Morning Audibles 8.3.10 - Tell the DJ to fix it in the VIX

Last evening, I read, perhaps the most interesting BLOG exchange that I've ever read... I'm just going to post the most interesting parts (and let readers here - decipher)... But first, you'll need a little MUSICAL HELP (Amen - I KNOW you "DJ'ed" like CV back in the day so don't lie and say you don't appreciate this)...

"Just tell the DJ to fix it in the VIX"



Goldman Sachs (stated position) - Recommending a short Sep 2010 VIX position

"We are recommending a short September 2010 VIX position, currently near 27.50, with a target of 22 and a stop of 30. We view this trade as a way of trading continued compression in elevated risk premium in a “carry-positive” way, above and beyond any directional view on the business cycle (though there are certainly elements of that here too)."

Before you dabble further, first, remember THESE...


Goldman top trades for 2010:
The full list of nine trades was originally sent to clients in December 2009. [how they're doing]

- Stay short S&P 500 Dec10/Dec11 Forward Starting Variance Swap, opened at 28.20, with a target of 21, now at 30.38. [loss]
- Stay long Russian Equities (RDXUSD), opened at 1645.9 for a target of 2050, now at 1631.95. [loss]
- Stay long GBP/NZD, opened at 2.29, with a target of 2.60, now at 2.1606. [loss]
- Close short 2-yr GBP swap rates vs. long 2yr AUD swap rates on a 1yr forward basis, opened at 268.5 bp, for a potential loss of 24 bp (inclusive of carry). [loss]
- Close short 2-yr TRY rates through cross-currency swaps, opened at 8.77%, with a target of 12.0%, for a potential loss of 168 bp (inclusive of carry). [loss]
- Close long 5yr credit protection in Spain vs. short 5yr credit protection in Ireland at 13 bp, opened at 70 bp, with a target of 20 bp, for a potential profit of 2.9% (inclusive of carry). [profit - whadda ya know]
- Stay long the GS FX Growth Current, opened at 103.5, with a target of 111.8, now at 104.45. [profit, on Goldman's own index - this is like betting 50%+ pass in the Euro stress farce]
- Stay long PLN/JPY, opened at 32.1, with a target of 37.5, now at 28.4298. [loss]
- Stay long Chinese Equities (HSCEI), opened at 12616.01 on 01 Apr 2010, with a target of 15000, now at 12140.5. [loss]


Squid says... (on latest)

"Positioning for risk compression has been a key element of our trading stance across asset classes recently. The details of Europe’s stress test exceeded expectations in terms of disclosure and the resulting signs of easing in funding stresses in the financial sector have helped to reduce risk premia in fixed income and sovereign credit markets. US equity vol has come in a fair bit too, however the volatility curve remains upward sloping,
with the term structure at the very front-end particularly stretched by historic standards; September is trading about 5 points above spot as detailed in the August 2 “The Buzz: Views on US Index Volatility.” In addition, after a long stretch of US data disappointments this month’s PMI reading suggest that the global industrial cycle remains firm, even if evidence of further acceleration is muted. We suspect that markets are becoming more accustomed to the second-half slowdown notion, and now, even moderate signs of stability may also help to keep reduce risk perceptions.

However, the economic backdrop is softening despite a US PMI that beat expectations and similar “strength” in many parts of Europe. The US Economics team has highlighted the possibility that they will lower their GDP forecast for 2011, as domestic demand in the US remains sluggish and risks of muted policy responses are a headwind. These concerns may make realized and/or spot VIX sticky at current levels even as other  forms of risk are mitigated, which is why the premium embedded in the September contract (relative to spot) helps to enhance this trade relative  to a pure market long.

Shorting volatility has been a dangerous trade this year. We remain short forward variance as a Top Trade, with vol levels too high versus likely outcomes. But long-dated vol spiked sharply during May and June and has retraced slowly. One advantage of the near-dated VIX contracts for  tactical trades is that loss-limited strategies through options are available."

-- COMMENTARY --

It's August and everyone is on holiday, nothing happens intraday (see today, dull dull dull) so the vol term structure steepens, and forward vol goes up. This happens every year.

Selling it is maybe not a bad idea, as long as you close it at the end of August, when everyone is back and before vol rallies again as everyone gets nervous about the traditional September/October collapse. You have to get in and out.

But target 22? Dont make me laugh. Target 24, absolute minimum. And GS will get you in sub-27, guaranteed. So IMO maximum 3 points to gain.

Stop loss at 30?..... ah well. Here is where GS make $. What are the chances of something blowing up and the forward vol going up 2.5 points at some point in the next month? Lets say, generously, only 30%.

So GS has a 30% chance of collecting the whole bid/ask spread from you, in and out, and especially out when you call with your book on fire and your boss in your face asking you why you listened to those fucks at GS.... your stop may be at 30 but you will be out at 32.

So 30% chance you lose 5 points, paying GS say 2.5 in stressed bid/ask.

Say 50% chance you make fuck all and have to close it in september, pay GS 1.2 in normal bid/ask.

20% chance you make your 3 points, and pay GS 1.2 to get in and get out.

Full disclosure - am long vol, and in a past life I have made VIX option markets. It is consistently a very very lucrative business. No manipulation necessary, just clients who believe.

Tricky one without much information. One thing I can maybe profitably talk about is the term structure of volatility.

---

Where various regimes signify different economic stresses, if you replace the term rate with the par variance swap level, you have the variance term structure curve. What your friend may have done is

a) found expensive point(s) on the curve to short - a short vol trade, earning theta as you say.

b) sold forward variance (no spot gamma, no theta)

c) or sold a steepener/flattener (some residual short spot gamma, earning some theta)

These are all bank and hedge-fund strategies, not for individuals, as I believe bingocat correctly pointed out above, just thought you might like to see how the traders think.

---

"Vix is probing lower bollinger band (usually provokes a snapback)." 
CV adds (be careful - correct, but WEEKLY lower BB's on VIX are more reliable - McHugh would agree I'd believe)...

"AJC getting press again pimping her SPX 1,300 year-end call (we all know what happens here)"
CV adds (LOL - Rarely hurts to fade AJC)...

And GS is screaming short vol? I'll take the other side of that trade...

