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Black Wednesday


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I've found these bits of information most intriguing. It looks like there could be a liquidity crunch in Europe.

The bad bank debts are in Europe but Denninger has suggested that a lot of the CDS counterparties in the event of default are in the US.

This might explain some of the Feds keeness to fund a bailout.

Edited by stormymonday_2011
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I'd disagree. The fact that a bailout was announced at that time probably confirms that the markets were on the verge of a correction.

the govt is part of the market, always has been always will be, any action they take or dont or law they pass or rescind is part of the market, it would be nice to exclude market participants actions we dont like but then it wouldnt be the market

Edited by georgia o'keeffe
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the govt is part of the market, always has been always will be, any action they take or dont or law they pass or rescind is part of the market, it would be nice to exclude market participants actions we dont like but then it wouldnt be the market

Yes but the inflection point was still identified.

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Three 'BLACK' threads on the main page in 2 days.

(TMT's, Moneyweek Bank shares, This one).

Definately a contra-indicator buying opportunity coming up (pointing to banks/financials too) :D

This has certainly been consistently true in the past.

However, TMT may have got it right this time.

Papandreou Offers to Quit for Unity Cabinet

Noonan Says Anglo Irish Senior Bondholders Should Share Losses

Mr Market seems to have finally come to the realization that the PIIGS position is untenable with the Euro in its current form.

Euro crisis --> second credit crunch --> commodities and stocks down big time

We shall see...

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Yes but the inflection point was still identified.

well i wont argue that but black days are tricky beasts, firstly they can only be thirds as they need the momentum of the crowd behind them and secondly calling the market to a day isnt easy clearly, the more you drill down fractally the more erratic the form, i guess its why i'll never be a day trader

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This has certainly been consistently true in the past.

However, TMT may have got it right this time.

Papandreou Offers to Quit for Unity Cabinet

Noonan Says Anglo Irish Senior Bondholders Should Share Losses

Mr Market seems to have finally come to the realization that the PIIGS position is untenable with the Euro in its current form.

Euro crisis --> second credit crunch --> commodities and stocks down big time

We shall see...

It doesn't matter what the news says.

This is a potential selling climax. i.e. A buying opportunity for swing traders. Not a sell. The more fear today the better for longs.

The bigger moves are in the euro/dollar anyway as the risk trades come off.

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well i wont argue that but black days are tricky beasts, firstly they can only be thirds as they need the momentum of the crowd behind them and secondly calling the market to a day isnt easy clearly, the more you drill down fractally the more erratic the form, i guess its why i'll never be a day trader

I'd say it's just about impossible but it's fun.

TMT's cheating tactic of booking a whole week is not worthy of a mention.

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It doesn't matter what the news says.

This is a potential selling climax. i.e. A buying opportunity for swing traders. Not a sell. The more fear today the better for longs.

Didn't know you were a swinger ;)

Let me ask you this: wouldn't a Greek default upset your strategy?

The bigger moves are in the euro/dollar anyway as the risk trades come off.

Agreed, and that's the side of things I am more interested in, personally.

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I'm heavily in euros and soiling my pants with increasing frequency.

I've had an epiphany today of the 'understanding the blindingly obvious' type: the currency signals of old cannot be relied upon anymore.

The level of central bank coordination across the world is unprecedented and has now (I think) reached a level similar to the coordination of clearing banks by a central bank. Central banking allowed the coordination of inflation rates across all clearing banks, the aim being to avoid excessive (visible) credit inflation of one bank vs. others thus (usually) preventing bank runs and creating inflation by stealth; this global coordination is allowing countries to inflate all at the same rate thus avoiding currency crises.

The answer to this lies somewhere else.

Commodities are not an easy answer either as their prices can easily be managed via the supply of paper commodities.

So I don't know.

I dunno either.

Was watching this guy Bergman on Bloomberg earlier on, struck me as very measured and intelligent.

Here's his position on financials in early 2009 - the first guy is correct, but Bergman is right:

And here he is in Feb 2011 tying the threads together during the Egypt troubles - you'll never guess what he sees as the greatest risk ...

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The FTSE doesn't matter these days. It's all New York and the odds are still decent for a waterfall event by the end of the session.

Yeah who cares about the FTSE and its 100 leading shares. A drop in the ocean these days compared to the scale of international monetary flows (debt).

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I'd say it's just about impossible but it's fun.

