Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (111346)	5/8/2010 6:22:13 AM
From: Haim R. Branisteanu	3 Recommendations of 116555

Thursday extremely high volatility in the financial markets was blamed on various technical factors and/or human error unfortunate there is more and more evidence surfacing that the whole debacle was intentional and premeditated with the sole purpose of grabbing profits and inflicting financial damage on the public at large. In one e-mail I received Monday last week was an information I interpreted as a hedge that one of the big WS banks bought a EUR/USD one month put at a strike of 1.2975 (or so) @ 12.5% IV for a month for the amount of 600 million +. Friday EUR/USD close was around 1.33 therefore the put buying made sense. Similar transactions where done on other currencies like the Yen, Canadian and Australian dollar. Prominent price spikes were noted also in those currency pairs. Right away since Monday the EUR/USD started to slide and on Tuesday it's slide accelerated for no obvious economic reason even that the EU released very positive economic news.The Greece story was already OLD news and should have been already in the market price. Similar price action were noticed with other currencies mentioned above. On the same time stock markets followed. Further it seems that the tool chosen to inflict the drop in the stock markets where various ETF’s those instruments are build based on a computerized algorithm which tries to hold the balance of the various stocks currencies or commodities in the ETF. The sell or buy orders are automatically computer executed to reflect the true value / composition of the ETF and the main driver are the stock price with complete disregard to the fundamentals. Reviews of the charts that reflect the price action on Thursdays of various financial instruments reflect just that as the underlying components of the ETF’s had slightly lower swings than the ETF’s. Similar discrepancies are in the S&P Minis which were also used in the scheme. In all likelihood the trades were initiated from the US, and by an US entity and affected the financial markets the world over. I would not be surprised that if the culprit will be found not with CitiBank who in the past engaged in such activity in the European Bond market only to be punished for their actions, but with one of the BIG WS firm which is hiding behind a obscure subsidiary with a different obscure name. In a nutshell it IMHO it is no glitch or human error but an action design to maximize profits by some WS scum and embezzle anyone else. Only wonder if they will go to the bottom of the event find who designed this and if there are any laws to punish them. After all there is no law which denies the right to sell a huge amount of financial instrument all at once as it was Thursday even if it causes severe disruptions. The key will be the “intent” if same party bought massive amounts of puts on the financial instruments it sold and that where in actuality not for true hedging. As the example at the top of my post indicates it will be difficult to prove, and the practice used so successful in the fix income market via CDS and it is used now to bring several EU countries to its knees by buying multiple CDS naked contracts on sovereign debt.

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