---

One should get college credit for reading that string... Now... ON TO the eclectic aspects...

OK - So CV had to whip out the MIDNIGHT STAR to roll his point across... But little do you all know that there is INSPIRATION to every move (which becomes a move - which becomes ANOTHER move [perhaps even more than 15 years later])...

So... You saw the MIDNIGHT STAR "No Parking" clip before... Which was a "Universal" concert that CV happened to be at attendance at (in his EARLY DJ years)... But The following is what they were REALLY famous for (note: I apologize for the sound quality on both - but I've been searching for YEARS to find YOU TUBES on these performances and JUST found them)...


FREAK-A-ZOID

Now I know... That video & sound quality is horrible... But I've been looking for a clip on that performance for the past 25 years - and just found it... What sucks is that the YOU TUBE actually cuts out 2-3 minutes before the end of the performance... But the performance was UNBELIEVABLE... You don't even want to know... BELINDA LIPSCOMB, in her day, would FRY "Beyonce" in a millisecond...

Anyway - I don't want to even get locked onto that... ECLECTIC - is the THEME of this thread... What did it all lead to? Why is that of any importance in 2010... And with the VIX, for crying out loud?...

Well... Let's take a step back... Remember "VIX" rhymes with "MIX"... I kno - kinda cheesy... But MIDNIGHT STAR (and their "unbelievable" performance skills - IMO, equal to George Clinton & Parliament)... Led me to the following young woman...

MADONNA

I think many of you on this blog already know CV's "brush" with the material girl... It wasn't for long... 1986-1988'ish... But it wasn't without episode...

She (TMG) was doing WHO'S THAT GIRL, in 1987 (and had to do a World Tour)... FRANKLY - At the time, she had had a few "hit" singles, but THE WORLD hadn't really caught on yet... You have to think that this was a time, PRE SEAN PENN, that she was still renting a penthouse West Hollywood apartment, and CV spent half his time tossing her damn panties off the upholstery of that apartment to find WORKOUT room... (Note: CV IS NOT the personal trainer that EVER made her pregnant - that was the OTHERS)... But (CV rolls eyes)... she was a head-case...

Anyway - She has to do this World Tour in '87 (and CV has to get her in shape)... Fact is... She didn't NEED to be in shape... She WAS... If I'd have suggested ANYTHING (and of course, I DID)... She needed to work on her LUNGS... She had NO STAMINA to sing LONG SETS, or EXTENDED SONG RE-MIXES...

As always... She KINDA listened to me... and she MOSTLY didn't (which is why we eventually parted ways)...

But LATER... Less than a few months after... After I'd sat up for hours and expressed my opinion on something... THE FOLLOWING occurred...

INTO THE GROOVE (Live) - Torino, Italia - 1987)

This "rendition" was performed in Japan/US/Canada/& Europe in that year... But by the time it had been "polished" in Europe, it had taken on EVERYTHING that CV had intimated from the very beginning...

POINTS?

- CV "hated" the idea of of the silly Michael Jackson kid (it was "patronizing")... whatever
- Madonna HATED singing "Into the Groove"... It was a lung buster (chord wise) She wanted to keep it under 4 minutes...
- CV said... "It was the BEST SONG IN THE SET"... Milk it...
- Madonna COULDN'T SURVIVE (physically) a concert without that song coming in under 4 minutes...
- CV "recollected" a studio version of "ITG" on the YOU CAN DANCE (ep)... Which had sparse sales (other than for DJ's)... Remember - The Material Girl was only interested in CV because he was a TRAINER & DJ at the same time)...

SOLUTION?

CV "suggested" that ITG be extended out to 8+ minutes (on stage)... (Which Madonna didn't have the lungs for [see it in the video - for reference - THE BREAKS - you'll see])... Also... As CV "hated" the MJ kid (and frankly would have NEVER used him - but that was just IMO)... CV suggested that TMG used other FILLER...

FILLER is only "time" (in performance terminology - for all we know - the SPX is doing EXACTLY that right now in this MELT UP - "filling time")...

So... I'd suggested TWO things...

#1 - A MOVING STAIRCASE... (The level of stairs - where a "tapis roulant", treadmill, is located... CV showed TMG how to "DANCE" on that thing)... She learned pretty quickly :-)...

#2 - A BUNCH OF BULLSHIT... For 4 minutes in the video (to save TMG's lungs)... all she needs to do is do a bunch of PARTY S*** back and forth across the extended stage... CV takes NO CREDIT for this wellspring of creativity because it was COMPLETELY inspired by the aforementioned MIDNIGHT STAR concert... Which, in turn, was most likely COMPLETELY inspired by GEORGE CLINTON & PARLIAMENT...

That's the way it works people (if you're ECLECTIC enough to be FLEXIBLE)...

I have to say that TMG (despite our mutual HATRED for one another) to this day... Was "the girl" that UNLOCKED a bounty of success for CV (in Italy), for more than a decade to come (CV "thanks" her for that)...

So all CV can say is... "VOLATILITY IS WEIRD"... Go ahead and take your chances on it if you wish...

It's NEVER disappointed me personally :-)...







181 comments:

karen said...

EXTRAordinary post, CV.. I can't get over it.. really.. Never saw a Madonna clip I could even watch before that one.. but the first two clips! ah! can i have those non-stop hips! Well, thank you for sharing as always..

CV said...

@karen

Belinda (Lipscomb)... Tho CV doesn't know her personally...

Was a BOMBSHELL of energy on stage (I saw her 3 times)...

FRANKLY - CV says this... The best 3 PERFORMANCE ACTS I saw (back in the day) were:

- The BAR KAYS
- The GAP BAND
- MIDNIGHT STAR

Belinda "worked it" like no other... (now - you have to QUALIFY that because the GAP BAND [which CV is in 2 videos of], and the BAR KAYS [which were TRUE heroes of the time]... Didn't have female lead vocals... NEITHER DID "PARLIAMENT"... or some of the other bands...

Anyway... It "registered" to me in that day that a STAGE ACT needed to be that way... Just POUR IT OUT sexually... (Funny thing was that BELINDA had ZERO in way of a name)... Despite the "hits"... It wasn't going to last...

