***Official*** 2012 Stock Market Thread

[Hugo Drax]

Vix 19.87

 

[The-Noid]

Vix 19.87

Tomorrow's an expiry, traders always push VIX trend (generally selling) into expiry as they move out to the forward months. Use the forward months for a better feeling on where the VIX is. The contango picks up tomorrow.

 

[The-Noid]

*snip*

I definitely agree market underestimated the LTRO (myself included). A lot of chasing now as people are behind. Financial CDS and Bank/Broker debt looks a heck of a lot better than 45 days ago, equities are in this case the dog as the debt and synthetics are the tail that wagged. MS, GS, BAC, Unicredit, BCS, France, Austria, Belgium all look much, much better since LTRO day. Thus far the LTRO has had the best pop in the last few months for a European solution.

"In her interview with Papademos, Rachel Donadio says that “European leaders are set against” the idea that Greece’s credit default swaps should be triggered, on the grounds that it “could ignite a chain reaction with unpredictable and potentially catastrophic results for the world financial system”. She’s wrong about that: it couldn’t. The only thing a CDS trigger does is make sure that people who bought insurance on a Greek default get paid when Greece defaults. It would mean that the people doing the insuring lose money, of course. But anybody writing an insurance policy has to be willing to pay out on it — especially when you’re insuring a credit as risky as Greece. A CDS trigger would not be catastrophic at all, and there’s really no reason to try to avoid one."

FYI, no way the ISDA can vote against it not being a trigger if they pass a law to push people into taking losses. That is guaranteed 100% trigger as it is no longer voluntary.

 

[mshan]

I don't know what his investing time horizon typically is (he sounds more of an investor than short-term trader), but Bob Doll of Blackrock always seems to have savvy comments on CNBC:

http://video.cnbc.com/gallery/?video=3000063155
-> 3:15 - LTRO comments
-> 7:30 QE comments
-> 8:45 in a muddle through world, he recommends companies with positive free cash flow and increasing dividends or ability to institute a dividend

(please note that this video clip is from the middle of December 2011 on day LTRO was announced, but perhaps not fully appreciated by markets (?).





For context, when markets were roiling up and down at end of October through end of last year, IIRC he was previously recommending playing trading range 1100 - 1250 with barbell strategy of buying technology around 1100 and selling healthcare around 1250. I think he was reluctant about being such a short-term trader, but that was the market he was given):

- http://video.cnbc.com/gallery/?video=3000058926 (day before Thanksgiving; 1100 - 1250 trading range)

- http://video.cnbc.com/gallery/?video=3000058537 (Cyber-Monday; healthcare, technology, and risk of breaking 1100 with financial accident in Europe)

- http://video.cnbc.com/gallery/?video=3000060353 (a day or two after coordinated central bank action)

- http://video.cnbc.com/gallery/?video=3000060447 (Wednesday, Dec. 7; tempered optimism?)

 

[mshan]

"In her interview with Papademos, Rachel Donadio says that “European leaders are set against” the idea that Greece’s credit default swaps should be triggered, on the grounds that it “could ignite a chain reaction with unpredictable and potentially catastrophic results for the world financial system”.

When I read that, I thought the same thing as you (i. e. seems like a b. s. excuse; sounds like that, for whatever reason (just trying to screw over their counter-parties?), they just don't want to pay out insurance policies they issued and counter-parties paid premiums for).

 

[The-Noid]

Europe is more set against CDS in that they don't want to set an example that you can speculate on lots of sovereigns and drive borrowing costs up. Although I don't necessarily agree with the argument, some make the argument that speculators in CDS raise borrowing costs and do not increase transparency. Most of the sovereign debts are fairly easy to short cash bond wise, however the CDS is still cheaper in that it is a direct spread product, not a duration and spread product which isis harder to hedge.

I think Europe hopes both CDS and rating agencies are gone. In their minds borrowing costs would then be lower.

I also think they would be ok with paying out insurance policies, they don't want to be seen as paying out speculators. If it was an insurance company who was hedging their ggb position with CDS that may be seen as ok. If it was a hedgie with 100mm in capital and 5 100mm long sovereign CDS positions (effectively short credit) that may not be seen as a positive payout.

 

[mshan]

Thanks for the insights.

Are they trying to totally destroy the overall CDS market against sovereigns, vs. actually being concerned about paying out on these particular Greek CDS? (I remember reading an article at Seeking Alpha quite a while ago about setting up a transparent exchange for CDS, but I think article said doing so would destroy all of the profitability to the CDS issuer(?).

May I also ask your take on negative yields on short term German Bunds and U. S. TIPS today?

