scary market crossroads
putting together the return of volatility, political risk in europe and the u.s., housing stagnation, end of qe2, even if earnings are still good, the market just seems really funny right now. like the part of the river where the current goes in 5 directions right before the waterfall down.
are y'all moving to cash? treasury etf? rock-solid dividend plays?
the zerohedge bit on the averted flash crash in the high-yield etf was pretty ominous, as that would be one of the first areas to collapse in a general capitulation.
anyhoo, just looking for some interesting color
If they don't get Greece figured out by Monday, it could turn into a real shitshow.
I'd add China to the list of macro concerns. And it's a big one.
I agree on China. Any reason they got no pub for their mini TARP? Since when is a ~500bb bailout considered unimportant?
http://www.reuters.com/article/2011/05/31/us-china-economy-debt-idUSTRE…
Also, liquidity in Euroland is not very good right now thanks to Greece, and they could be entering a liquidity crisis. Deja Vu is a bitch.
It's not a big deal because it's not a bailout of the private sector. We don't hear much about the size of transfers from the federal to the state and local level here either.
Yeah, but it kinda is a bailout of the private sector as all these LGFV's were going to default against the private sector loans they had. Bailing them out is basically bailing out the lenders as they are sure to get paid and don't have any default risk.
Anytime a Gov is going to thrown 500bb worth of cash at anything, public or private, it should be a real issue in my opinion.
That's fairly similar to what's going on in the Euro zone with the difference that China is still a closed system in many respects and this shouldn't affect markets we have access to all that much. It is, however, symptomatic of the difficulties China is currently facing and definitely helps build the case that China is headed for a hard landing.
Your steepener makes sense in the short-term but there are a couple caveats. One, if the economy keeps worsening, there will be plenty of buyers for the 10s. Two, if things stabilize/get better, the curve could flatten in a major way.
Finally, things could get pretty interesting in the Treasury market this Summer. Depending on how close the debt ceiling thing gets, liquidity could be drained from the Treasury and repo markets and cause all sorts of havoc, albeit temporary.
Not that Macro but CA's Gov. Brown just vetoed the proposed budget today so now none of the legislators in CA are getting paid until something is passed...
While not Global definitely not a good sign.
I'm trying to be as market neutral as possible through this. I put on a big position in VIX july futures over the last few weeks (avg. cost 19.675) and that has worked great as a hedge. I recommended the position to a few people, and none copied it. Like, lol, it was so obvious a lot of things were going to drive VIX into at least the low 20s...
Covered calls and/or collars are good plays here if you still want to maintain a net long exposure. There's lots of value out there, but also lots of way overpriced stuff. On the whole though, I think the market moves sideways or lower over the next few months.
Short risk is the play here, lot of downside risk going long.. well, risk.
I wish they would just let Greece go bankrupt along with Ireland, Portugal and Spain. They need to purge the debt just like the US needs to purge the debt here before growth can continue.
What I am wondering is whether or not Bill Gross was right when he said there would be a QE3 in the form of Caps around the 2-3yr range. OTR spreads are the tightest they've been there as a lot of people seem to be getting in for that reason alone.
Although, it could also be a "flight to safety", which TSY's definitely are not. Maybe shorting the 10's and going long the 2's as a decent bet right now? We are definitely overbought in the 10's as they're at a negative real rate, and when the Fed stops buying bonds in a few weeks there will be a lack of buyers to maintain this sub 3% BS. I don't think the "flight to safety" crowd will be able to compensate for as much as the Fed was eating up via POMO's.
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