Even FUNNIER... Madonna didn't really have that type of personna back then either... She didn't even know what she was supposed to be...

Neither did I... For that matter... But I just expressed (IMO) what was on my mind...

It's VERY HARD for a person... THESE DAYS... To put their arms around that experience because it was mostly antecedent to what TMG ever became... In fact... BEFORE she became anything that she ever WAS (to most people's VIEWS)...

I'm VERY HAPPY... I think... In all... It was MEANT TO BE... It MADE my name in Italy (which is the most important thing that has ever happened to me)... For TMG? (it seems that she hasn't fared too poorly)... No credit ascribed... it was a fate of timing...

So "nononstante"... my molecular feelings with TMG... She might be the most important person I've ever come in contact with in my life...

So I say... "Thank You MG"... :-)

Anonymous said...

Terrific post CV. Will have to download these and check them out.
You know, reading all that you write, one could almost say that you have lived quite a full life, so to say. Carry it on.

karen said...

good morning! i'm into attitude adjustment today..

CV said...

So far... the market seems to be tracing all the "little moves" that DAN has been mapping out pretty closely...

Madonna said...

You know you want me, CV.

By the way A-Rod has a small d*ck.

CV said...

A-Rod can't seem to find his stroke (to hit #600)...

Madonna said...

It was you that stole my panties! Not even your size...

72bat said...

this post has to give an entirely new meaning, if not a wholly new dimension, to "elliptical"
tour de force, cv

CV said...

UUP finally hit its 61.8% retracement...

But these currency moves seem to tend to go through a basing process first...

CV said...

@Amen

Would a DARK CLOUD COVER candle necessarily have to make a higher high at some point in the day?

CV said...

TG breaking every lie detector in the country (lol)...

http://www.nytimes.com/2010/08/03/opinion/03geithner.html?_r=3&hp

Gary Shilling said...

Factory Orders -1.2%. FUGLY....
Treasuries to resume the rally.

AmenRa said...

CV

You want it to open higher (even by .01) and close below the midpoint (of the body) of the preceding bullish long day.

karen said...

i think TG is rather blatantly warning "don't bet against the market" in much the same way as AG implied that interest rates would stay low so ARMs were the way to go.

karen said...

odd that this number dropped.. it is ALWAYS up and worthless data anyway.

U.S. pending-home-sales index falls in June
08/03/2010 10:06:28 AM

An American House said...

No-one will buy me because there is no price discovery.

Leftback said...

The gap between the 10y and the 30y is very wide by historical standards. That is bullish for the long end, so don't bet against the 30y right here, we are likely to see some flattening occur.

Leftback said...

Dollar down, stocks down, we said we would see that and
WHOOP, here it is.

Gold not doing much on the BUCKY plunge. Nervous, Goldfinger?
USDJPY must find its bottom eventually...

Leftback said...

One for CV:

Is Italy too Italian

karen said...

JNK is paying .31 this month..

Leftback said...

USDJPY is the Falling Knife du jour.
Crude and gold are very weak in response to the Bucky plunge.

When Bucky stops falling, I will pick it up.

karen said...

CT is attempting to lure NY Hedge Funds..

http://www.forexlive.com/123140/all/new-york-hedge-fund-managers-consider-leaving-new-york

I-Man said...

http://www.examiner.com/x-10722-Austin-Science-Policy-Examiner~y2010m8d3-Large-solar-storm-headed-our-way

CV said...

The fractal on todays movements (in 5 minute candles) is a lot like last Tuesday...

The only difference was that the high point actually came late yesterday afternoon...

Then, a .009 pullback, followed by sideways...

So far - that's panning out again...

CV said...

You could basically draw a price channel from last Tuesday's high to yesterdays high...

and last Tuesdays low (and today's low) and see the price action in and out of that fractal...

Leftback said...

Strange sad story of American wealth.

http://www.nydailynews.com/real_estate/2010/07/31/2010-07-31_a_42room_5th_ave_palace_no_one_lives_in.html

Leftback said...

This was a good laugh, Macro Man posted this morning.

JPM blew a big commodity trade and then decided to reveal all. Apparently the unit head is having a Deep Dive with Jamie Dimon (aka Saint Jamie).

JPM Finds Lump of Coal

Leftback said...

BTW, LB is not an expert in this area, but FX and hedgie chatter is that the Euro rally is close to cooked.

I bet a lot of you were surprised how long it lasted. Hat tip to Nic for pointing out this area as a likely target. Likewise the yen rally has defied all logic. Are we watching the very early stages of carry trade unwind? Lots of people see the writing on the wall for AUD CAD, and Japan is changing FX rules to limit the activities of Mrs Watanabe.

Bucky has begun a bottoming process based on QE2 anticipation. Look for this to be a slow grind sideways before the dollar squeeze begins.

karen said...

I just overlaid the $spx on the $nikk.. $spx has outperformed % wise since July 1.. prior to that they were in lockstep.

CV said...

@LB

That's the way I see it playing out as well...

Leftback said...

These people are dirt. I hope to live to see them on the street.

High End NYC Realtor Scumbags

CV said...

@karen

You should probably overlay the DOW as well...

I'll bet that has outperformed even more...

Mannwich said...

I can't even summon the energy today to read that, lb.

Leftback said...

We are doing a bit on the short side today. Crude, gold, RUT.
Small potatoes.

We think that weak jobs data and a dollar rally might drive long bond yields lower still and break into new territory, with a 2.75% and even a 2.5% 10y in play. Not shorting bonds here until we see panic buying.

CV said...

Well all I can say is she sure looks well fed...

Mannwich said...

FWIW - my tile guy who's doing part of my bathroom reno said that a bunch of jobs that he had quoted out 6-8 months ago are now all hitting at once. Maybe there are pockets of real recovery out there? From what I can tell, things aren't as bad relatively here in the Twin Cities as they are in many other places.

karen said...

CV, you are correct on that $indu overlay of $nikk..

$usd or uup back at low of day.. fxe back near hod..market thrives on it.

Mannwich said...

7% (as opposed to 10% or higher in some places) unemployment likely has something to do with that, I'm guessing.

Just throwing this little anecdote morsel out there for thought today.

