Imminent and severe market correction

[Bushman]

I understand you chops - chart projection values based on prior - got a few of those myself where zero on the Y axis bobs up before your line finishes - share tries hard to complete the line sometimes

Ah so it is a chart thingy.

In news just out, JP Morgan is purchasing Bear Stearns at $2 USD per share. No further details of the deal as yet. Talk about a firesale.

This should 'delay' BS dumping $40 odd billion mortgage backed securities on an already distressed market for these toxic products. Now that eventuality would have made things very interesting for no 4 on the list, Lehman Bros.

They keep shifting a bit here, stashing a bit there to keep the house of valuation cards teetering on the brink. Good watching this.

 

[Aussiejeff]

Fed has cut rate by 25 basis points efffective immediately.J P Morgan to buy bear stearns at $2 a share.
Futures go from -25 to plus +136 in 23 minutes in America.

But how long will the nervous *positive* knee-jerk sentiment last?

I guess the next Fed cut of .5%? in two days time will get another short-term reaction, then what?

Maybe the US needs to open up it's borders to a flood of new immigrants (rather than building the Great Wall of America) to help buy up all those empty houses and significantly boost internal demand for goods and services.....


AJ

 

[wayneL]

Futures go from -25 to plus +136 in 23 minutes in America.

...punters still in faeryland.

Unbelievable.

 

[explod]

But how long will the nervous *positive* knee-jerk sentiment last?

I guess the next Fed cut of .5%? in two days time will get another short-term reaction, then what?

Maybe the US needs to open up it's borders to a flood of new immigrants (rather than building the Great Wall of America) to help buy up all those empty houses and significantly boost internal demand for goods and services.....


AJ

I'm sure if you got a bit of dough to buy some up you would be most welcome. But I dont' think too many would want to go at the moment

 

[Seaking]

...punters still in faeryland.

Unbelievable.

I think that's all the punters back from fairyland now.... Could be a few still left behind...

 

[wayneL]

I think that's all the punters back from fairyland now.... Could be a few still left behind...

The faeries must have all been bearish.

 

[sassa]

...punters still in faeryland.

Unbelievable.

So true.Futures have dropped back from +136 to -164 in an hour

 

[Aussiejeff]

So true.Futures have dropped back from +136 to -164 in an hour

Ahhhhh .... the smell of Ozzie dollars burning in the morning...

 

[Kauri]

I don't know much about hedge funds but was wondering if anyone would know...
Do they go in for FX much..if so the violent moves in the FX pairs today may have caused more damage to those caught on the wrong side??
Maybe even Banks trading rooms??...
Maybe even the %5...

after all the COT suggests there were quite a lotta longs on some of the most punished crosses...

Cheers
..........Kauri

 

[reece55]

I don't know much about hedge funds but was wondering if anyone would know...
Do they go in for FX much..if so the violent moves in the FX pairs today may have caused more damage to those caught on the wrong side??
Maybe even Banks trading rooms??...
Maybe even the %5...

after all the COT suggests there were quite a lotta longs on some of the most punished crosses...

Cheers
..........Kauri

Don't know myself Kauri, but you could have a look at the stats in Barclays hedge site for an idea (www.barclayhedge.com).......

Whatever the case, the FX markets are completely out of whack with absolutely huge moves across the board..... I mean, I thought we would see below 100 in USD:YEN, bu the swissy going past parity with the Dollar??? I don't think it has occurred in measured FX history....

Cheers

 

[Awesomandy]

I don't know much about hedge funds but was wondering if anyone would know...

It depends on the funds. For a lot of funds, they would enter into forward contracts as a hedge against currency movements. However, there are quite a few funds that actively trade currencies as well. I don't know how many there are, but from my knowledge, I would guess that hedge funds have a substantial amount of involement in the fx market, although I'm only basing this on what I've seen from my work - which is not even the tip of the iceberg.

 

[>Apocalypto<]

...punters still in faeryland.

Unbelievable.

i am not complaining I took 100 pips off the eur/usd today. God bless the FED :grinsking

 

[Kauri]

mmmmmm.. whats uo Doc... :bunny:

two members of the European Central Bank"s
Governing Council have canceled their prior speaking engagements. Axel Weber
will not be attending an event organized by the European Union Chamber of
Commerce while Christian Noyer has also canceled his attendance. Both the BdF
and the Bundesbank suggest personal reasons are behind the moves but speculation
has since mounted that various emergency meetings and talks are looming.

 

[chops_a_must]

Not on a "blue chip" I haven't. The interesting thing is that IVs are staying high after the gap. That means the market is expecting massive volatility into the near future.

The rewards are there, but they are signalling RISK in superbold capitals.

Don't quite know how I'd play this yet, but short vega appeals.

Bludy hell!

People were selling $5 puts at 10c. Even those writing puts at 5 for $2.40 are going to lose. **** me!

The trading was obviously concluding it was going to the ground... but I don't think even the most bearish people expected that catastrophic end.

Also... I don't think it was insider trading. Didn't you hear those geniuses in the senate enquiry saying it was just for retirement? Personally, I think it was money for an Angelo Mozilo fake tan fund. Must cost him a fortune.

