trashed and margin requirements will be cut leading to a another bull market in housing and commodities in time for O's election in Nov 2012. By driving everything down now, it will appear very rosy by this time next year. The elite wealthy family are short now and will be buying going long after new year. Wait and see.
tempo -1 for suggesting that the ponzi is doing any long-term thinking. I guarantee they haven't got shit planned past december (they can't even agree on how much pork to keep funding). If they're even worth half an IQ point, which is debatable, then they also already know that they're fucked long before then anyway. Today's move was just preparation, and to allow JPMorgan to relieve themselves of their uncountably massive inventory of naked shorts before the shit hits the fan and people stampede eachother to death trying to trade their paper for real money.
Disagree. All these moves are planned and the plan is disseminated to insiders before execution. This is "making money the TPTB way 101". This is a planned economy. This is what the FED, margin changes, etc. are all about. Even if we are heading towards apocalypse, be it deflation, inflation or war, it will be a policy decision. And just because we experience apocalypse and chaos doesn't mean TPTB will. If they plan for chaos you'll get it, but it is still their plan.
You give these hacks way too much credit. They are not smart enough to think that far ahead. They are playing defense, as all TPTB do. It's about credit right now, and the exposed insiders (the Morgue, etc.) are riding the coattails of the credit crisis to improve their position via sleuth margin hikes.
These dropouts haven't thought past next week. The ones that have are maneuvering around the decisions.
6% down for the week?
Gold gonna skyrocket!
Do what you believe, cheers.
I believe in Scarlett Johansson but unfortunately I'll never get to "do" her.
keep the dream alive, man!
Quitter. Is it because you want it to be consensual?
Damn...a real man! Take what you want!
Real Men Rape! Take what you want!!
you sound like a banker.
(but most likely just a wanker)
Unlimited liquidity. WTF is that. Are you gonna print Trichet or is that just more words to calm the markets.
Of course it means printing. He'll rob the sheep blind to keep the banking and sovereign debts from imploding. It has always worked that way with fiat currencies. Always. That is why none of us are using a fiat currency that is more than just a few decades old.
And if you think the US dollar is 100 years old, think again. All their shallow attempts and reneging on a gold policy multiple times finally fell apart entirely in 1971, when it became pure fiat paper.
We've had 40 years. We will not have 40 more.
Own physical gold and silver.
Will the Germans allow that right now? Maybe later, but not sure about now.
How many army and air force bases does the USA have in Germany? I forget.
The BIGGEST advantage that paper has over gold as money is that they can create it at will - very easily. The other advantage is that paper notes can't be mined - they hold a MONOPOLY on money.
I guess you never heard of inflation.
ECB is going to have to print or be bailed out...who the hell is funding all these ecb purchases?
thin air ones and zeros
oogs66
who the hell is funding all these ecb purchases?
My $ is the treserve is in on it, as they already have dumped into their banks big time.
Didn't some of TARP go to European banks? It seems reasonable that the USA will pick up some portion (all?) of the tab.
unlimited liquidity?
from where?
(insert anus joke here)
Ah oui, oui. Jean-Claude, he pee on me, s'il vous plate? Lequidteeee!
Je voudrais de plus Santorum pour mon Bernanke. C'est mon liquidity favorite, oui? Merci!
I don't understand what you're talking about. I'll have too google it.
I hate when people speak French and they know you don't understand. I was in a French
restaurant a few weeks ago and I asked the waiter if they had a bathroom. He said wee wee,
and I said no, poopy and it was really none of his business.
Hi-Yo, er, bondz bitchez!
The problem isnt LIQUIDITY it is SOLVENCY. They already are providing the banks with unlimited liquidity in both Euros and Dollars (remember unlimited dollar swaps announcement from last week?).
The banks have much more in liabilities than assets - loan them all you want it wont do anything unless you buy those liabilities from them. They need a Euro QE to help them...
No one has been solvent since 1933, besides the post office really.
Thanks for taking the time to notice.
Correction, 1913. And if you think the post office is solvent then I think you might enjoy some of Goldman's trading advice. I think their latest was "Go long Euros". Hurry, buy now before they run out of euros to sell and you get left out.
congrats on the most clueless comment I have ever read here.
The problem is neither ILLIQUIDITY nor INSOLVENCY. INSOLVENCY can be fixed (e.g.: transfer the bad assets onto the backs of taxpayers, they are busy watching American Idol or the NFL games).
The problem is the LACK OF CONFIDENCE. Nobody trusts the banks or bansters. Due to the aforementioned transfers, nobody trusts governments, either. The LACK OF CONFIDENCE is not so easy to fix.
The erosion of confidence in the establishments (.gov, .fin and .multinationals) is the hallmark of empires in decline.
the average person trusts the banks and the governments. Who the hell is "nobody"?
What's an 'average' person? In America? Lol. TeeVee watchers - of course they trust the banks. The programming tells them so.
Got a link for your stat?
Are you average? Do you trust the banks?