Bruce in Tennessee said...

http://www.ft.com/cms/s/0/0ae8415c-9e5e-11df-a5a4-00144feab49a.html

"At the US Embassy in London, there is a waiting list that none of the officials likes to discuss. On the list are Americans hoping to give up their citizenship, as they seek shelter from the Internal Revenue Service."

"By comparison, the tax positions of Britons who move to the US are somewhat less complicated. British citizens do not face double-taxation in the US as they escape UK taxation on most types of income while abroad. But shares in investments such as unit trusts and ISAs could draw US tax at a higher rate if sold, so advisers often encourage expatriate Brits to avoid cashing them in while abroad."

...Morning all, busy day...see you later this afternoon.

karen said...

xrt took a plunge this morning but is "soaring" in the last ten minutes.

I-Man said...

Blythe Masters sounds like a joke.

She wont be around long.

CV said...

@LB

2.5% 10 year...

Gee, with the SPX up here, that would make it, like 200+ points rich...

karen said...

spy:uup looks bullish on the chart..

karen said...

breakingNews

Update: Four dead in Connecticut workplace shooting, including employee who opened fire - NBC http://bit.ly/cVyLlL

karen said...

Gold getting a lift amid report China to allow more trading
Written by Jamie Coleman
August 3, 2010 at 15:33 GMT
China plans to allow its banks to have a more active role in the gold market, the Journal reports. Gold has firmed up on the news and now trades at $1189.

Leftback said...

I wonder what would happen if a hedgie went postal?

Ben22 said...

bought the dip again today for a quick trade via SSO

karen said...

US Treasury Four-Week Bills: 0.150%; 2.20% At HighFont size: A | A | A
11:51 AM ET 8/3/10 | Dow Jones
WASHINGTON (Dow Jones)--The U.S. Treasury awarded $31 billion in four-week bills at Tuesday's auction at a high rate of 0.150%.

The Treasury received bids totaling $139.75 billion and accepted $31 billion.

Primary dealers were awarded $17.78 billion, while indirect bidders--a category that includes foreign central bankers--were awarded $8.99 billion.

Indirect bidders got 29% of the total competitive; direct bidders received 13%.

The dollar price was 99.988333 and the investment rate, or bond-equivalent return, was 0.152%.

The bid-to-cover ratio, an indication of demand, was 4.51, Treasury said.

Tenders submitted at the high yield were allotted 2.20%.

The Federal Reserve purchased $3.78 billion in bills for its own account. When the auction was announced, the Fed held $3.78 billion of maturing bills. In Monday's auction the Fed didn't buy three- or six-month bills.

The bills awarded to the Federal Reserve are in addition to the public offering amount.

CV said...

@karen (11:50)

Aww shucks... You mean it wasn't Capitol Hill?

karen said...

sso.. i'd be more interested in a breakout of 39..

karen said...

Not everyone is reporting BTE earnings.. revisions or not.. didn't stop them from issuing new shares however:

Tuesday, August 3rd, 2010, 10:52 am
Losses continue to mount at Radian Group (RDN: 7.6499 -15.28%), with the Philadelphia-based mortgage insurer reporting a net loss of $475.1m — $4.31 per share — in Q210.

The loss is up from the $310.4m loss Radian reported in Q110, and comes despite an offering of 50m shares of stock in May and reports in June that the company's mortgage insurance operations are stabilizing because of improvements in the economy and housing markets. Radian reported net income of $231.9m in Q209.

http://www.housingwire.com/2010/08/03/radian-reports-475m-q210-loss-expects-2010-mortgage-insurance-claims-to-total-1-5bn

CV said...

Crude is 82+ a barrel...

Yeah! Let's all get long equities!

Winthorpe said...

Pork Bellies... I knew it!

karen said...

oops, another:

Tuesday, August 3rd, 2010, 10:59 am
Commercial real estate firm iStar Financial (SFI: 4.70 -9.96%) posted a second quarter loss of $250.1m or $2.51 per diluted common share.

$890.9m of its $1.53bn gross book value is classified as REO and being held for sale in the near term. The remaining $641.5m is classified as real estate held for investment, as iStar intends to hold, operate or develop these commercial real estate assets over a longer term.

iStar continues to unwind mortgage holdings, as it can. The company operates on balance sheet, meaning it rarely, if ever, issue securitizations for its holdings. Its portfolio of first mortgages and participation in first mortgages, senior loans and corporate tenant lease investments collectively comprised 77.4% of the company's asset base, versus 82.3% in the prior quarter. Its loan portfolio consisted of 70.5% floating rate loans and 29.5% fixed rate loans, with a weighted average maturity of 2.2 years. The company said 63 of iStar's 195 total loans are in non-performing status.

http://www.housingwire.com/2010/08/03/istar-financial-loses-250m-as-it-holds-commercial-reo-book

Lord Blankfiend said...

Let's get short crude. My basement is full of the stuff.

Mannwich said...

Anyone else eyeing DTO here?

CV said...

@Manny

I think I'd rather just play it straight with Bucky...

Leftback said...

LB is short crude but it's a commando raid.
In silently, wait under cover of darkness and out tomorrow.

CV said...

@LB

Couldn't resist that gap in the USO chart, could you?

Leftback said...

Overhead resistance in the EURUSD approaching. Inventories tomorrow, Bucky has been beaten with the yen which is a floppy stick of celery.

Any BUCKY BOUNCE™ and a supply build and it's CLAVADISTA d'OLIO.

CV said...

The market seems to be in a funny spot here...

It seems like everyone WANTS it to go higher, and it's behaving as if it may, but it's also behaving as if it's SCARED to go down and give up any technical progress it's achieved...

I believe one good INTRADAY move (down, then up) is needed for the bulls to be confident here...

I don't think this mornings move corrected enough...

CV said...

"petrolio" (more specific - LB)

CV said...

It would seem to me for the market to make any further move higher, it needs to put 1110 in the rearview mirror...

It managed 2 closes over that number last week - then failed...

Yesterday it closed over, and today, so far so good... But it's hard to imagine a big rally until that point is settled...

Of course... There's the RIDICULOUS gap from Monday morning... and another ridiculous gap around 1070... But the market may deal with those later (on the way down)...

CV said...

1110 was the .009 FIBO (from 1220)...

