Bear market is here?? (worst than 87 crash)

It's been said already somewhere on some thread, but the 87 crash happened after a few days of hard selloffs. I would say expensive insurance has justification now.
 
Attached is a chart of USD/JPY directly after the 4pm equity close today. This is what concerns me that I mentioned in my first post.

The other carry pairs fell in concert as well after being down heavily all day, but USD/JPY had been holding its own for most of the day, up 14 ticks at the 4pm close (reflective of the USD rally).

The very second the US equity markets closed, a significant market participant(s) unwound a very substantial amount of carry trades. They could have done this all day long and not moved the market as much (after all, european and asian traders are long since gone at 4pm). What was their motive for intently waiting until after the 4pm close to drop the market?

This could just be a fluke, but the tin foil hat in me says this is a red herring. I didn't have my ES chart open at the time, does anyone know how it did after the close?
 

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Quote from scriabinop23:
Thats saying that 55-60%of the funds of these loans will be uncollectable.
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Your math is not accounting for the fact that lower tranches absorb the losses of the higher tranches they're bundled with. It also misses that what is at issue here is not really the principal, it is the income stream generated off of that principal.

At the relatively low interest rates many of these loans were originated at, it does not take anywhere near 40% default to wipe out all possible profits from an entire tranche. Once that happens, nobody wants to buy these things as the best you can do is get your principal back - and there is no value in a 0% return investment!

Hence the current No Bid situation.
 
Once again, in regards to a "bear market" I was wondering what everyone's thoughts were about the removal of the uptick. Doesn't this contribute to the market going down since anyone can just short? Will/should the uptick rule be put back into place? Thanks guys
 
Quote from pdiddy4u:

Once again, in regards to a "bear market" I was wondering what everyone's thoughts were about the removal of the uptick. Doesn't this contribute to the market going down since anyone can just short? Will/should the uptick rule be put back into place? Thanks guys
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No real effect. Much of the selling in individual names has been from long liquidators who were always allowed to sell on the downtick. Program guy's have circumvented the uptick only rule from day one of futures by using long stock held in the firm or custodial accounts.
 
Bravo.

Quote from scriabinop23:

thanks.

but consider this.

-lets say total subprime outstanding debt is 3 trillion.

-lets assume 100% of all subprime debt bought at the top (likely not true) with 0% down (not true as well) cash collateral.

-lets assume 30% default rate. lets also assume 70% collection rate (ie on $100k home, bank collects $70k).


3.0 * .3 * .3 = 270 billion in total losses in all of 3 trillion in subprime tranches. That means real risk is 10c on the dollar for the entire batch - in other words, 90c on dollar would be appropriate price for this debt, not 40c. 1000bp appropriate cdx value.

Likely the real liabilities will be less. Lets say more realistically there is a 15% default rate on all of this debt, collected at a 20% discount to purchase price (assuming not everyone in the subprime bought the perfect top, and there is a little cash collateral in these loans).

Thats:

3.0 x .15 * .20 = 90 billion $ worth of risk, or 300 basis points of appropriate risk premium.


Boy if GS is shorting all those CDXs right now... they will be sitting on a goldmine.

Any smart hedge fund is buying this debt underpriced by 5000-5700 basis points !!!!!

what a killing it will be.
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Quote from Random.Capital:

Your math is not accounting for the fact that lower tranches absorb the losses of the higher tranches they're bundled with. It also misses that what is at issue here is not really the principal, it is the income stream generated off of that principal.

At the relatively low interest rates many of these loans were originated at, it does not take anywhere near 40% default to wipe out all possible profits from an entire tranche. Once that happens, nobody wants to buy these things as the best you can do is get your principal back - and there is no value in a 0% return investment!

Hence the current No Bid situation.
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question - do you know how a default gets handled? ie when the property is foreclosed and part of principal is recovered, what happens to that cash? whats the procedure for sending that back to the bondholders?

by the way -- any idea if these BBB abx's are -actually- secured ? are the BBB products second lien or first lien?
 
Quote from S2007S:

Just 2 weeks ago many here were using charts and technicals saying NDX 2400 was coming. Some even calling for DOW 14,500-15k, now look, nearly 1000 points away, a dip below 13k is going to bring a HUGE amount of selling if it does take place.
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I believe that YOU were the gentleman that was "cheerleading" this market to higher targets, and were doing so without any technical analysis basis whatsoever.

Let's face it.
There are maybe a handful of "technicians" that post on ET, and most of them don't even bother doing anything more than "lurk" here because of all of the rookies and noobs who think that T/A is an ADX chart with a slow stochastic oscillator thrown in.

:D
 
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