The Credit Crisis Financial Stocks Short Journal

I had made up my mind the fed was not going to emergency cut but it looks like congress will only come back for real on thrusday!
The market is at the mercy of fear in the mean time, this means there is a chance of a big cut. I decided to take half of profits on fed funds futures by shorting the MAR contract like on a spread trade(there was no liquidity on the contract I hold) but now I might regreat this one.

Its a very tough spot to be in, in the one hand you have a vix at absurd levels around 46 based on BS news(yeah right, like congress wont approve that package after a close vote and equities meltdown) ff traders going nuts in the other hand the holiday increases the chance of a 'black swanish' type event that a emergency cut is. Any decision that I take seems like a mistake so I will just have to hold half of the position and hope for the best. The risk still seems to be to the downside on fed funds
 
Going to have to take a risk here. Just took my hedge off on fed futures. so im back at full position, if the fed emergency cuts it should be like in Jan, before the market opens. If they dont cut today then I dont think they will do it at all and I can put the hedge back on during the trading day, looks like the market is waking up that the world has not ended
 
8.20am ET is the standard announcement time for a 'surprise' rate cut


Quote from Daal:

Going to have to take a risk here. Just took my hedge off on fed futures. so im back at full position, if the fed emergency cuts it should be like in Jan, before the market opens. If they dont cut today then I dont think they will do it at all and I can put the hedge back on during the trading day, looks like the market is waking up that the world has not ended
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Just realized something. The fomc knows the bill is far more important than a shot in the arm that a cut is. So they might not want to prop the market and remove the political will to pass the bill, that means they are likely do hold till there is a message from washington
 
Back at half hedged Fed Futures. I got filled to get out and get in at the same price! they market didnt reacted much when the 8:20am time got there, very strange. m22au are you sure this is some kind of rule they always follow?if this is the case the ff market just blew it big time by not changing the odds
 
I think 8.20 is the time of the August 2007, January 2008 and other similar 'surprises'

Quote from Daal:

Back at half hedged Fed Futures. I got filled to get out and get in at the same price! they market didnt reacted much when the 8:20am time got there, very strange. m22au are you sure this is some kind of rule they always follow?if this is the case the ff market just blew it big time by not changing the odds
More...
 
I think I figured out another way to play the credit crisis. shorting CHF/JPY
I went through some data at the forex forum, if anyone knows about more the state of swiss banks I would like to know
http://www.elitetrader.com/vb/showthread.php?threadid=139150

The paulson plan has been taking a beating everything because they are buying assets and not equity. they say equity would have a bigger impact since it would leverup the lending by 12x or so and that doesn happen if you inject from the asset side. Well it could be that tarp gives paulson the authority to buy preferred equity

"(9) TROUBLED ASSETS.—The term ‘‘troubled assets’’ means— (A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability;

and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress."

Plus they might use the FDIC to inject equity as well
 
I'm in a dilema on whether I get out of fed futures my hedge or not.
vix is too high and sentiment is bound to change but the fed is likely to step in after the vote.
If Roubini is even remotely right that the commercial paper market wont come back will the fed starts lending there(through the Small Business Administration) and hedge funds are likely to start dropping like flies my gains on fed futures will be massive it will my most profitable trade fnm fre to shame, we are talking fed funds below 1% within months
The effective rate today was 0.67% :eek:
 
Removed the fed futures hedge on friday, the hedge leg lost money because the market sold off after the vote. Maybe thats not a bad thing because now it makes a emergency cut more likely. I will bet on one today, it will be a sizeable bet if the futures have liquitidy and my balls are intact. If the fed cuts 50+ I'm going to clean up
 
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