It's also the weekly candle close from FLASH CRASH week...

CV said...

If you drew a straight line from the most recent "B" wave low (1056)...

Thru 60 minute CANDLE CLOSES... Chart support comes in pretty close to 1110 at the moment... It's around 1107 right now but should intersect tomorrow or so...

CV said...

Tyler Durden losing his marbles one rant at a time... :-)

Earlier today, the Middle East again came once step closer to war after the latest Israel-Lebanon clash claimed the most lives since the Second Lebanon War. As part of the escalation, 3 Lebanese soldiers and 1 journalist were killed, as well as an Israeli officer, over what appears to have been a day of gardening gone horribly wrong: Haaretz reports: "The violence apparently erupted over a move by Israeli soldiers to trim some hedges along the border, a sign of the level of tensions at the frontier where Israel fought a war in 2006 with the Lebanese militant group Hezbollah." Surely this latest escalation explains the most recent surge in stocks, as Ben Bernanke will now have an excuse to take his money paradrop operation over to the Middle East, in hopes of keeping everyone occupied through endless amazon.com purchases of assorted useless gizmos.

Mannwich said...

@cv: I think your meant "lost"....his marbles.

Leftback said...

The B/Ds must be loving the action in the 5y and 7y. They will unload them next week after we get the soggy jobs numbers out.

Anyone expecting a sizzling ADP? No, I thought not. BUCKY might rally here on a) a sizzling ADP or b) a disappointing ADP and risk aversion.

Either way commodities look rich here.

karen said...

(1) realize that the $usd has fallen for nine straight weeks inclusive of this one.. for fun, plot $vix over the weekly chart..

(2) i do not know if this is a correction and the rev h&s will play out or if this trend will continue bringing $usd into 70s.. uup is on support now.. clearly oversold, but i may not be a true proxy of the $usd.

(3) whatever happens is all important..

karen said...

"but IT may no be a rue proxy of the $usd."

anyway.. RSI on uup hasn't been this low since june 2009.. when a small bounce ensued.

CV said...

FXE is hitting a 261.8% extension of its move off the bottom...

Looks like a 5 waver to me...

CV said...

FXE is also at 38.2% of the move back to the top...

So these are perfect FIBO completions...

karen said...

3 month yielding .13

CV said...

Any "tweets" from Danny?

karen said...

fxy made a 52 wk high today..

CV said...

@karen (1.04)

lol - I think Bernocchios idea is to get the 2 year down to zero as a steepener...

karen said...

USD/JPY grinding lower as Treasury yields fall further
Written by Jamie Coleman
August 3, 2010 at 16:23 GMT
Wanna lend Uncle Sam some dough for the next two years? He’ll only give you 0.525% interest but investors can’t get enough of his paper…
USD/JPY is back to session lows in the high 85.60s as rates slide.
BOJ intervention against the backdrop of low yield spreads and Chinese buying of JGBs looks like it would be fruitless…And traders sense it.

Leftback said...

EURUSD and JPYUSD rallies are very long in the tooth.
DXY 79 probably marks the lower bound for this nonsense.

AmenRa said...

It still looks like the market is trying to keep the 10yr at 2.90% or better. Closing below that would invite LB's targets to appear sooner rather than later.

Ben22 said...

the wave action looks more like a fourth wave or small b on Andy's charts, both of which are bullish in the near term once this pullback ends, I'm not a bull, just appears to me like you can squeeze a little from the long side still. Added more to dollar position today.

also, this nonsense buzz about how "healthy" corporate balance sheets are because of all the "cash" they hold, well, perhaps it makes sense to look at the other side of the ledger:

http://finance.yahoo.com/banking-budgeting/article/110218/the-biggest-lie-about-us-%2520%2520companies?mod=bb-budgeting&sec=topStories&pos=3&asset=&ccode=

Leftback said...

Ra,

As you know I love to bet against the long end and have made a bundle doing it. But the more times we knock on this door, the greater chance it will open. A fugly downside surprise in ADP or NFP and we may be in virgin territory for the year.

MS still calling for 5.5% on the 10y... not really. Why does Jim Caron have a job? Can anyone tell me? What about Abby Jo?

Barry Knapp is funny, dude called for market down early in the year, CORRECT. But his logic was based on a bond rout. WRONG. Now he looks dazed and confused and a little scared, as though his Ukrainian girlfriend and her friends are smoking crack in his office.

karen said...

another i haven't been watching $xsf has rallied for nine straight weeks.. mirror image of the $usd

Sitting on piles of cash said...

Look at me...I'm sitting on piles of cash...

Mannwich said...

In other "news", looks like Drama Queen Favre not coming back to Vikes. I believe that when I see it.

CV said...

I think Abbey Jo was out again as recently as yesterday doing her 1300 boogaloo...

Mannwich said...

Maybe Favre can "hire" boot-licker Jim Gray and ESPN to deliver the "news".

Ben22 said...

just thought this was some interesting information:

Anyone that has charted the dow priced in gold knows that it would show a depression in stocks since July 1999, 80% drop.

historically nominal trends play catch up with real returns. Examples, When the Dow was pushing to a new high in January 1973 in nominal terms, the index was plunging in real terms, which set up the great bear market of 1973-1974, when the nominal DOW was down 25% from April 1981-August 1982 the real DOW was rising fast from the Jan 1980 low which led to the great bull market of the 80's and 90's.

it's probably different this time I'm sure.

CV said...

Which was the 1800 boogaloo (back in 2008)...

I think she just took an eraser to the sides of the 8 to make it into a 3...

That's why she gets paid the big bucks...

CV said...

@Manny

Last week he was saying he'd play until 50...

Jim Gray said...

Every one in media is a boot-licker Manny....

Abby Joseph Cohen said...

You know you want me CV. Have you seen my panties?

karen said...

ben, did you read some of the comments on your 1:13? well, don't bother !

AmenRa said...

Weekly DXY testing its SMA(89) and SMA(233). The rubberband has been stretched too far..

Mannwich said...

@Jim: But you lick boots and other parts as well. You're just willing to go a little further on the "licking".

Leftback said...

