The Credit Crisis Financial Stocks Short Journal

Also the Fed balance sheet contracted for 2 months before they pulled the plug at the last meeting and net credit growth was negative. I dont see why M2 would come back significantly given this unless the banks were swapping Fed reserves for USTs or GSE MBS on a net basis
 
I'm pretty certain he was short Treasuries. I saw him give a presentation at a Grant's conference a few months back and he was extremely bearish on Treasuries and the $ for the usual reasons.

Yesterday smelled like a capitulation day for bond bears. First, the head interest rate strategy guy from MS (?) comes on Bloomberg and apologizes for a bad call on the direction of long rates. Next, we get news of a big bond bear closing his hedge fund. All of this occurs while the 10 year has a big reversal - after falling to around 2.55% in the morning, it closed the day at 2.64%.

----------------

Aussie rate expectations continue to move towards future easings. Their 90 day bill strip is now completely flat all the way out to Sept 2011, and the Dec 10 price actually traded a point or two higher than the Sept 10 price.

http://www.sfe.com.au/content/prices/rtp15sfIR.html

They have elections taking place this weekend. I have no doubt that the market will interpret whatever result occurs as being bullish - with stocks bid higher on Monday and STIRs rising a few ticks (prices falling). I will tell you now that the result is completely and utterly meaningless. Oz's bed is made.
 
Here's the former fed member that seem to have agreed with my proposition that the Fed might never exit its balance sheet
http://taxesandbudget-blog.ncpa.org/the-delta-blues/#comments

"I infer that Milton Friedman’s view of the proper level of bank reserves, Fed assets, and the like, was that they should all be whatever was necessary to achieve a moderate steady growth rate in the money supply. It was the growth or change in the money supply that mattered—not the levels."

People seem to be looking at the wrong place, excess reserves instead of the money supply. Excess reserves in the new normal will be higher(maybe significantly higher) than in the past because credit growth will be either negative or weak, furthermore Basel 3 will demand more liquidity and capital
 
Some people seem to be worried about Bernanke not leading the FOMC enough
http://economistsview.typepad.com/economistsview/2010/08/a-call-for-transparency.html

I believe they are incorrect and I refer to the book In Fed We Trust to show my point. In the day they dropped rates to 0-.25% Dec 2008 Bernanke changed the way he conducted FOMC meetings by speaking first instead of last and was able to get people on board for that, plus reusing the language about keeping rates low(which had been quite criticized due the housing bubble)

Clearly Bernanke doest think the committee is ready for more substantial policy action right now, given the semi-dissents for the reinvestment program, heck maybe HE is not there yet so they will wait for more data. But when the time comes one can be confident he will get the committee in that direction
 
2y and Fed Futures continue to soar, it seems overbought but I dont know if I should take profits, its a hard call because the liquidity is poor so there are costs involved. I could short some more recent liquid contracts but the problem is what if the econ data continues to be bad and the markets price in the 2nd dip totally. Then I miss the train

I rather go long the stock market but its not oversold enough by historical standards so I only have a small long. Hopefully it drops a bit more here so I can load up on ES
 
Quote from Daal:

Pellegrini closing up
http://noir.bloomberg.com/apps/news?pid=20601087&sid=arLj5GbzcDo4&pos=3

Must be short USTs, that -11% might be at Q2 end and the performance from then to today might have been hideous(though this is just a speculation)
More...

He was up around 65% in Q1 2009 by shorting bonds, which only declined about 20%. So he seems comfortable with 300% exposure, or a boatload of options, in an asset that can move 20% in a couple of months. Not exactly tight risk control.
 
You must log in or register to reply here.
Back
Top