Sunday, September 11, 2011

Something bad is really happening

I am at home today so I can't pull many charts from Bloomberg to post alongside with what I am about to write, but I just want to point out a few facts.

Even though we can't affirm yet that we are in recession in some countries or that we soon will be, shockwaves are being sent our way in the form of market prices.

Does some one know stuff that isn't public yet?

John Mauldin, in his weekly letter, points out that the amount of deposits with the Fed from foreign institutions topped 2008-2009's highs.

Financial Institutions stocks have dropped dramatically since recent tops.
Some italian, french and spanish bank stocks have lost their 2009's lows.

The iTraxx European Senior Financials credit spreads have shot through last crisis' highs as I showed in the previous post.

Are market prices, again, causing the trouble?
Or are market prices simply making people see what they didn't want to see since stress subsided in mid 2009? That the amount of toxic debt around the world isn't sustainable?

Time to be nimble, simple and defensive.

The world is changing and so is the investing landscape. Central banks are out of monetary bullets and governments are out of fiscal bullets.

The bashing of bail-outs of equity holders and bond holders have been pretty strong and I really am not confident it will happen again in the same grand scale as it did in 2009.

Let's stay tuned for the next chapter of this on-going story. Very interesting times ahead.
Very interesting times.
*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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