Karen, are you saying the highly sophisticated Yahoo finance poster types like WANGER are not worth reading?

ben, as far as corporate bonds are concerned, the cash positions are seen to be there, at least, and it will take a big turn for IG to be in danger from balance sheets. JNK, more dangerous, but what is clear is that in THE NEW NORMAL there is LITTLE or NO INTEREST RATE RISK, and that's why bonds are rallying. Stocks also to some extent, if you follow me.

Mannwich said...

I'll bet he comes back at mid-season to save the day for the same coin he was to make for the whole season. His hero complex (and lust for that dough) won't let him sit out all year, and the Vikes will be desperate by then to give him the house.

This is what the Vikes get for letting him call all the shots.

karen said...

is it really only tuesday? eem has a fascinating weekly candle.. is that a h&s on the one year?

Leftback said...

Bennie and the Feds have to do their utmost to make crude go up slowly and try to keep Bucky down. Crude and $gaso are the only possible drivers of inflation in a no-growth environment, so that's the main weapon to counter falling asset prices in the battle against deflation.

But every now and again, free market forces will overcome the manipulation and price discovery will be unleashed, Bucky and crude will change places. Remember the seasonals say crude sells off after July 4 and we are overdue.

karen said...

the truth is, i would be bullish right now if we hadn't overstepped the february lows in may.. twice even.. but this week is really throwing me for a loop... just trying to remember that it really is only tuesday..

CV said...

@LB

Repo city baby!

Leftback said...

EEM H&S = China Slowdown, Karen.
The commodity restocking is over.

You do look rather fetching when you bend over....

CV said...

@karen

It's going to be a long month...

Ben22 said...

karen,

no, I never read comments on Yahoo, of course now I'll have to go back and read since you mentioned it.

left,

I do follow, my primary point though, is that there is no "cash", but that doesn't stop people from saying there's cash. Nobody would look at their own balance sheet in such an insanely foolish manner and call it "healthy", well, very few people outside of DC that is. Further, I find it noteworthy that companies are borrowing still today at such a rapid rate. People used to say it would take a "big event" for subprime to become a problem as well.

Ben22 said...

regarding China, I don't subscribe but I'm fairly certain the EWI Asian team has called a bottom for China's markets at this time. So this would go against what Chanos, or Hugh Hendry among others are saying. Faber seems to have chilled out a bit with his China bear call.

I disagree with EWI, but you look at something like FXP right now and it certainly doesn't look bullish.

karen said...

the 1121 area is really important. closing over it for a second day in a row--let alone a third day--is not going to work for me..

James Altucher said...

Ben22,

You idiot!

Gold is going to $200; the Dow is going to 20,000.

CV said...

Somebody deserves a Nobel Prize for this...

http://www.youtube.com/watch?v=uCK8oSFFpgc&feature=player_embedded

Leftback said...

ben,

I look at stocks, junk bonds and corpies as things that I can be long for a while until they blow up. Corpies are further in on the risk continuum than stocks or junk. Eventually even Ts will blow up of course.

But if we are in a deleveraging deflation US bond and USD risk is low. Sans Son of Stimulus it will be a cold winter for the Reflationistas.

Ben22 said...

it would seem that someone was inclined to bet against goldman today in the options pits regarding volatility in September.

Ben22 said...

left,

I believe we are in the same camp though I refuse to hold stocks for longer than little blips here and there in this environment. I've got clients loaded up with bonds, though not a ton of HY, though I'd argue some of the things marked AAA in what I hold....aren't. I'm quite confident it won't be a problem anytime soon, which is perhaps a problem in itself.

karen said...

Ashraf on BNN:

http://watch.bnn.ca/the-business-news/august-2010/headline-august-3-2010/#clip331950

karen said...

aapl chart from Corey:

http://blog.afraidtotrade.com/update-on-the-pesky-trading-range-in-apple-aapl/

Bruce in Tennessee said...

http://finance.yahoo.com/banking-budgeting/article/110218/the-biggest-lie-about-us-%20%20companies?mod=bb-budgeting&sec=topStories&pos=3&asset=&ccode=

The Biggest Lie About U.S. Companies

"Commentary: Healthy balance sheets? They owe $7.2 trillion, the most ever"

CV said...

@karen

Remember that thing I did back in April (where I was looking at DOW stocks in relation to their all time highs)?

Well... we're basically at that point again (with many of the big names)...

IBM
MCD
MMM

etc. within a few bucks of their all time highs

Leftback said...

ben

More than ever, this is simply a giant game of chicken. I am pretty sure that I can scrub my portfolio clean very quickly when the time comes. Learned a lot in 2008. Meanwhile, those 10% yields in HY are slowly bringing in cash.

CV said...

even CAT is at it's October '07 level...

Leftback said...

This is a massive snoozer.

LB is off for a walk, see you at the close.

AmenRa said...

Ben

That story mentioned how companies failed to pay down debt during the downturn (ongoing). How come that doesn't get mentioned along with the "excess" cash in the MSM?

Leftback said...

BTW, the state of corporate "accounting" is another reason that Ts are not going to blow out. This will all remain hidden, as in Japan.

Bonds cannot be allowed to fail or the Boomers are toast via the pension funds and their managers. Stocks on the other hand are expendable....

LB loathes Boomers and Bankers.

karen said...

CV @ 1:28.. thanks for that observation..

Ben22 said...

Ra,

it's all a big joke man, look what happens every time we get into earnings season, I find this is one of the biggest jokes of them all, how many times do you hear an analyst point out how we are all blindly thinking that operating earnings are the same thing we used to look at when we measured earnings. The answer is it never gets pointed out, and everyone out there talks about p/e ratios and how cheap stocks are compared to 19XX whatever, but it doesn't apply apples to apples to anything prior to 2002.

it gets old pointing stuff like this out though, nobody cares, or they just want to treat you like you are negative all the time, doom and gloom, or some other derogatory description.

karen said...

doug kass: A month ago, I made the case that stocks had hit their lows for the year.

As stocks begin to challenge my upside S&P 500 target of 1,150 (in a range between 1,025 and 1,150), I would now reduce stock positions in the belief that shorting the U.S. bond market, via a ProShares UltraShort 20+ Year Treasury (TBT) long, provides a better downside risk/upside reward ratio than owning the S&P now.

http://www.thestreet.com/story/10824977/1/kass-a-risk-on-risk-off-world.html?cm_ven=GOOGLEFI

DL said...

