The Credit Crisis Financial Stocks Short Journal

1725 GMT [Dow Jones] Dallas Fed Pres Fisher mounted another strong attack on the idea the central bank needs to provide more support to the economy. "While none of us are satisfied with the current pace of economic expansion and job creation, presently it is not clear that conditions warrant further crisis-like deployment of the Fed's arsenal," Richard Fisher said. He is an FOMC voter next year and is rising as a strong voice against something a number of core officials and many private- sector economists think is likely. There are rising expectations the Fed will restart buying fixed-income securities to drive down yields and cheapen borrowing costs for households and companies. (michael.derby@dowjones.com)

Looks like when Hoenig gets out of the FOMC rotation Fisher till take over as the dissenter in chief
 
I'm with GoC here. Yet again, I have to conclude that ZH is/are (a) total idiot(s). To suggest that this trade somehow is a no-brainer because it worked so well is, how do I put it, completely retarded. For all the indiscriminate abuse of the term "tail risk", the article totally disregards all sorts of tail risks that you take on when you do the equity put/CDS trade. The fact that these risks didn't materialize and the trade may have worked doesn't matter. So, yet again, ZH's reporting is breathless, shrill and inaccurate. But then what else is new.

GoC, CDS are collateralized derivatives, so not much credit risk there. Boaz blew up on CDS basis trades, but it wasn't the CDS leg that was the problem, it was the bond leg.
 
Dec 2011 FF futures now at 99.735.

I initiated my position in these during the sell-off following the Sept NFP. My purchase price was 99.47. I recount this not to point out what a great trade this was, but to illustrate how dramatic the move in price has been over the past 4 weeks basically a year's worth of gains in the space of 20 trading sessions.

I don't know whether the recent trend in financial markets is ending or changing yet, but the last 5 weeks have to rank up there as one of the more remarkable periods ever - huge and perfectly correlated moves in a number of asset classes.

The trade now is not to just to bet on a reversal, but to seek out the asset class where the option on reversal is the cheapest - SPX options, VXX, AUD, TBonds, Oil, Beans, ... I don't know. My rudimentary analysis says SPX options are overpriced compared to some of these other things. I remain long VXX calls and AUD puts. I'm pretty sure I'll be out of my Dec11 FF futures before the NFP tomorrow morning.
 
Greenspan had an interesting op-ed in the FT
http://www.ft.com/cms/s/0/4524339a-d17a-11df-96d1- 00144feabdc0.html

This part stood out for me

"Only the deficit lends itself to being quantified. Fixed capital investment as a share of cash flow over the past four decades has been significantly (negatively) correlated with the ratio of the federal deficit to GDP, with the deficit ratio leading the fixed investment share by nine months.* This would imply that the federal deficit as a percentage of GDP since September 2008 (cyclically adjusted to remove the effect of a weaker economy), accounted for as much as a third of the $325bn shortfall in business capital investment since early 2009.

But an indeterminate amount of the remaining shortfall reflects both a direct and indirect hobbling of vital financial intermediation. It is going to take years to address the unprecedented complexity of final rulemaking required in the massive Dodd-Frank bill. The inevitable uncertainty engendered will inhibit financial innovation and intermediation, and render the rules that will govern a future financial marketplace disturbingly conjectural. This is bound to have a significant impact on economic growth. "

The bolded part you wont find in your typical Keynesian textbook. I do believe stimulus can provide some help in stopping negative feedback loops but the fact that they carry a cost in terms of private investment do decrease its attractiveness plus you have the bond market vigilantes issue

And the 2nd bolded part is the difference between the normal period of regulations and this 'new normal', when was the last time a regulatory bill like Dodd-Frank came out in the US? I wouldn't be surprised if it was in the 30's, this all increases uncertainty more than usually
 
I do believe that the 1st stimulus was important because it came during a time where there was a negative feedback loop going on in the US economy and people were really afraid(In my view the stimulus worked as a both as a economic stimulant but also as a placebo) and also it was questionable whether the private sector was going to invest in fixed capital in any event(because everyone was shit scared)

But Krugman takes that too far in my view, arguing for even more stimulus even though the panic is over(claiming its due the liquidity trap and the zero bound). Yet, he argued for stimulus after the 2001 recession, with no liquidity trap and plenty of room for rate cuts
 
Quote from ralph00:

Dec 2011 FF futures now at 99.735.

I initiated my position in these during the sell-off following the Sept NFP. My purchase price was 99.47. I recount this not to point out what a great trade this was, but to illustrate how dramatic the move in price has been over the past 4 weeks basically a year's worth of gains in the space of 20 trading sessions.

I don't know whether the recent trend in financial markets is ending or changing yet, but the last 5 weeks have to rank up there as one of the more remarkable periods ever - huge and perfectly correlated moves in a number of asset classes.

The trade now is not to just to bet on a reversal, but to seek out the asset class where the option on reversal is the cheapest - SPX options, VXX, AUD, TBonds, Oil, Beans, ... I don't know. My rudimentary analysis says SPX options are overpriced compared to some of these other things. I remain long VXX calls and AUD puts. I'm pretty sure I'll be out of my Dec11 FF futures before the NFP tomorrow morning.
More...

I liquidated more than half of my FF position this morning. I will watch the market for 10 or 20 days then buy back again. My position is now about 33% of my original purchase size
 
1021 GMT [Dow Jones] There has been selective gains for the dollar after St Louis Fed's Bullard told CNBC more Fed easing is not a done deal, echoing overnight comments from Dallas Fed president Fisher. EUR/USD lost some half a cent to the day's low of 1.3855, USD/JPY has given back its 15 tick gain and now trades unchanged at 82.40 while GBP/USD has barely budged from 1.5850. The move suggests the market is positioned overweight in EUR/USD, less so in GBP/USD and USD/JPY. (gary.stride@dowjones.com)
 
I think Bullard is wrong here. Bernanke wants more stimulus in my view, obviously he is quite a dove, the vice-chair will be Yellen she is also quite dovish, the NY Fed president already had a clear statement he wants more stimulus. With their votes casts and already 1 dissent from Hoenig(and the implicit FOMC rule is that there cant be more than 1 dissent per meeting) everyone will be forced to go on board
 
Bullard (or whoever) is trotted out specifically to add a bit of ambiguity. I'm sure the Fed doesn't mind lower yields, a lower dollar, higher stocks and commodities ... however, they cannot be comfortable with the one way (and dare I say nearly parabolic) moves lately. Once in awhile, they have to let the market know that they cannot just put all of their chips betting on a single direction. This kind of stuff is right out of the central banker playbook.
 
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