Thursday, May 20, 2010

Pink Flamingos (Part XI?)

Events necessitate that today's post is somewhat brief...

Although liquidity in the German bond market returned after a couple of hours of confusion and discussions with legal teams, the damage was done. The unpredictable behaviour of politicians in the face of financial crisis evoked memories of the failed TARP vote in September 2008 and the associated deleveraging that followed. Those that had managed to just about hold onto their favoured risky asset trades suddenly felt that the tickling feeling in their posteriors perhaps was developing into the feeling Edward the Second of England had in his last moments. Short EUR/AUD and short Euro vs. Asian FX has been one of the favoured trades of both levered and real money since the beginning of the year when the Greece crisis began to materialise, having so far bailed them out to some extent on other trades gone wrong.

So... here is the only chart you need today:

In other news, the Paris Museum of Modern Art appears to have fallen victim to the biggest heist in history .



Well they say that addicts turn to crime to fund their habits. Perhaps the British Museum should up its security around the Elgin Marbles?

13:32 UPDATE:

A lot of these markets feel very thin. Eurostoxx volaility break, Spooz already gappy and EMFX looks like its anorexic. Not really a sense of panic yet, apart from a few cases of favourite trades getting hosed (AUD, XAUEUR, Platinum), or starting to get hosed (EURAsia). There have been a lot of shocks to P&L this month and it is hard to see appetite appearing to do anything other than cut risk ahead of month-end, especially with the vote tomorrow. If it passes, then yes, it's a different story. But this is somewhat reminiscent of the "three day rule" (which reader RightField wisely applied on the day of the "flash crash"). Things haven't bounced after a couple of days, if anything the newsflow is getting worse, and there is significant event risk and no policy response (OK, technically there was the German howler) to a worsening financial crisis. The weakness of the Jobless Claims numbers will only exacerbate this. The risk remains a -3% day in Spooz.


Finally, we have noticed that the recent posts have pushed Macro Man's "last request" down out of sight, so it is only fair that we raise it again. So incase you missed it:

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k1 said...

The addicts/crime observation tickled my funny bone. What better time than now to adopt state-sponsored terrorism for fun and profit?

Nic said...

The short yen trades aren't having much fun either particularly vs USD.
Great chart today

Richard said...

Mr Watanabe will be having serious words with his wife when they wake up. Could be seperate bedrooms tomorrow tonight ..

dc said...

Looks as though tomorrows vote will pass with SPD Abstention but with authorities lacking bullets that merit use difficult to see what breaks the tailspin. (Am sure they'll concoct something suitably ridiculous over the weekend).

Audjpy liquidation party only just getting started with record longs recorded yesterday.

Bonne chance