My take on Doug Kass is that when making market calls, he uses sentiment indicators primarily, and technical indicators secondarily; that he makes a prediction of a reversal in direction when the indicators reach an extreme, on the bet that “regression to the mean” will occur. When a journalist asks for his reasons, he just makes up a few, so as not to “give away” his methods.

karen said...

gotta read:

Banks ‘Throw in Towel’ to Add Most Mortgage Bonds in 18 Months

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=arW5WYPMtQ48


http://www.housingwire.com/2010/08/03/former-fannie-ceo-says-poor-credit-judgments-sank-gses

Bruce in Tennessee said...

Karen:

I don't think we took any kind of vote on whether you should change your avatar.

...Show of hands for those who liked the "old" avatar? I thought so...

karen said...

CV, no TopStep yet.. sorry!

karen said...

Bruce, I do aim to please! However, I'll look around for something better later! Yours was quite a puzzle.. I finally got it tho : )

karen said...

zerohedge

why is the market not green yet? after all Q2 GDP was just shown to be 30% lower than previously presented

Ben22 said...

doug kass can go fuck himself as far as I'm concerned. what he has been doing is screwing over the small retail investor with his insane flip flopping, and we all know that's who hangs at ts.com.

he first annoyed me when he got credit for calling the March 09 bottom, uh, not exactly. Dude made bottom calls on banks and other sectors several times starting in late september 08, did he say bullish things in March 09, yup, but he had been for nearly 7 months, he never "called the bottom"

He also called a market top in August 09.

then he makes statements like this, July 16, two weeks after his "market has hit lows for the year"

"It still remains my view that the S&P 500 has made its low for the year, but, from my perch, the developing downbeat economic conditions will trump the nonrecurring events at BP, Goldman Sachs and Apple, and, in the days ahead, stocks will erase some of the recent breathtaking gains."

he then went on in the same paper to explain that analysts were rationalizing incorrect bullish views by "making valuation cases" or trying to talk about extreme's in sentiment, which was certainly the wrong thing to do as an investor. You know, not like he ever does that:

http://www.businessinsider.com/how-i-got-roubini-to-admit-the-stock-market-might-be-cheap-2010-7

http://seekingalpha.com/article/158578-doug-kass-calls-a-2009-market-top-on-overly-bullish-psychology


dude is all over the map....seems pretty clear to me, so he's probably doing the retail crowd a great service with these calls.

DL said...

B in T @ 2:37

You took the words out of my mouth. (More or less).

Ben22 said...

DL, 2:34,

your impression vs. his words:

"Prior to the recent soft patch, most economists and strategists expected a self-sustaining economic recovery that might average at least 3% GDP growth. Now, many of those same economists and strategists are begrudgingly reducing their growth forecasts and taking the slippery slope by rationalizing their bullish S&P targets, and they are making a valuation case and/or identifying negative extremes in sentiment (whether it is in a growing bears/bull ratio, the absence of flows into domestic equity funds or in investor fervor/popularity associated with the fixed-income market) to do so."

http://www.businessinsider.com/is-doug-kass-flip-flopping-on-his-july-1-bottom-call-2010-7#ixzz0vZP2fq00

perhaps I don't get it, but this statement to me implies that using sentiment extremes, for example, is not worth doing, it's simply rationalizing.

karen said...

I do believe existing will outfall pending:

http://www.calculatedriskblog.com/2010/08/pending-and-existing-home-sales.html

Nic said...

Hello Peeps
Vix sonar report:
http://www.youtube.com/watch?v=f0rUxH3gQyo

karen said...

ben @ 2:43.. i love it when you tell it like it is and than irrefutably back up your statements, LOL.

AmenRa said...

5 min left to hold TNX above 2.90%. Figures.

DL said...

Ben @ 2:47

“this statement to me implies that using sentiment extremes… is not worth doing, it's simply rationalizing”.

I’m not clear on whether that is your opinion, or instead, your opinion of Kass’s opinion.

One of my points is that whatever reason Kass gives for his market predictions is likely not the real reason.

Ben22 said...

DL,

not my opinion, just how I read his. I think sentiment indicators at extremes can be very valuable indeed, I look at sentiment in one way or another pretty much every day.

I guess what drives me nuts is that I'm sure his fund is doing fine, otherwise he wouldn't be around, but this kind of stuff just kills the little guy. My head is spinning reading him, how could someone that isn't really involved with markets understand it.

Ben22 said...

also, when I read that article where he talked about roubini, I realized DK's nose was so far up in the air I couldn't even see it.

course, that's not really saying anything unique about him compared to most on the street is it.

Nic said...

If anyone is interested Nicole Elliott is a very good technical analyst. Here is her view:
http://www.cnbc.com/id/15840232/?video=1558418467&play=1

DL said...

Ben22,

One reason why I give Kass more weight than other $ managers is that he is just as comfortable on the short side as the long.

CV said...

@ben

think of what the LITTLE GUY must have to go through on a daily basis if they watch...

- Liesman
- Fast Money
- Cramer
- Kass
- Biriyni
- Ken Fisher

then the odd Faber/Rogers/Roubini, tossed in for good measure...

All orchestrated politically by:
Bernanke/Geithner/Obama/Frank & Dodd...

karen said...

Nic! she's great! "the poor man's swiss franc"

thanks for that..

Ben22 said...

DL,

I would hope so, he's considered a "short seller" primarily!

we used to get real money silver, I was never very impressed with any calls he made.

CV said...

When I used to live in Europe, I'd catch her (& Hugh Hendry quite often on CNBC Europe)...

Leftback said...

Kass is less impressive than My Bottom™. I only called it once.

Ben22 said...

thanks for the video nic, she's got a cool last name at minimum.

Leftback said...

Tomorrow's headlines today from Leftback:

1) Oil, stocks fall on weak data, supply build, risk aversion.
2) Oil, stocks fall on stronger than expected jobs data, dollar rally.

The peep at Bloomberg only have to press button A or B.

CV said...

We're looking at about the 4th or 5th lowest volume day of the year...