 

[Kauri]

Bush is set to make a statement on economy after meeting .... He is meeting his economic advisers this morning...

more eyes on the wheel and hands on the road stuff???
Cheers
..........Kauri
.......................Reuters

 

[treefrog]

mmmmmm.. whats uo Doc... :bunny:

two members of the European Central Bank"s
Governing Council have canceled their prior speaking engagements. Axel Weber
will not be attending an event organized by the European Union Chamber of
Commerce while Christian Noyer has also canceled his attendance. Both the BdF
and the Bundesbank suggest personal reasons are behind the moves but speculation
has since mounted that various emergency meetings and talks are looming.

reackon that would be a strategy to shore up the US$ kauri which may have started already with today's move on $A

 

[wayneL]

Bludy hell!

People were selling $5 puts at 10c. Even those writing puts at 5 for $2.40 are going to lose. **** me!

The trading was obviously concluding it was going to the ground... but I don't think even the most bearish people expected that catastrophic end.

IV spikes are not often wrong on individual spots. It might not tell you the direction, but it give a strong clue to the magnitude.

Such is the case that Adam Warner often suggests that that sort of volatility should be bought, rather than sold. A dangerous game for sure, but often profitable.

As for me, unless I can get a minimal risk profile, I'll just stand aside.

 

[chops_a_must]

I expect Aussie banks to get absolutely shellacked tomorrow, as their mortgage insurer looks like it will go broke within the year.

But thanks to IB, I couldn't short left right and centre like I had planned.

Anyone reading my blog would know the significance of this news:

PMI Posts $1.01 Billion Loss
Amid Housing, Credit Woes
By DONNA KARDOS
March 17, 2008 7:15 a.m.

PMI Group Inc. swung to a fourth-quarter loss as the company recorded huge losses due to its stake in Financial Guaranty Insurance Co., as well as losses at its U.S. mortgage insurance operations amid turmoil in the housing and credit markets.

The company also slashed its quarterly dividend 76% as the nation's largest mortgage insurer looks to conserve capital.

PMI reported a net loss of $1.01 billion, or $12.51 a share, compared with prior-year net income of $100.5 million, or $1.19 a share.

The latest results include $776.1 million in after-tax losses due to the company's equity in Financial Guaranty Insurance Co., and a loss of $236 million in PMI's U.S. mortgage insurance operations amid an increased reserve for losses.

Revenue edged down 0.2% to $281.5 million.

The mean estimates of analysts polled by Thomson Financial were for a loss of $2.42 a share on $177 million in revenue.

The firm's consolidated net premiums rose 12% to $263.5 million, reflecting increases in new insurance written in the U.S. mortgage-insurance operations and an increase in international operations' net premiums written combined with favorable Australian foreign-exchange rates.

Consolidated losses and loss-adjustment expenses jumped soared fivefold to $574.7 million as a result of higher losses and loss-adjustment expenses in U.S. mortgage-insurance operations as a result of the significant deterioration of the U.S. housing, mortgage and capital markets.

FGIC -- in which PMI has a 42% stake -- resulted in a $776.1 million after-tax loss for PMI as a result of higher losses and loss-adjustment expenses. PMI said last week that it expected to the segment to have "significant" loss driven by FGIC. The release of PMI's results had been postponed several times in the past month due to delays in obtaining results from the bond insurer.

FGIC, the fourth-largest bond insurer, has lost its key AAA rating from all three major ratings firms on worries it might fail to raise $1 billion in capital to cushion possible losses on complex securities that have plunged in value.

While some banks were talking with FGIC to bolster the firm, the company surprised them in February when it made a request to regulators to split its profitable municipal bond business from its subprime credit-default-swap business. It was said that the move could possibly serve as an incentive to get the banks to step up to the plate on a cash infusion for the company. In the past, regulators have said dividing the insurers is a last resort and urged the banks to put in fresh capital. But PMI said last week that while it will work to stabilize its equity investments in FGIC, it will not be contributing any additional capital to it.

PMI said in its U.S. mortgage-insurance operations it added $434.8 million to its reserves for losses and loss adjustment expenses and paid $114.5 million in claims. Its international operations also fell into the red as European operations had $29.6 million loss. Australia and Asia were profitable.

As for the dividend, the reduction to 1.25 cents a share is due to "the current challenges in the U.S. housing and mortgage markets" and "one component of the company's overall capital management strategy."

Looking forward, PMI said it expects its paid claims for 2008 in its U.S. mortgage-insurance operations to be between $825 million to $975 million.

Mortgage insurers such as PMI cover potential lender losses on loans to borrowers who can't come up with a 20% down payment. The companies have seen claims skyrocket over the last year as the lack of liquidity in the housing market makes it difficult for borrowers to refinance or for lenders to resell foreclosed properties at profitable prices, forcing mortgage insurers to pay up. The current problems are also cutting into insurers' available capital.

 

[Trembling Hand]

I expect Aussie banks to get absolutely shellacked tomorrow, as their mortgage insurer looks like it will go broke within the year.

But thanks to IB, I couldn't short left right and centre like I had planned.

Anyone reading my blog would know the significance of this news:

Chops they can't borrow what is already 100% loaned

 

[chops_a_must]

Chops they can't borrow what is already 100% loaned

It wasn't even coming up with the shortable at all light, on anything. Not one thing. Not even the allowed to be shorted if located light. It was on and off like that last week as well.

There are no longer any stocks allowed to be shorted on the Aus market through IB.

And they better not close the short I do have.