If you have no assets in the bank, you really don't worry about the bank's survival. If you owe the bank a great deal, you may be truly "indifferent" to the bank's survival. This could describe most Americans.
They are going to apply a little solvent to their liquids. Dilute it down a little.
EUR, GBP,CHF,CAD,AUD all drop fast at 5:00 CDT.
Related?
I hope they get their clocks cleaned
Yet again, traders are reduced to reading minds. Who foresaw that margin hikes were coming? Obviously someone (and by someone I mean an influential number of people) knew. And that influential group sold off quickly. If you're not on the inside, you're screwed in the short term. I'm a long-term PM investor, and I'm not spooked by the recent downturn in PMs because I know that in the long term, PMs will rise. But this is a bullshit market. In this market, supply and demand is a thing of the past. Only central bank intervention and those pesky "animal spirits" determine the direction of the market now. I, for one, will be increasing my PM holdings. The global environment remains unstable ... and actually prone to a mass-casualty event. Do not kid yourselves based on the recent downturn in PMs.
And who saw that Swiss move? Not me.
"Yet again, traders are reduced to reading minds."
Ergo, if you cannot read minds, don't trade.
I'm not sure how they managed to get the level of selloff that they accomplished. Did they sell paper gold into the market in the manner of a large pile of naked sell offers or did they really sell physical? Regardless, I don't think the sellers sold because of a margin hike coming and it was clearly orchestrated.
The last couple of hikes had quite a short shelf life of impact and no where near the level of selloff generated. I just think the fact the margin hike was put on AFTER the drop shows it was preplanned. Why put on a margin hike AFTER a large drop in price of the underlying commodity? What purpose does that serve? In my opinion it is about deterring the speculators from jumping rapidly BACK into the commodity thus preserving the price decline for a larger period of time. That would serve to allow the CB's to print with cover, imo.
It's becoming easier to tell what is going on here as we approach key times for intervention. I for one didn't believe they could pull off this level of intervention so I didn't back off of my trading positions as I could have. This isn't the first correction I rode down and won't be the last. I won't be shaken out because I know the ultimate destination for the dollar. That destination is becoming easier and easier to perceive for the general public so I just think it is a short time before a significant number of investors pile into the PM sector, these beatdowns not withstanding.
Me Chief Hopium...me say BUY, BUY, BUY the stawcks from the Ben Bernank...on sale now!
Greece votes Tuesday on real estate tax. My guess is they default before vote.
Yup, that's what I'm thinking, too.
"it's the economist stupid." now that we know inflation is simply being laid low by the greatest depression in housing ever all that's needed is a blow up in Japan and Europe and suddenly "there's tons of gold on the market." and of course there's nothing like the potential for an Arab spring/peace thingy. Our Federal Government is the first to exit this depression--and it's doing so with panache. With Wall Street still pretty much flat on it's back it really is hard to imaginethis government capable of such a thing. We'll see how this peace process goes but DC deserves all the politics that's coming our way because basically "they saved us from Wall Street." of course what happens next in the markets is anyone's guess. It still looks like a Wild West Show to me. Oh, and hope doesn't fade on a Friday. Those are called "bids" and "this is called the weekend" which means there's a big chunk of people who don't mind being long going into the weekend.
and municipal bonds performing well of course
Not sure it's called bids...rotation and a lack of volume...I have no clue...which means I am not them...which means I am not "inside"...which means I buy something then can't PRINT.
market close : -15,68%. The bullshit.
Those not suffering from default fatigue, please raise your hand. No seeing any, I move that Greece default this weekend and exit the EUR. Buffet the empire saver would be happy to provide debtor-in-possession financing against a couple of pretty islands and a few old piles of rocks. Let's move on already.
Good one. Warren to provide the DIP.
That they haven't moved though suggests that someone is in very deep doodoo (SG BNP or DB Im looking in your direction). And it's not really the losses on Greek debt per se' but on the instruments resting on top that are the real killer. When banks cut each other off, it's big time trouble... Counterparty risk w/a capital "C".
Margin hikes, shmargin hikes.
All I know is, until the bread and circuses come to a screeching halt, none of this will truly matter.
If everyone decides to print then we all get hyperinflation at once.That really isn't a good outcome.
They are getting ready to cal for a world currency, world reserve bank, and a global debt reset. Of course the population will still owe the global bank every cent of debt they hold. We will get a global VAT to fund the system.
Freedom is over and if you think you can trade your gold for a world note you are kidding yourself. Only insiders will win this game. The bulk of the world's population is destined for slavery. Remember only God's chosen get to live in paradise. They are trying to make that reality. The gentile must submit.
ZE TRICHE IZ A SHILL AND WILL BE FORGOTTEN BY ZE ISTORY AFTER HE LEAVES ZE ECB HE HAZ NO L ARGINT AND CANNOT DO ZE PRINT WIZOUT ZE OZERS FROM ZE EU SO NO ARGINT FOR NOW ZE MARKET WILL KEEP TANKING ZEN WE SEE ZE MONEI COMING IN HARD!
