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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (79920)	3/12/2007 8:07:43 PM
From: Real Man	Respond to of 110194

Well, the large buyer of stock futures definitely exists, but who knows who they are. My thought - because of all organized bailouts some think they are immune. In addition, inducing liquidity whenever needed seems to have been Fed policy recently. Essentially this has allowed these strategies to prosper, because without the liquidity crunch they work well. So, a lot of large banks and WS firms are following the standard arbitrage practice of LTCM. Since the strategy of picking up nickels in front of steamrollers has been so successful in recent years, more than 300 billion in hedge fund $ are doing it. A part of it is carry trade, part of it is narrowing bond spreads, a part of it is shorting volativity, which has been record low in the past 2-3 years. What does this lead us to? A meltdown, inevitably. A backdrop in liquidity even the Fed can't easily fix. That's why the treasury has been so active lately discussing actions in that event. Mortgages are blowing up, and a lot of credit derivatives are blowing up with them. The high tide is about to come. We may see the downside to all this dark matter this year.