* Yes
* No

One of Wall Street's biggest whipping boys since the post-Lehman days, culminating with the insanity in credit markets in early March, have undoubtedly been correlation desks. These trading outfits, which hit their heyday in 2004-2005, when CDS spreads were nice and tight, and negative convexity would at most bring a 20-30bps widening, would repackage securitization tranches whereby usually they kept the senior and equity wrap around a mezzanine piece, which was in turn sold to investors. Buyers of mezz tranches, whose junior and senior layers would become impaired after a 15% and 30% cumulative losses, respecitvely, saw what the definition of a world of pain is first hand recently, and effectively shut down the correlation business at many major banks. But not all.

"In literature, it is difficult to find a protagonist more endearing, clever and flawed than Sherlock Holmes. Peerless in his attention to detail and his limitless powers of perception, what appears clear cut and evident to his trained senses bewilders those of lesser skills. His foil, Dr. Watson, his counterpart at Scotland Yard, the plodding Inspector Lestrade, and his arch enemy Professor Moriarty all wither in the face of Holmes’ masterful powers of logic and deduction. That said, I believe even the formidable Mr. Holmes would have a problem figuring out the truth behind the current economic state of affairs."

The backward revision economic data train continues, this time in GDP, which came in at a "better" than expected 1% while the prior quarterly data was adjusted significantly downward from -5.5% to -6.4%. Additionally, per a brand new revision to the way GDP data is presented, the GDP decline demonstrated over the past year is now the largest since World War II. Current quarter jiggering aside, downward revisions to prior quarters have left the decline in real GDP at -3.9% in the year through Q2. And to demonstrate, the severity of this downturn, the Q2 data concluded the first three-quarter consecutive period of falling GDP since 1953-1954.

Because sniping out the B&T crowd in Meatpacking at 3am is only so much fun.

4 down as of 6:30 pm

• Integrity Bank, Jupiter, Florida
• First BankAmericano, Elizabeth, New Jersey
• First State Bank of Altus, Altus, Oklahoma
• Peoples Community Bank, West Chester, Ohio

"A buy and hold strategy has been bad advice for the past 10 years. The S&P is
down 45% from its peak in early 2000. The investment world is likely to remain very
unstable in the face of the difficult longer-run problems discussed above. Investors,
whether they like it or not, are in the forecasting game and forecasting is all about time
lags. The exceptional circumstances of the current environment make any assessment
of time lags extraordinarily difficult and mistakes will continue to be costly. For that
reason, holding well above average liquidity, in spite of the paltry returns, is sensible for
most people who don’t have deep enough pockets to absorb another hit to their net
worth. They are in the unfortunate position of having to wait until the air clears a bit and
more aggressive action can be taken with higher confidence. Warren Buffet has
properly reminded us on numerous occasions that a price has to be paid for waiting for
such a time, but then most of us aren’t as rich as he is."

Regrettably, we now have an unfair playing field for investors. This
leaves us with, in effect, two financial markets: one for powerful
insiders, who use high-speed computers and privileged access to
information to exploit loopholes for profit, and another for the
average investor, who must play by the rules and whose orders are
filled almost as an afterthought. This situation simply cannot
continue. It is the financial equivalent of "separate and unequal."

- Senator Kaufman

As expected, dark pool operators have responded, getting concerned that after the recent escalation in the Flash trade scandal, they are the next natural target. And what surprise that their only retort, as per this WSJ article, is that they provide liquidity, and make stock trading cheaper. Right down to the generic script. At least they haven't used the mutual assured destruction defense clause quite yet.

The VIX just went parabolic

It seems these days any time a pundit is cornered by facts indicating the deplorable state of the economy, the traditional fall back is "...but the tons of money on the sidelines is just waiting for a 0.003% pullback to pour back in."

It makes sense to consider this argument.

What's Another $2 Billion More?

Ahead of the FDIC's Failure Friday all is normal at the Fed - the policy to destroy the dollar is working, keeping equities cheap and generating a ripfest in bonds (that bonds and equities are both going to the moon is nonsensical, matters not). For some reason WOPR hasn't confused what the VIX is supposed to do, and it is tracking the market 1:1.

Retail investors confuse the dollar weakness with stock strength and are buying a few hundred shares here and there, only to be promptly front run by the fine folks at the southernmost tip of Manhattan.

Let the CRE sales begin.

Developing story: Hartford Courant newspaper says Sen. Dodd diagnosed with early stage prostate cancer.