MF Global Is Large Enough for Its (Largely Anticipated) Bankruptcy to Drop the Ten-Year Treasury Rate by 20 Basis Points!?
Jeebus! I really hope we don't see a run on Morgan Stanley or Bank of America tomorrow…
(That's a joke: joke, joke, joke, joke, joke.)
Volar is having his hands full as he’s trying to trade without an Internet connection, functioning central heating, and food in his fridge, whilst fighting off alien invaders with a dull steak knife with his right hand tied behind his back. Plus the zombies over at MF Global refused to close out some of his client’s positions last week. Gee – I can only imagine the amount of stress he must be dealing with. We’re rooting for you mate and I hope you rats are sending him any charts he needs at his very whim.
Anyway, the poor fellow managed to free his right thumb and type me a quick email about the FDOM stats he shared with us back in August. Don’t feel bad – I had to think about it for a second as well. Fortunately my depraved brain eventually kicked in and I realized he was talking about his first day of month statistics. Anyway, Volar wants me to put up a pertinent post which gives me an opportunity to legally plagiarize his stuff for all it’s worth so that I get to appear intelligent for a change:
You just bet your ass that after today’s session the bears are ‘all in’. And I’m not saying there won’t be any further downside – after all my coveted daily NLBL has been taken to the butchers at the close, which means that there’s a chance we head toward 1226 or even 1200 here on the ES E-Mini. UNLESS of course we immediately reverse tomorrow morning and that’s what this post is all about.
Before we get to the stats let’s talk psychology, market distribution, and mean reversion. As the real Volar pointed out so aptly – if you are betting on mean reversion then you need a platykurtotic market – no, it has nothing to do with a platypus, although it does have a tendency to confuse mammalian trend traders in droves. And you just know that the perma-bears are now growling with joy hoping for some healthy mean reversion (as part of a platykurtotic market) to occur here and now. Although they definitely had their day today it just may just have been be a scheme to suck them in and hence take them to the cleaners tomorrow.
So what gives? First Mole proposes that we drop to 1226 or even 1200 – then he proposes that we may reverse here. You can’t it have it both ways, mister! Well, actually I can. This is what’s going to happen: We are either going to bust higher in a huge way right here or now (i.e. starting in the overnight spoos and then at the NYSE open tomorrow) – OR we beat all statistical odds and drop lower. So watch the S&P E-Mini overnight and look out for signs of accumulation – I sure will.
Since some of you noobs may be confused by all this let me be even more explicit – I’m going to give you three scripts for tonight and tomorrow:
- Overnight action lackluster and the spoos remain in the 1240 range. At the open there is little buying interest and we breach 1240 and descend lower with the Zero pointing down. This probably means we go down and touch P1 – which is at 1226.
- Overnight action lackluster and the spoos remain in the 1240 range. At the open there is buying interest although we may remain sideways for the first two hours testing the previous low. However, 1240 in the spoos remains intact and there is increasing buying interest during the session with a possible EOD rally to squeeze the shorts.
- Overnight action strong after initially shaking out a few more longs – we push above 1250 and are holding. Spoos continue upward and there may be a gap to open the NYSE session – the rest is textbook short squeeze.
Now let’s get to the good stuff. I yet have to tell you the reason why Volar (and now Ersatz-Volar) is suggesting a possible bear trap here and now:
Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
I hope I did okay playing ‘Ersatz-Volar’ – see you on the other side.
Prime Minister George Papandreou has stated his intention to hold a referendum on last week's agreement in Brussels for Greece's bondholders to accept a 50 percent haircut and the country to receive some 130 billion euros in loans from its eurozone partners.Things will become unglued in a hurry if Greek voters decide to tell the EU where to go. Moreover, but less importantly, Papandreou just may not survive the next vote of confidence.
Speaking to PASOK MPs, Papandreou also said that he would ask for a vote of confidence in Parliament. This is likely to take place next week. The referendum could happen later this year.
Papandreou said he had faith in Greeks making the right decision. “Let us allow the people to have the last word, let them decide on the country’s fate,” he said. He said handing the vote over to Greeks was «an act of patriotism."
The premier insisted that calling snap polls - ahead of elections scheduled for 2013 - would be “simply dodging the issue.”
The vote of confidence - likely to be held next week - would come just over four months after a similar vote that Papandreou sought, and won, to bolster his government ahead of a Parliamentary vote on austerity measures.
The premier's bombshell came a day after an opinion poll, carried out by To Vima, found that 60 percent of Greeks regard last Thursday's EU debt deal as «negative» or «probably negative."
Mike "Mish" Shedlock
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Here is today’s train reading home for Trick or Treat:
• Say What? In 30-Year Race, Bonds Beat Stocks (Bloomberg)
• Stephen Roach: America’s Other 87 Deficits (Project-Syndicate)
• Crumbling Bridges’ Leaves Business Paying (Bloomberg)
•Hussman: Whipsaw Traps www.hussmanfunds.com/wmc/wmc111031.htm
• What Does ‘Recapitalizing Banks’ Actually Mean? (Economix) see also Getting Over Our Over-Levered Selves (Forbes)
• Bill Gross: Pennies from Heaven (Pimco)
• Consumer ’Scared to Death’ But Still Spending (Bloomberg) see also 10.4 Million American Families Slide Toward Losing Their Homes (Alter Net)
• ECRI Recession Watch: Growth Index Virtually Unchanged (Advisor Perspectives)
• Apple spending big next year on retail and cloud (Gigaom)
• ‘Once you get beyond a million dollars, it’s still the same hamburger’: Bill Gates says being a billionaire is overrated (Daily Mail) see also Millionaires Support Warren Buffett’s Tax on the Rich (WSJ)
What are you reading?
