Short DAX at 7740
- Thread starter ASusilovic
- Start date
Adding some shorts 7800.00...I am impressed....
After all the short covering yesterday, do you guys expect we will we see another final leg down in the next few weeks? i think we'll see a nice counter move to this head fake. I'll be looking to get short again on Friday or possibly Monday.
Runningbear
Runningbear
Subprime Near a Bottom?
Interesting that Markit's ABX index of the value of BBB-rated subprime has slowed its descent in recent week. Are we near a bottom? Unless you think it's all going to zero, at 20-ish cents on the dollar you have to imagine it's close.
Comments
2. Comment by Josh Stern -- November 27, 2007 @ 4:16 PM
I'm not a believe in the ABX indices as an efficient predictor of the broader market. Notice that the corresponding AAA tranches of the same aggregated portfolio you graph above have continued to go down. That can't fit with the idea that both indices are an efficient predictor of loss because the way the subordination works, the BBB tranche loses everything before the AAA tranche experiences its first dollar of loss.
My view is that the AAA tranche is probably way too low and relative to its underlying fundamentals/subordination, and I suspect the price action is being driven by people who need to sell in order to control risk or improve capital ratios; the BBB tranche is really tough to put a value on because it is an aggregate of a bunch of bets that don't pay off unless loss is over percent X1 but lose everything if loss is over percent X2.
4. Comment by AccruedInterest -- November 28, 2007 @ 11:14 AM
Actually the BBB tranche can reach "interest only" prices and stay there, whereas the AAA can keep falling due to principal impairment. In other words, at some price, the BBB tranche reflects receipt of no principal, but some amount of interest. At the same time, more senior tranche prices may reflect some amount of principal. As losses mount, senior tranche prices can therefore fall while junior tranches are unchanged.
That's what burned Morgan Stanley, BTW.
Interesting that Markit's ABX index of the value of BBB-rated subprime has slowed its descent in recent week. Are we near a bottom? Unless you think it's all going to zero, at 20-ish cents on the dollar you have to imagine it's close.
Comments
2. Comment by Josh Stern -- November 27, 2007 @ 4:16 PM
I'm not a believe in the ABX indices as an efficient predictor of the broader market. Notice that the corresponding AAA tranches of the same aggregated portfolio you graph above have continued to go down. That can't fit with the idea that both indices are an efficient predictor of loss because the way the subordination works, the BBB tranche loses everything before the AAA tranche experiences its first dollar of loss.
My view is that the AAA tranche is probably way too low and relative to its underlying fundamentals/subordination, and I suspect the price action is being driven by people who need to sell in order to control risk or improve capital ratios; the BBB tranche is really tough to put a value on because it is an aggregate of a bunch of bets that don't pay off unless loss is over percent X1 but lose everything if loss is over percent X2.
4. Comment by AccruedInterest -- November 28, 2007 @ 11:14 AM
Actually the BBB tranche can reach "interest only" prices and stay there, whereas the AAA can keep falling due to principal impairment. In other words, at some price, the BBB tranche reflects receipt of no principal, but some amount of interest. At the same time, more senior tranche prices may reflect some amount of principal. As losses mount, senior tranche prices can therefore fall while junior tranches are unchanged.
That's what burned Morgan Stanley, BTW.
Alliance & Leicester profit to miss forecasts after charge
U.K. bank Alliance & Leicester said Thursday that its core operating profit for 2007 will be below the current market forecast of 598 million pounds due to a charge on the value of its investments. The group said it will take a 55 million pound charge from certain holdings in structured investment vehicles and collateralized debt obligations. Excluding this charge, profit would have exceeded expectations, it noted. Alliance & Leicester said its put in place additional funding facilities and added that 57% of its customers loans are funded by customer deposits. For 2008 the bank said it expects margins to decline and growth in interest earning assets to slow against a background of slower economic growth and a smaller U.K. mortgage market.
Broader picture (chart wise) remains bearish, but shorter term charts are now bullish. For instance 4 hour chart, we had a dip dip dip and up, that normally lasts a few days. Daily chart on most major indexe's histogram is at centreline and crossed it in some cases, that is also bullish. As I am on much shorter time frames, I have to chose a time frame which is more likely to provide quicker benefit, well, you know all this anyway.
Scaled out 2 lots +9
Also 2 things to consider for today, ImO:
1. I don't see yesterday's p/a as just short covering, to me that was mainly gradual buying, slow grind;
2. Today's daily pivotal coincides with 38.2% retrace from yesterday's range, although S2 is normally a much better place to buy intraday, but I doubt very much we would get to S2 today.
3. S2 coincides with double bottom zone, but that would have to be one huge fake move to be bought.
+1 on 3rd
Scaled out 2 lots +9
Also 2 things to consider for today, ImO:
1. I don't see yesterday's p/a as just short covering, to me that was mainly gradual buying, slow grind;
2. Today's daily pivotal coincides with 38.2% retrace from yesterday's range, although S2 is normally a much better place to buy intraday, but I doubt very much we would get to S2 today.
3. S2 coincides with double bottom zone, but that would have to be one huge fake move to be bought.
+1 on 3rd