Seriously now, a little selloff scared the shit out of many today, it shouldn't have if you own PMs in PHYSICAL FORM!
In a few weeks( who knows maybe even just days) you can do what was the mantra BTFD on what ever you like, especially PMs both paper and the hard stuff, it'll be all on super sale, markets have some more downside but eventually the shills in gov will come out "saving" their sucker WALL STREET SHIKLS!
Panic is for sheeps, be a wolf!
Are guns bullish? When's a good time to tap that market?
"When's a good time to tap that market?"
When the target is w/in 400 yds (preferably 200 yds w/my eyesight)
Mossberg bitchez!!!!!
Beretta A391 semi-auto
clearly you don't live in open country...
Got Sig?
I'm am 870 man - but they both get the job done.
SKS full auto with 75 round drum
There it is. People were making a big deal on gold, silver and copper getting hammered. Their comments clearly expose the errant belief that people owned these contracts, outright. When the margins were raised, the debt in the game was exposed. I am just stunned. People can't tell the difference between debt and money, even when they leverage themselves over the edge. This is madness. The gambling addiction that commodities traders show would put a horseplayer in a homeless shelter.
http://georgesblogforum.wordpress.com/2011/08/09/fiat-addiction-update-08092011/
Been quite new to the financial market ( last 3 years ) I am totally taken aback as to how much these traders are compulsive gamblers , at this point you would think they would walk away from the market, but nooooo they have to get that last fix whether it is stocks or paper SLV/GLD , I feel sorry for them for they know not what they do .
I'm long on dumpsters, since that's where everyone will be getting their food next year and I don't want to be left out of the market. Although thinking about it, I think guns are looking pretty bullish too. Gotta defend my dumpsters.
This sell off in silver will end as violently as it began.
I am glad the CME raised margins. I say they keep doing it to smoke out all these paper speculators. You cannot even get excited about price rises when you know these paper monkeys are never going to take delivery of the product.
The only way you will get any price discovery in Silver and Gold is through default or multiple supply shortages. That is only going to occur through lower spot prices.
The one bright spot of this last takedown is that it was quick and comes with diminishing inventory. I say take it lower. Another violent week will hopefully drive out the rest of these Comex paper monkeys who will never take delivery anyway.
"Trichet: We Stand Ready to Supply Unlimited Liquidity"
I think the whiners are demanding that your feet be moving.
OT but what the hell , check out Aangeleyes on myfreecams, awesome!
The only way this scenario will play out is with more printed money. The U.S. has more debts then they can pay, Europe has more debts then they can pay. Anyone and everyone who has a printer will use it. You know how the story ends. I appreciate the pullback. Purchased Gold and Silver at a discount. Talk to me in 5 years about this little gift. coulda shoulda woulda... Take a step back...gotta pay for the military industrial construct, gotta pay for social security, medicare, interest on 14.5 trillion and counting, gotta keep bailing out all the World banks, and all the World Govt, gotta feed the baby boomer retirement generation, gotta keep the heavy handed police and home land security suppressing the people, gotta keep shoveling worthless fiat into the system.
Got Gold or Silver for our little banana republic? That's what we have now, a certified banana republic.
Agreed. Failing debt not liquidity. PIIGS have 3.5 trillion and the EU is screwed. No way out. Which for our to big too fail US bankstering means no way out as the daisy chain implosion will rock the fiat world of paper money. You know the debt based saturated currencies collapsing globally; racing to zero. USDinker dollar one of the most exposed debt based currencies. World gets a sniff the EU has lost it they'll know the dead head feds have lost fiat debt control. USDinker dollar will have the sovereign nations fleeing it as vegans from a slaughter house.
The EU is losing it as we speak. The USD will laughably function as a "safe haven", which is like building a nuclear fall-out shelter under Fukushima.
Do you guys seriously believe that all it takes to make it big was to read this blog and be long PMs?
Sure looks like it from reading these comments.
You have been owned.
It takes an understanding of the global situation which this blog assists with. It take courage to change your normalcy bias and swim against the currents. It takes courage to put your hard earned fiat into your belief system. It takes courage to stand alone with a conviction in PMs. Yes...I believe holding PMs will make me wealthy. I'll be the one eyed king in the land of the blind. I will be watching your women suckingcock for a sandwich.
no "normalcy bias" there, nosireeee! Capt'n Courageous you are!!
Would you like a little mayo on that sandwich?
Seems to me that folks who had the courage of their convictions in 1933 and didn't turn in their gold did "make it big". And the folks who went to Mexico in 1971 and bought gold (I know one) made it big, too.
The only thing that was "owned" was gold.
In conjunction with this story, look at inflation relative to interest rates.
Think about it. Fannie Mae and Freddie Mac sitting on stockpiles of 30 yr mortgages. When interest rates climb .... watch out.
http://confoundedinterest.wordpress.com