Freddie Mac reported that the Single-Family serious delinquency rate increased to 3.51% in September, up from 3.49% in August. This is down from 3.80% in September 2010. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.
These are loans that are "three monthly payments or more past due or in foreclosure".
Click on graph for larger image in graph gallery.
Some of the rapid increase in 2009 was probably because of foreclosure moratoriums, and also because loans in trial mods were considered delinquent until the modifications were made permanent.
Tracking this on a monthly basis this is kind of like watching paint dry, but the serious delinquency rates are generally falling - but only falling slowly. The key is the normal serious delinquency rate is under 1%, and at this pace of decline, the delinquency rate will not be back to "normal" for a number of years.
UPDATE: Michael Swanwick shows how easy it can be:It's Halloween! So Marianne and I went down to City Hall to donate a case of water, a box of granola bars, and some M&Ms (for the seasonality) to the Occupy Philadelphia people.
This presents some issues; that summer sleeping bag isn't really adequate for NYC winters:
[W]inter's coming, fast up here in the Northeast. And while the Rude Pundit is convinced that the true flourishing of the Occupy movement will occur next spring (and into the awful summer and awfuller fall of an election year), there's a core of the protesters who are gonna stay, no matter what.
Here's what the Rude Pundit proposes, an action in the spirit of OWS:
On Friday, November 25, the day after Thanksgiving, Black Friday, the biggest shopping day of the year, as marketers force us to know, let's give to our local Occupy encampments what they need to stay warm for the winter.
The deal: check out your local Occupy website. There's a list of all the things they need in order to flat out survive into the Spring. [links to NY, Buffalo, Chicago, Nashville, and SF lists in original]
Having shoveled snow this weekend—and knowing people in NJ, MA, and CT who are without power, and (especially in MA) don't expect to have it back until the weekend at least—my only concern with this plan is that 25 November may be late.
Speaking of marketing, we could call this "Blanket the Earth." We could organize this on, say, a Facebook page or perhaps a Twitter feed or a hastag.
Blanket the Earth it is. Just make certain there are no smallpox virus cultures in them this time.
Submitted by FMX Connect
MF Global: Comments from a Bank Executive
More from our Bank Exec friend, this time on MF Global after we tried to lay blame on Rubin, Thain and Corzine for blowing up their firms :
“MF Global. They named that company right. You probably didn't see it first hand but Lehman, Bear and Merrill were doing the dumbest real estate deals "ever" in the run up to the implosion. Every real estate veteran saw it, and while AIG's CDS exposure gets airplay, bad real estate lending is at the center of the disaster. So, Merrill was toast before Thain showed up. He was just the funeral director. Citi (with its 14 off balance sheet SIV's @ $1 trillion) was an abomination in progress before Rubin arrived, the Enron of banking and each and every officer and board member should go to jail. But they won't because they are all too powerful and very politically connected.
But Corzine takes the cake, jumping into European sovereign debt of all things. WTF ?? I mean, doesn't he read zerohedge ? They blew the whistle in like 2008. From news reports, Corzine himself was the primary trader taking ever larger positions in government debt. That's almost astounding. If you liked Bear Stearns leverage, you'll love MF Global.”
"In sum, there were many varieties of Progressivism and Progressives. They held in common, however, a conviction that society should be fair to its members (white native-born ones, anyway), and that governments had to represent “the people” and to regulate “the interests.” It went without saying that there was such a thing as “society.” The progressive “big four”—Bryan, Theodore Roosevelt, La Follette, and Wilson—and the many less visible Progressives for all their differences shared a belief in society, a common good, and social justice, and that society could be changed into a better place."
--Walter Nugent, "Progressivism: A Very Short Introduction"
Based on official data from the Eurostat in 2009, when was the last census that pushed the deficit above 15%, Greece's debt was 127% of GDP. Today, the Government is making earnest efforts to pull Greece out of the crisis according to statements of Chancellor Angela Merkel, mortgaging much to get the debt-to-GDP ratio to 120% by 2020.All Pain and No Gain
And the obvious question that arises for all is, what is so much effort for a decade? To get to where we were in 2009?
The numbers and figures, unfortunately, speak for themselves.
Eurostat census estimates real unemployment will reach 20% by the summer of 2012, Greece will close 183,000 companies, increase cuts in wages and pensions, and over-tax all its citizens just to get 2020 debt to 2009 levels.
The author, George Kouros perfectly describes the ramifications of stretching out debt for a decade in pretense that a 50% "voluntary" haircut on bonds will solve anything.
Greece surely does need structural reforms, but the average Greek on the street sees all pain and no gain.
A hard default and debt forgiveness of 80% by the EU would show Greek citizens they were at least getting something in return for forced (but badly needed) structural reforms and austerity measures.
Instead, the average Greek understands everything is being done to protect German and French banks, and anything that helps Greece is nothing but a fortuitous accident.
Moreover, by fooling itself, the EU hurts itself. The longer the EU pretends haircuts are voluntary, that Greece can pay back these loans, and that Greece can be competitive with Germany, and there will be no hard default, the worse the crisis will become.
Mike "Mish" Shedlock
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