Other than pure panic (return of money vs. return on money), is more likely and reasoned motivation for such a move as some sort of bet / hedge on a deflationary outcome by some market participant (e. g. scenario of Germans at least believably feigning that they will choose deflation for their people like Japanese did by nationalizing banks in trouble down the road if Italians don't ultimately relent to their reform demands? http://brontecapital.blogspot.com/2008/07/deflation-and-bank-bailouts-in-japan.html )

"Over the weekend, it was Wolfgang Reitzle, CEO of Linde AG, who’d elicited gasps when he told the Spiegel, “I don’t believe that the euro must be saved at any price.”

He feared that reform efforts would fade if the ECB takes pressure off the Krisenländer by buying their bonds. And he explained: “If it is not possible to discipline the Krisenländer, then Germany must exit.”

Yes, it would lead to an appreciation of the “Deutschmark, the euro-north, or whatever currency we’d have then.” It would be a shock to the economy. Exports would cave and unemployment would rise. But not for long. “Five years down the road, Germany would be even stronger in comparison to its Asian competitors.”

http://www.testosteronepit.com/home/2012/1/17/the-old-europe-is-not-an-option-for-germany.html

 

[The-Noid]

Thanks for the insights.

Are they trying to totally destroy the overall CDS market against sovereigns, vs. actually being concerned about paying out on these particular Greek CDS? (I remember reading an article at Seeking Alpha quite a while ago about setting up a transparent exchange for CDS, but I think article said doing so would destroy all of the profitability to the CDS issuer(?).

May I also ask your take on negative yields on short term German Bunds and U. S. TIPS today?

Other than pure panic (return of money vs. return on money), is more likely and reasoned motivation for such a move as some sort of bet / hedge on a deflationary outcome by some market participant (e. g. scenario of Germans at least believably feigning that they will choose deflation for their people like Japanese did by nationalizing banks in trouble down the road if Italians don't ultimately relent to their reform demands? http://brontecapital.blogspot.com/2008/07/deflation-and-bank-bailouts-in-japan.html )

Yes I think they would like to kill the ability to speculate on CDS if they could. Greek CDS is expensive to carry if they don't default soon and you are specuating, by dragging it on and not having a credit event there hope is people will be less apt to buy CDS I'm the future. Some participants have also gotten out of CDS and put on other trades with the same objective. Short eurobor against Libor swaps etc...

I didn't really pay much attention to the tips auction today as I was in meetings all day. I would have to bet that roll into the on the run was cheap compared to the current on the run. Tips have also been a security that people wanted to be short agsinst nominals so people could have covered into the auction if it was cheaper. Tips aren't really my strong point. I am a credit guy.

 

[IHateMyJob2004]

Buffett buying more Tesco ...

 

[JEDI]

Why is materials soaring?
ie: VAW is Vanguards top fund YTD. up +10%

on another nite:
consumer discresionary is up a bit. people finally having confidence in the econ?

 

[zimu]

Imp,

This sucks. Everything I sold is up. The only saving grace is that I re-entered USG which kept going up. I looked at the numbers last night. I have basically lost a 7% gain in portfolio value trying to "trade". The only thing keeping my head on straight is knowing that it could be worse if I did not re-enter USG.

hope you cashed out before today's -7%?

 

[Imp]

Ok, so GOOG is sitting flat at -8%. Buy now, or wait a bit longer...

MSFT. Damn. It's getting close to $30 for the first time in over a year. Maybe I should stop week trading and just buying and walking away. Oh wait, I get bored.

Everything else kinda flat.

 

[endervalentine]

Ok, so GOOG is sitting flat at -8%. Buy now, or wait a bit longer...

MSFT. Damn. It's getting close to $30 for the first time in over a year. Maybe I should stop week trading and just buying and walking away. Oh wait, I get bored.

Everything else kinda flat.

yeah, any other thoughts on goog, might be a good opportunity for a 10-12% gain in a couple of weeks ... reviews of ICS around has been very positive.

 

[The-Noid]

yeah, any other thoughts on goog, might be a good opportunity for a 10-12% gain in a couple of weeks ... reviews of ICS around has been very positive.

Just bought a lot of GOOG 583.01 for my personal. Stats would tell me this is a bad buy and GOOG will go lower, screw stats.

 

[Imp]

Just bought a lot of GOOG 583.01 for my personal. Stats would tell me this is a bad buy and GOOG will go lower, screw stats.

I'm hoping for a 'less down' day on Monday. Debating whether I should start a position (very small mount) in 10 minutes.

Even if it rallies on Monday, I plan on dumping a shit ton of money in to catch a few percent.

