Wednesday, July 09, 2008

The Perplexing Vix

Today's perplexion is the VIX--specifically, why it has not gone higher amid all of the bonds dropping.

Helene Meisler on Real Money surmised that it was due to the fact that many institutional sellers have already sold--hence not needing to buy put protection. Marty Chenard had an opinion on it well. You can access that here:

I'm going to discontinue the daily sector report for a bit. I'm still going to capture the information, but there have been too many changes in the last few days, and I need the dust to settle before I start formatting and have to reformat again.

I've also wondered why we did not hear of more hedge fund failures. While this is old new with respect to the frozen assets, this news is of the total liquidation:

From Bloomberg:

John Devaney's hedge funds, frozen a year ago because of wrong-way bets on mortgage securities, are being liquidated at a total loss to investors.

The Horizon group of funds run by Devaney's United Capital Markets Holdings Inc. couldn't meet a margin call from Deutsche Bank AG at the end of June, according to a letter to clients today obtained by Bloomberg News. Deutsche Bank then seized and auctioned off the collateral.


nice said...

Well we've had this mini panic - FRE FNM going under, LEH in trouble... gold jumped...

Now what?

With the Fed given the authority - do they just let these duds drop like BSC - swoop in again buy them for pennies on the dollar - or maybe let one go under as a 'token' to free markets...

Or have the bears been pulled in again - and while one of the above financial problems may happen - it is a question of timing... have the bears got the timing right?

The market is wound pretty tight here - could be tough for the bears if GE surprises positively or some financial firm does not immediately go under - as we have a very strong wall of worry now.

Oddly enough the USD was level all day so far.

bear trap or not - that is the question?

The market's been a pretty easy sell (short) - has it become too easy - or is it still the corect trade?


nice said...


While a monetary crisis is certainly possible and increasingly probably
(especially if all the Central Bankers keep sitting around and don't start hammering out a new agreement NOW)

Calls for a US Peso are childish IMO.

Everything is 'Fiat' now - including gold, oil - it is all traded like paper.

In particular, A Non-Fiat currency in a world where there are billions of people trading and exchanging goods and services everyday - is a total impossibility.

The real power behind a country's currency are its people, its rule of law - and most importantly the strength of its military.

Which country has a 'can do' attitude?

Which country has 100's of years of history based upon - rule of law?

And which country has the 'biggest sticks' to swat others with?



Leisa said...

I'm confident that neither Freddie or his two GF's Fannie and Ginnie will ever be allowed to fail. First, it will tank the USD (though rescuing them may tank them as well). I waiting for an implicit guarantee to become explicit. In fact, I posted that on RM and Rick Santelli not 5 minutes later said same.

Think of all the MM accounts that have these GSE bonds.

nice said...

Observations of a simple mind...

Commodities rallied as soon as the Ben & Paulson roadshow began - traders buy fingers were itching .

USD did not fall

Asian central Banks have been Buying EUR/USD

But Gold near breakout level

Volume on SPY last 4-5 days has been very large - making little movement pricewise.

Daily Moneyflows positive past week - weekly moneyflows still trending down

Futures players seem to have little interest - they seem to be at the mercy of news flow and the oil price moves like the rest of us.

NASDAQ did not make new low today while DOW and SPY did.

Oil stocks testing support at 300 day moving average - could be interesting if the selling pressure is relieved

VIX did not go higher on today's fears than it was on Monday when the same fear based rumors on FRE FNM LEH started

When earnings come out - there is more often than not an automatic 'sell the news' after the opening reaction (whether earnings beat or not) - then a buying back in a few days later.

Every up move or rally is still being heavily sold/shorted

What is weak is sold down weaker

.. truly a bull's nightmare

... according to wiki:
"studies of dreams have found that about three quarters of dream content or emotions are negative"


nice said...

What are the odds that GE will pull another quarter like last time and provide further weak guidance?

Probably their regular business
reports in line estimates or maybe slightly better than expected - however their financial business could not be that great - unless they have some accounting tricks to cover it...

Being one of the largest companies in the world - it will have an impact on the market - plus the CEO's job is probably on the line..

They didn't warn - but the announcement of spinning off stuff just before earnings doesn't raise ones confidence...

But... 2 double hammers on the S&P cash price in today's last hour hints at a positive opening tomorrow - possible with a pop to 1280+ - will it be due to GE?

Otherwise testing the 1220 level...


nice said...

One further point...

lately... there are various timed stories coming out about the US/Israel/Iran situation such as tonight (According to Iraqi news network Nahrainnet, Israeli fighter jets may be using Iraq's airspace and US bases to prepare for an attack on Iranian nuclear plants)

These always seem to come out right about the time there is some kind of problem in the market...

So rest assured if GE or some other company has problems or some financial goes belly up - we will have the Middle East/high Oil as the reason for the markets problems... right?

sleep well...