The Credit Crisis Financial Stocks Short Journal

Hussman Recession Warning
http://www.hussmanfunds.com/wmc/wmc100628.htm

-Calling for another recession
-March 2009 lows not safe(I'm playing this through SPY May 2011 70.00 puts)
-12% UR

Anyone who says no double dip better be prepared to ignore a hybrid model that has only failed once. Furthermore he demolishes that argument that some silly bulls make "double dips are rare", yeah looking at economic data from the credit bubble buildup, they are rare but looking at the Rogoff sample, I bet they aren't so rare

Given that his new hybrid model that uses ECRI index instead of the ISM is quite accurate and already signals a recession, I'm upping my probabilities for a double dip. Will consider making my ZQ transition to further out of the curve, the question is, should I wait for the NFP for more confirmation
 
I would say that anybody who starts off a recession argument by citing the ECRI indicators is not being very rigorous. The ECRI is a curve-fitted black box - nobody knows what is in it, and it is an index that is continually being changed based on new data so that it appears to have worked perfectly in the past. The trouble is that yesterday's perfect indicators may not be so perfect today. Of course, one year from the now, the folks who run the ECRI will again adjust the index so that it appears to have been spot on for this year.

Maybe we'll have another recession, maybe we won't, but I've never once found the ECRI helpful in trading interest rate futures.
 
Quote from ralph00:

I would say that anybody who starts off a recession argument by citing the ECRI indicators is not being very rigorous. The ECRI is a curve-fitted black box - nobody knows what is in it, and it is an index that is continually being changed based on new data so that it appears to have worked perfectly in the past. The trouble is that yesterday's perfect indicators may not be so perfect today. Of course, one year from the now, the folks who run the ECRI will again adjust the index so that it appears to have been spot on for this year.

Maybe we'll have another recession, maybe we won't, but I've never once found the ECRI helpful in trading interest rate futures.
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Hussman's point is that it correlates with the ISM well after a lag. Furthermore I'm not sure when they change the methodology they also change the past data to reflect new the methodology. It could be like the CPI inflation figures that historically had different methods but the data is still in real-time
 
I'm just seeing that every guy w/a web address has been yakking about the 'ECRI rolling over" for the past two weeks. The ECRI doesn't have a better pot to piss in that any other shop. If anything, I would be looking to fade the "slowdown or double-dip is imminent trade".
 
Quote from ralph00:

I'm just seeing that every guy w/a web address has been yakking about the 'ECRI rolling over" for the past two weeks. The ECRI doesn't have a better pot to piss in that any other shop. If anything, I would be looking to fade the "slowdown or double-dip is imminent trade".
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Yeah, just like someone on ET said in 2007 "If there is a recession this will be the most anticipated recession in history, I'd fade the crowd" or something to that effect. Double dip is the contrarian trade not the other way around
 
I'm definitely in the debt deflation/slowdown/double dip crowd (actually whether we technically enter a recession or not is of no concern to me), but its all about price to me.

I'm looking at my screen and seeing Eurodollar futures and FF futures stacked almost on top of each other going way out and the turndown in the ECRI is being trumpeted by all. We've got an employment number coming Friday which will need to be pretty horrible to satisfy the longs in these contacts.

If I'm putting on trades this week, it will be a short term fade of the double dip trade.
 
Through 2009 I had some urges to go really all-in in Fed Futures, because I could see no way the fed would raise rates and the pricing in the futures seemed just ridiculous. After the Jun ZQ crash I bought a decent sized position but I still held back a really large trade

Now this double dip/slowdown could provide me another opportunity, I still dont know if I will have the guts, I get paranoid about seeing another crash, which combined with IB auto-liquidation could lead to some severe losses even if I turn out to be correct. The trick is to buy after the crash, but if there is no crash then I just leave a ton of money in the table
 
An update on the Aussie trade ... My Aussie interest rate futures continue to eek up and have hit new highs today. One thing that is curious to me is that I would have thought that the AUD would get hit pretty hard as my scenario plays out. The AUD got smoked during the panicky times a few weeks back, but has really performed quite well since then even though chances of future rate hikes have evaporated.

I took advantage of the strength this morning, and purchased some OOM puts on the Aussie currency.

I would note that the conventional wisdom says that the reason that the PM got sacked last week was because he had introduced the very unpopular mining tax. I won't take issue w/that, but would add that political leaders usually don't lose their jobs when all is going well with the economy.
 
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