<<When the biggest bull of bulls leaves town.. oh well...>>
AT... I am big 'horny' bull, the bears don't like me much, however, I have made more short side trades in last one week than all the shorts put together. Thread posts should bore resemblance to yuor trading style and direction, most of this junk lacks that authority of own money on line, when 'money talks bullshit walks'. Here in middle of all of crap I am hearing since last three years it is important that opinions should be developed once markets are throughly scouted and tested.
Look at my last message, I wrote about resolution of '1292' spike that we had on Friday. We tested that 1300 area rather 1298 exactly, now even I leave I make sure to leave some guidance to the market. Now, I think if that spike needed to be resolved, we needed higher bottoms, now 1393 and 1305 close for me is sequence of higher bottom,this should play out now. Short term these kind of bottoms post spikes result in an upside 4-5% point rally. If we don't have this we are certainly testing 1282 in first step.
However, these things are too simple, for people who follow 'haramis' and 'inverted hammers' and 'erotique 'hot' cycles' rarely understand these simple tools of analysis.
Market opens every day for me being a 'bull or a bear' hardly matters, I analyse info and am totally emotionless and event driven, right now I am looking at these 'Rumors of a new financial crisis involving a major hedge fund are growing'. Volatility and spreads were widening for sometime but indirect denial from fed Governor is positive. The higher bond yields includes that 'flight to quality' premium also.
Independent of UK reports of a major hedge fund in difficulty! Federal Reserve Bank of St. Louis President William Poole said on Friday he sees no signs of brewing troubles in financial markets despite the recent widening of debt spreads to levels not seen since the global financial crisis of last August.
Spreads are widening, a red flag in the market of swaps, complex interest-rate derivatives which are widely used by hedge funds and the proprietary trading desks of the big investment banks to fund their high-risk trading strategies is, say traders, showing the same signs of distress that was seen after the Russian bond default last August.
According to a news report in Independent of UK concern is growing in the financial markets that a major hedge fund is in difficulty, prompting fears of a repeat of last year's crisis when the Federal Reserve in the US had to mount a $3.5bn bail-out of Long- Term Capital Management (LTCM) in order to stave off a global financial collapse. This has taken the form of a widening of credit spreads - the interest rate differential - indicative of concerns within the market of a major default. Spreads on 10-year swaps have widened on both sides of the Atlantic from the early 80s (0.8 per cent) to 110 over the past few weeks. Over the past few days the widening has accelerated. Tiger, the $12bn hedge fund run by New York-based financier Julian Robertson, yesterday dismissed as "rubbish" reports that Goldman Sachs, and Chase had cut its credit lines. Goldman Sachs was reported to have unwound a big swaption (combined swap and option) position, and was also rumoured to have lost pounds 200m on European options. It was fruther reported that Fed was holding back on raising short- term interest rates to keep one of the big securities houses afloat. Other accounts have referred to a big US or Swiss bank having taken a big hit.
In a seperate development indirectly contradicting the rumors appearing in the markets and 'Independent' of UK, Federal Reserve Bank of St. Louis President William Poole said on Friday he sees no signs of brewing troubles in financial markets despite the recent widening of debt spreads to levels not seen since the global financial crisis of last fall. ``I think the markets are a litle more nervous than they were some months ago but they are less nervous than they were last fall,' Poole told Reuters in an interview. ``As we always do, we have situations that we need to stay on top of. I don't think this is in any way an odd or peculiar period,' Poole said when asked whether current market conditions would play a greater-than-usual factor in the monetary policy debate when the Federal Open Market Committee (FOMC) next meets on Aug. 24. ``I don't think there is anything that is odd or unusual about the current situation,' Poole said when asked whether the recent widening of spreads between Treasuries and other higher- yielding debt was a concern at the Fed.
Spreads reflect the higher interest rate investors receive from debt that carries a higher risk than U.S. Treasury issues, widely viewed as the safest debt securities. Worries about big trading losses have been exacerbated by a number of large trades in both the equity and swaps market yesterday and on Thursday, indicative of an unwinding of big market positions.
The dismissals of rumors by Tiger fund of huge losses are taken by the market with caution. Last year before the near bankruptcy of LTCM which had two Nobel Prize winners on the management have been similarly dismissive of reports that it too was again in difficulty, less than a year after being rescued by a consortium of 13 banks including Barclays, Deutsche and Merrill Lynch.
There was talk, too, that the Fed was holding back on raising short- term interest rates to keep one of the big securities houses afloat.
Some of the big investment banks yesterday admitted privately to sustaining small losses over the past few days but nothing that would result in a material profits hit let alone a default.
Although hedge funds and Western banks lost up to $40bn when the Russians refused to honour their GKO bonds, the real problem that brought LTCM to the brink of collapse was the widening of credit spreads in the the swaps and high-yielding bond markets which blew its strategy of buying high-yielding bonds in anticipation of yields falling to bits.
Despite a booming U.S. economy, the Fed lowered the federal funds rate for overnight inter-bank lending by three-quarters of a point last fall during a global financial crisis marked by an unprecedented widening of spreads.
The crisis put many investment strategies at risk and nearly brought about the default of the hedge fund Long-Term Capital Management (LTCM) last September. The New York Fed helped engineer a rescue of the hedge fund by several major financial institutions. |
