A Conundrum

Friday, July 17, 2009

If equities blithely ignored the CIT bankruptcy earlier in the week and refused to go down......why are futures now rallying on a rumour of a potential bailout?

(Or is it just a story spread by a guy long 940's who's hoping for a lottery-ticket win on the settlement price?)

Posted by Macro Man at 2:19 PM  


It might be two arms of one propaganda campaign ... with bank earnings out, the recovery marketing campaign had run out of good news, so it had to manufacture some; and the TARP US Treasury Department hedge fund validated the news by buying SPX -- the main government propaganda method right now.

The rally looks tired, Asia and Europe are going up less than the US now, SPX buys are generating fewer followers. That suggests to me the pump is about to take a break. They don't want to lose half their TARP money in the stock market just before the banks need new bailouts.

Go short, MacroMan!

Anonymous said...
2:54 PM  

Just put my brand new put structure into the system, mate....

Macro Man said...
3:08 PM  

MM, so what the verdict... Is this a EURO breakout..
hurray for the DGDF crowd, Aussie still looks technically weeks, yen pairs rangebound at best, sterling is down a 'tad' on IMF discussion of a possible run on the sterling (ha!)

Anonymous said...
3:36 PM  

Fx is a graveyard. I've got some calls on the usual EM names, but nothing other than small, short-term technical punts.

Macro Man said...
3:41 PM  

Just a thought from the deckchair analyst:

If banks a refloating themselves borrowing at the fed window and then buying the long end (Brad Setser and TIC data appear to indicate this - US banks bigger and bigger holders of long end) then any rise in the US short end could cause the long bond pocalypse that Jim Rogers and the DGDF crowd are calling for as the only marginal buyer of long bonds would be taken out of the market as they have to find some other carry.

Now for the trade - is it possible to buy correlation between the long and short end cheap enough such that you get a leveraged lift off the option + increased duration while hedging yourself against Japanese style deflation by shorting the short end?

Nemo Incognito said...
4:31 PM  

Pretty surreal listening to the BAC, GE & C calls. They all talk and act like they have functioning business models, when in reality they're GSE's. And everyone expect policy makers and management knows it. Question to MM or anyone else with experience of the '90's in Japan; Is this how it was?

Anonymous said...
5:05 PM  

Another macro poser, although not sure of the signficance.

Why are sterling retail depo rates going up at such a clip now? You can get anywhere from 4-5.5% 1yr fixed GBP retail.

Is the UK banking system still struggling with funding? Or, are they (still) trying to cut the wholesale funding gap they probably still have in size?

I find it strange behaviour with the repo rate at 0.5%.

Anonymous said...
5:54 PM  

The usual bullshit into op ex in NY.

Turn on the cricket, Macro Man, England are putting the Aussies to the sword at Lord's....

Neil said...
6:17 PM  

MM -- question: a while back you put up a chart of Chinese oil imports... where do you get this data from?

Anonymous said...
6:41 PM  

Neil, it's belting down rain my way...so I imagine the Aussies are going to try and pull what Strauss did in the first test.

Anon, it's from Bloomberg.

Macro Man said...
6:47 PM  

I disagree with you guys. I do not think currencies are a graveyard. In fact, I think they are on the cusp of getting jiggy in a fairly serious way.

Furthermore, the bid in equities is a function, not of guys who want to get into the market, but of guys who NEED to get into the market.

When things started to get choppy around early June, a lot of guys who didn't believe in the rally refused to keep playing the greater fools' game and moved to the sidelines.

Fast forward to this week. Everyone with a brain is bearish, so when things start to go up, we chase. That is what we do--sad though this admission may be.

Though our brains say the higher probability outcome is to the downside in risky assets, the bigger surprise would come from a positive shock, however small. Over the short-to-medium term, emotions tend to trump brains. This is why we go higher, and will probably continue to do so--even though my facial tick kicks in every time I say this to myself.

Macro Monkey said...
8:53 PM  

Don't fight the Fed takes on a whole new meaning when you're being rabbit-punched and groin-kicked by the Fed's bullies at Treasury and Treasury's minions the money-center banks (on second-thought, maybe I have that backwards), the financial shills - er, press - and the Obama administration all at the same time.

As a small retail investor I'll enjoy the view from the sidelines and count my cash while you boys have it out. I'm rootin' for ya.

To be short right now is to truly have faith in the EMH.

Oregon Guy said...
8:56 PM  

Hey guys - Check out this posting entitled "A Deal with the Devil" on the blog below. It talks about Goldman Sachs, the Fed, our economy, the stock markets and tries to tie it all together. I found it to be very thought provoking and challenged some of the biases I had before reading this article.


Anonymous said...
3:39 AM  

Wow, these days the comments section is a lot of fun. The odd conspiracy theorist, a few newbies and ppl touting their blogs. The proletariat demands still better blogs to match the audience.

Anonymous said...
5:49 AM  

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