The Credit Crisis Financial Stocks Short Journal

You read way too much into past actions of a bureacracy (the Fed) and the daily nonsense that spews from their members. One week ago, they were out there talking about the need to raise rates before the UE rate topped out. Then we get a weak Chi PMI and a weak jobs report, and now they're out there saying inflation won't be a threat for years. The upshot ... these guys are clowns, the emperor has no clothes. They're flying as blind as the rest of us, and like most, will respond to what the market does.

Right now, Treasuries are doing great, but something has to give - either equitiess or bonds. If it isn't equities, then, at some point, you are going to see Dec 10 eurodollars or your cherished July FF futures drop 100 bp in a weak. It'll be breathtaking.

I don't know what it will be and I'm a fan of holding Dec 10 99 calls (I'm also a holder of extremely cheap options on $150 and higher oil).
 
Quote from ralph00:

Aussies raised rates (unexpectedly) last night. Its pretty obvious that Australia is benefitting from the craziness in China more than most, but they're economy has as much of a consumer debt problem as the US. It can happen.
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I have limited knowledge about the RBA or the AU economy. Dont know much about the UK and the BOE so I rather stick with the US.
Perhaps there is a lesson here, about sticking with you speciality. Niederhofer went big in Thai and got cleaned, the doves who bet big on the RBA got cleaned too
 
Quote from ralph00:

(I'm also a holder of extremely cheap options on $150 and higher oil).
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I'm interested on fat tail oil calls as well. Which year are for those calls?I asked for a MM quote on the $200 CL 2016 Dec call and there werent too cheap

And I'm not worried about a big sell off in the fed funds futures, I want them so I can buy more. My exposure right now there is not big due delevering for the GE calls. But if they drop a ton I will be in the market. After all the Fed will be still buying mortgage paper in Mar 2010, its unlikely they would change stance quickly and hike the next month(and I'm being generous by even considering this hawk scenario given the likely inflation outlook presented by Dudley)
 
I actually don't hold traditional (expensive) call options on higher oil.. What I do own is an extremely cheap Canadian company that owns some outstanding tar sands properties. The company has the properties, a lot of cash, and no debt. It is essentially a very long dated call option on oil with very little time decay. Its UTS Energy for anyone who cares.

I think its one of the best ways to play a chance for explosively higher oil prices.

See if you can find a speech by Thiel from 7 or 8 years ago talking about higher oil prices. He said the best way to play it was to buy cheap Canadian oil sands companies, which were a far cheaper alternative than traditional call options. Of course now, everyone's favorite oil sand company is Suncor - this is owned by every institution on the planet and hence is very expensive. Stay away from that one.
 
FWIW, the Aussie unemployment rate continues to rise and the Central Bank's own forecast is for a continued rise. Didn't stop them from raising rates.
 
Quote from ralph00:

FWIW, the Aussie unemployment rate continues to rise and the Central Bank's own forecast is for a continued rise. Didn't stop them from raising rates.
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Not much slack. UR is around 6%, only 1% above the century average. No banking crisis, exposure to a V shaped asia.
http://www.treasury.gov.au/documents/110/images/3round-5.gif

Canada which is supposed to be a AU type country has promised no hikes till Q2 2010. Another anchor to my ZQ trade, US would have to hike before canada which is simply too damn unlikely to happen
 
Interesting to note that the RBA raised rates on 5 March 2008, from 7.00% to 7.25%. This was during an ugly decline in equities from Feb 2008 to March 2008.

Then less than six months later on 3 September 2008 they cut the cash rate to 7.00%. By 8 April 2009 (only 7 months later), the cash rate was 400 bps lower at 3.00%.

http://www.rba.gov.au/Statistics/cashrate_target.html



Quote from Daal:

I have limited knowledge about the RBA or the AU economy. Dont know much about the UK and the BOE so I rather stick with the US.
Perhaps there is a lesson here, about sticking with you speciality. Niederhofer went big in Thai and got cleaned, the doves who bet big on the RBA got cleaned too
More...
 
It seems that AU didnt had a technical recession, which shows they are in good shape. UR only 1% above century average, so they are close to 'full employment', their yoy CPI inflation never went negative like most of the developed world. It should be hardly surprising they are raising rates, unless RE turns down they will probably do very gradual tightening over the coming year.

Very different situation from the US where labor conditions are the worst since the 30's(specially with all the folks hiding out by dropping from the labor force, there seems to exist a 'shadow inventory' in labor too)
 
This is amazing. Gold is up 2.5% almost, silver 5%, stocks 1.5%, oil 2%, dollar down nicely. Yet UST bonds and Fed futures are hanging in there, 30y futures -0.33%, Dec 2010 e$ -0.02%, ZQ mostly flat.

Its like the interest rate market is ignoring everyone else and betting on deflation
 
I am also in awe about the UST, especially today. All headlines read "on higher inflation expectations" yet the 10y is yielding 3.25%, up a full THREE basis points.

Of course, the inflation mongers tell us treasuries will implode as soon as the Fed "stops buying all the supply". But what if they phase out QE and yields don't explode? If the entire bond market was betting on high inflation they would steamroll and negate any Fed buying.

Will be interesting to see how this plays out.
 
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