TMT's cheating tactic of booking a whole week is not worthy of a mention.

Actually, I said Wed/Thurs but highlighted that something would happen this week.

Revel in the bitterness, feel the dark side, kneel before me and call me Master... more in a Darth Vader / Emperor kind of way and not in a gimp wearing a rubber ball gag kind of way. :blink:

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Didn't know you were a swinger ;)

Let me ask you this: wouldn't a Greek default upset your strategy?

Agreed, and that's the side of things I am more interested in, personally.

Perhaps if it pops up somewhere unexpected.

US SPX is off around 1.5% so far, which is much less than the Euro and doesn't feel especially cataclysmic. Perhaps equities like the sell off in crude.

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http://thetailchaser.blogspot.com/2011/06/usd-libor-futures-are-banks-funding.html

USD Libor futures: Are Banks Funding Disappearing?

from The Tail Chaser by [email protected] (theintriguedtrader)Interesting moves in Eurodollar contracts (and Euribor contracts too).

The short-end of the curve, much linked to the Fed Funds rate, for instance, has widened.

Is this the same move experienced in late 2010? In 2008?

I do not know. But stay tuned to possible funding issues now with european banks on negative watch due to the debt crisis.

With equity markets taking a beating it doesn't make much sense to see rates going up...

The book HOUSE OF CARDS was very fun to read and it touched this exact topic. Bear Sterns died (and Lehman) when funding dried up and the short-term funding x long-term assets issue popped up.

2011+06+15+-+USD+Libor+not+looking+good.JPG

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http://www.zerohedge.com/article/lehman-deja-vu-there-goes-market-liquidity

European liquidity just went into Defcon 1. Presenting the FRA-OIS spread. Oops.

EURFOSC_0.jpg

And now moving to a US near you...

USFOSC_0.jpg

An explanation from a trading desk:

So the fact that Greece itself was stretched further on the rack was not the be all and end all of the new credit crisis and catalyst of the latest Libor jitters.

In reality, analysts immediately warned that the ramifications of any action on the 'threat' of French Bank downgrades was this time a significant event in the financing market.

When other EuroZone Banks had been downgraded or threatened with downgrades, the markets were to some extent immune because any shortfalls in Euro funding were continually topped up via swapped Dollars.

However, this '$-Funding' has been dominated by the Big French Banks and now we see the reality of such a polarized or skewed funding profile for Europe.

Not only are these French Banks significant players in the short-term $ markets, but many investors have large exposures to these entities either via CP?CD/ABCP or the Repo Markets.

**Based on the current market info on their money-market activities, we are told that the 3main French Banks collectively account for as much as 50% of all Eurozone CP/CD exposure as at recent month-end (31st May)...and, furthermore, they account for almost 15% of $ Repo Markets as per the end of Q1 2010 (31st March).!!!**

Looks like the European banking system needs the Fed to keep on printing.

Still more debt is bound to sort this out.

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I forgot about that. Not only is France a club med country, Paris is the derivatives capital of Europe.

Nothing to worry about really...

Might explain why it appears to be the French not the Germans who are keenest to screw the people of Greece for every last Euro

http://www.telegraph.co.uk/finance/economics/gilts/8578101/Greek-crisis-exposes-growing-rift-between-France-and-Germany.html

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Might explain why it appears to be the French not the Germans who are keenest to screw the people of Greece for every last Euro

http://www.telegraph.co.uk/finance/economics/gilts/8578101/Greek-crisis-exposes-growing-rift-between-France-and-Germany.html

May also explain why the France are so keen to ensure DSK is replaced by someone else who is French. Perhaps DSK wasn't looking after France's interests?

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I dunno either.

Was watching this guy Bergman on Bloomberg earlier on, struck me as very measured and intelligent.

Thanks, he seems to be quite clued up.

He was on Bloomberg today:

Bergmann Says Cash May Be `Least Safe' Investment

He's not really suggesting anything but he doesn't beat around the bush.

:(

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Might explain why it appears to be the French not the Germans who are keenest to screw the people of Greece for every last Euro

http://www.telegraph...nd-Germany.html

Well the word is that US banks are on the hook for 50% of CDS on Greek debt. How many multiples of Greek debt do these CDS cover I wonder?

And who's on the hook for the other 50%?

Or in other words, I read that luxury properties in Paris went up by 22% in 2010. You don't do that by selling cheeses to the rest of the world.

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