 

[The-Noid]

I'm hoping for a 'less down' day on Monday. Debating whether I should start a position (very small mount) in 10 minutes.

Even if it rallies on Monday, I plan on dumping a shit ton of money in to catch a few percent.

Should also preface buying "a lot" was 100 shares. Not a lot.

Small position, based on nothing but emotion.

Always a good investment strategy.

 

[Imp]

Should also preface buying "a lot" was 100 shares. Not a lot.

Small position, based on nothing but emotion.

Always a good investment strategy.

No... That's a LOT. I just bought less than 10 shares of GOOG. Also got back into TGT with a small position. Just having some fun now... I'm still 90% cash, so whatever if I'm wrong.

So, you have $60k lying around, huh? Where do you live again?

 

[SSSnail]

I might take a position with another stock on Monday, this has been into oversold territory for a few days now - XCO. For short term gains.

 

[The-Noid]

No... That's a LOT. I just bought less than 10 shares of GOOG. Also got back into TGT with a small position. Just having some fun now... I'm still 90% cash, so whatever if I'm wrong.

So, you have $60k lying around, huh? Where do you live again?

Lying around isn't really the best term. I do have more cash than I would like right now and have really not participated in this rally as I have been mainly flat nominal exposure and actually a tad negative Beta adjusted exposure.

Yay for 66bps of absolute performance when the SPX is up 4.59%.

 

[JEDI]

Greece's creditors leave Athens

LONDON/ATHENS (Reuters) - The representatives of Greece's private creditors left Athens unexpectedly on Saturday without a deal on a debt swap plan that is vital to avert a disorderly default, sources close to the negotiations told Reuters. Negotiations will continue over the phone during the weekend but it is unlikely that an agreement can be clinched before next week, the sources said, as Athens races against the clock to strike a deal.

http://news.yahoo.com/greeces-creditors-leave-athens-talks-continue-133626371.html


wow.. so what happens if Greece defaults?
they declare bankrupcy, and the bond holders get 0%?

then what happens?

 

[The-Noid]

Greece's creditors leave Athens

LONDON/ATHENS (Reuters) - The representatives of Greece's private creditors left Athens unexpectedly on Saturday without a deal on a debt swap plan that is vital to avert a disorderly default, sources close to the negotiations told Reuters. Negotiations will continue over the phone during the weekend but it is unlikely that an agreement can be clinched before next week, the sources said, as Athens races against the clock to strike a deal.

http://news.yahoo.com/greeces-creditors-leave-athens-talks-continue-133626371.html


wow.. so what happens if Greece defaults?
they declare bankrupcy, and the bond holders get 0%?

then what happens?

Generally they will get new debt or there will be some recovery on the outstanding. See Russia or latam debt crisis.

 

[mshan]

I have not been following the financial news as closely as I was at end of last year, but sounds like the current deadline is a soft and arbitrary one, the first step in a process leading up to March 20.

Looks like they are hoping to have a deal in place to present to meeting of Eurozone finance ministers on Monday (http://www.athensnews.gr/portal/11/52471)

Michelle-Cabruso Cabrerra (start at 1 minute mark) says this is just step one in a drawn out process leading up to March 20: http://video.cnbc.com/gallery/?video=3000068497

If your tv provider's channel line-up includes CNBC Asia, then you can watch Asian markets open Sunday evening to see their initial reaction to whatever news (or lack of news) there is. 6 PM EST is pre-market I think but Bernie Lo often has some good insights and questions for his guests (I think actual markets start opening around 8 or 9 PM night EST, which is Monday morning there).

 

[The-Noid]

I have not been following the financial news as closely as I was at end of last year, but sounds like the current deadline is a soft and arbitrary one, the first step in a process leading up to March 20.

Looks like they are hoping to have a deal in place to present to meeting of Eurozone finance ministers on Monday (http://www.athensnews.gr/portal/11/52471)

Michelle-Cabruso Cabrerra (start at 1 minute mark) says this is just step one in a drawn out process leading up to March 20: http://video.cnbc.com/gallery/?video=3000068497

Deadline is fairly hard on Monday.

The EUFIN Ministers can't release the bailout without a debt cramdown in place. IT will be up to the IMF at that point.

 

[mshan]

Interesting.

Christine Lagarde of IMF is supposed to be CNBC Squawk Box guest on Monday's 8 AM hour I believe.

More details on timeline constraints for Greece: http://www.athensnews.gr/issue/13479/52480

 

[Imp]

Very interesting... All news that came out Friday said that they were "close" to a deal.

Finally time for that pull back?