Not a very feisty follow thru after yesterdays surge...

Bulls are really on the rampage (rolls eyes)...

CV said...

@LB

Wow - those headlines might be too confusing...

Last week I posted two articles from Bloomberg (literally overnight - one was from about 12 midnight and the other was about 5 in the morning)...

A) Stocks rise on "the economy"
B) Stocks retreat on worries about "the economy"

karen said...

bears throwing in the towel.. x-ing my fingers for a close under 1121..

trend is up so now they think lows won't happen till next year..

ben22 said...

yeah, I think volume today would support at least one more push higher on this beast. I know EWI, Dan, etc. are in a hurry to label this the top of v of C however, internals looked a lot more like third wave on the recent rise than they did fifth wave.

I won't short again until I can see a good five down with some volume pick up.

Leftback said...

Did someone leak the ADP? Easier to expect since it is not government. After all, a government statistic would never be leaked to Wall St...

Clarence Beeks said...

I leaked it...

karen said...

the $cdw has only spent 2 days over the breakout line.. i need a third..

and as for $xsf.. it is as overbot as the $usd is oversold..

karen said...

do we live in strange times or what?!

http://nymag.com/daily/entertainment/2010/08/the_cost_of_being_kanye.html

karen said...

as Andy would say, this will all end in tears.

Leftback said...

Where's Beeks?

Leftback said...

BUCKY will wreak vengeance on all those who don't have enough of him when the final reckoning arrives and the GRIM REAPER calls, well, the margin clerk anyway....

Bruce in Tennessee said...

Leftback said...
Kass is less impressive than My Bottom™. I only called it once.


..I dunnno...I've seen a lot of unimpressive bottoms in my day...

Mannwich said...

Good grief, karen. Strange days indeed. Bonfire of the vanities part deux.

Ben22 said...

kanye,....just keepin it real isn't he:

“I had a dream I could buy my way to heaven, when I awoke I spent that on a necklace.”

Mannwich said...

@ben22: Someone needs to slap that idiot.

If God exists, people like him will go broke during the next bust.

karen said...

Jeff, don't bet against entertainment industry in the coming years..

Mannwich said...

@karen: Probably true. Need something to medicate the sheeple and keep them docile.

Ben22 said...

the future of rap is going to be interesting to say the least. Rhianna now sings "I'm a rock star" and Jay-Z plays on a Fender Strat at most of his shows now as does Lil Wayne, and we've moved from bitches, 40's, and big screen tv's to yachts, jets, and weekend trips to the south of france.

Public Enemy seeks legal advice over their lyrics, Jay-Z seeks legal advice on which sports franchise to purchase next.

"I'm not a businessman, I'm a business....man!"

CV said...

You call that entertainment?

Mannwich said...

@ben22: But that's all just part of "keeping it real", right?

Jenny from the Block said...

"don't be fooled by the rocks that I got"

Leftback said...

Once the Artist is all about the Bling, they are no longer Relevant.

Look for the next wave of Artists to be angrier than any since the 80s.
RP is right about the swings of social mood.

"God Save the Queen.
It's a Fascist Regime.."

Ben22 said...

lol, real? no, the public has created personas for these guys that they can't possibly escape now, I have a lot of old rap albums, the message today is so very different from what rap was built on, but I think that's a product of social mood.

I'm a huge Jay-Z fan though, and I like all Kanye's CD's as well, you know, if I'm keepin it real.

Ben22 said...

@Karen,

I have pit seats for KOL thursday night in dirrty jersey. should be a good time.

Ben22 said...

I just got a call from snookie, she says this sun flare should provide some good tanning windows.

pump ur fists!

karen said...

live in Brussels on May 12 2010!! speaking of rappers reminded me of the orignial and my favorite since I was 17 years old.. Gil Scott-Heron.. Winter in America

his voice is a bit scratchy.. years of smoking.. but amazing he has survived his heroin addiction..

love his Spirit recording from 1994.. listen to these lyrics (this is part 1 of 3) The Other Side

Hard to top the Winter in America recording from 1974, tho.. : )

karen said...

Ben, KOL?! too fun! you know I went to HS in NJ.. (oh, Camden, I just looked it up..)

karen said...

SF on the 15th.. but i've never been one for crowds.. even when younger.

Lord John said...

Karen,
Which high school in NJ?

Ben22 said...

yeah, I hadn't planned on going but someone had extra tickets so why not. Haven't been to a show since Pearl Jam played in Philly last fall.

I paid $8 the first time I saw KOL and I was all of 3 feet from the stage, maybe 150 people there....they've clearly gotten a bit more popular since then though.

and you went to hs in jersey? didn't know.

Ben22 said...

take that back, we saw Norah Jones earlier this year in Philly, she had a nice gig.

Lord John said...

Ben,
It looks like "Built To Spill" is opening, great band!

Leftback said...

The Bond Report 8.3.10

Treasuries rallied especially in the belly of the curve, with the 5-7y being the sweet spot today. Spreads widened slightly. An unusual feature was the strength of TIPS, perhaps on dollar weakness and the recent strength in commodity complex.

Corpies: LQD 0.25%; AGG 0.07%; JNK 0.25%; HYG 0%;
Govies: TLT 0.58%; IEI 0.43%; TIP 0.53%

2y and 10y yields are at or near record lows (excluding the panic buying of 2008) but 10s30s are near record wides, so there is room for 30y bonds to rally as that spread corrects.

The ADP and NFP numbers are obviously paramount here, suffice to say that we don't expect a hot number, and if we got one we would be looking to buy the dips in Treasuries, in which we have been less exposed recently since the July panic buying.

Auctions of 3y 10y and 30y are next week, so selling is likely on Monday and may begin earlier. Let's see what tomorrow brings.

Post a Comment

Disclosure/Warning

This blog should not be interpreted as investment advice of any kind. The authors are NOT representing themselves CTAs or CFAs or Investment/Trading Advisor of any kind. The authors may or may not trade in the markets discussed. The authors may hold positions opposite of what may by inferred by this blog.The information contained in this blog is taken from sources the authors believes to be reliable, but it is not guaranteed by the authors as to the accuracy or completeness thereof and is presented here for information purposes only. Commodity trading involves risk and is not for everyone.