1. The stress tests assume a fixed response by the banks to dynamic changes and have nothing to do with the resilience of banks, but are designed to create a facade of sticking it hard to the banks but are really a method like most regulations to reduce competition and create an illusion of the public interest.

2. The bond stock ration has taken one of the worst declines in history the last week and this must be very bearish for stocks and bullish for bonds.

3. The decline in VIX to below 15% sets up another great opportunity for squeezes to be created by the market makers.

4. The Nikkei has crossed 10,000 and this has made the imitative Asians much happier but the foreign buyers haven't profited that much because the value of the yen has fallen about as much as the increase in the stock averages.

5. The S&P has gone above 14,000 from a low below 12,000 in two months without benefit of a reversal and this is unprecedented. But how does it affect the future?

6. Oil is about even over the last few weeks and it's future movements will determine how much stasis the current increases in stock prices will have.

 7. Like the chickadees in Memoirs of a Superfluous Man, the banks refuse to buy puts to meet the stress tests because they are so accustomed to the transfers of wealth fro the forgotten man to themselves by the cronies, and flexions that they refuse to invest the few hundred million to meet the stress tests. The ridiculous absurdity of the stress tests assumes that the banks wouldn't change their position if unemployment were to go up by about 100 %, and that they would still have their current positions.

Let us never forget that the signer named his ramblings "Briefly Speaking" instead of "Nobody Asked Me But" in disparagement of the sanctimonious flexion from Nebraska who said he wasn't "briefed" on the matter of the bribery at one of his insurance companies with AIG where the one briefed went to jail, and similar "briefings" he did not have with Sokol on companies they bought stock in.

I would recommend Ring Lardner's book of short stories Roundup particularly "Alibi Ike", "Horseshoes", and "Champion" to all who wish to enjoy the current baseball season better.

Anonymous writes: 

I put on a small long position in TLT on Friday. If one believes that the recent backup in rates will put a dent in the current record pace of corporate issuance, then the relentless rate-lock sales in treasuries ought to diminish. Combine that with the bit of central bank buying of long paper on Friday and the dearth of auctions in the immediate future, and it looks like there is a good setup for bonds.

I'm often wrong about trades like this, but I'm glad the chair is on the same side of the market, opinion-wise, as me. I must be doing something right.

Mr. Krisrock comments: 

I couldn't ignore your comment.

You might like to consider this, especially with q end so close…

Over the past several weeks, in stepwise fashion, many profound issues affecting investment policy have been deferred.

Several rounds of ECB 'LTRO' in Europe has convinced investors that the PIG financing dangers have been postponed for the near term, with the highly competent Greek Legal System adjudicating foreign claims.

Here in America, the FED's well staged narrative for releasing stress tests to be followed by large bank dividend increases blew up thanks to miscommunication with JPMORGAN.

Bernanke panicked and shocked the market with the early release of a report that 5 financial institutions had failed the test…

It's obvious from the "careful" staging that we now have "teleprompter" independent regulation.

One must remember that in the 4th quarter of 1999 the FED also telegraphed its intentions to offset financial complications from Y2K
with market participants 100% certain the FED wouldn't increase rates, investors turned to 'momentum' trading, chart breakouts and PE multiple expansion.

The unintended policy consequences planted the seeds for the subsequent negative stock market surprises in March/April 2000 when policy reverted.


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