When I see some kind of rushed trades buying junk financials the first thing that comes to mind is not why ( I know it's short covering) but what else happened?
The popular hedgefunds trades were:
1. short financials
2. long BRIC
3. long momo-basic material/metals/oil
4. short dollar
While indiscriminate buying happens in #1 because hedgefunds are in liquidation mode from misguided bets from #2-#4, the best one can do is move in gradually to short position in financials.
Don't get me wrong though, it is a bitch trying to time this correctly because who the hell knows which other one(s) will get margin call next. And when unwinding of bad bets happen, such as Amaranth's, we get to hear the news a couple of weeks after the facts (maybe a week for some).
Which brings me to the point of this conjectures, that could this sort of thinking be applied to today's situation assuming some hedgefunds did cover their pair trades this week and next?
Also the other thing to improve timing, maybe the one to watch is #2-#4 and spend less time analyzing the movement in #1, which is like analyzing why Joseph Stalin ordered the executions of this farmer or that plumber because its indiscriminate nature.
The right enemy
12 years ago
5 comments:
I think that is very likely.
I've sold 5/6th of my spy calls I was playing on this bounce, I am thinking the easy money has been made, wait for the turn down now. I'll let the last 1/6 ride a few more days.
do u have puts on financials or is there a flash point u would like to share / speculate where the next contention is ?
MBI is extremely ripe - i never thought I'd see this guy at 9 bucks again. And ABK at $6 yesterday? THat is extremely indiscriminate.
Jan powder kegs = ABK/MBI
Mar powder kegs = BSC/FRE/FNM
Jun powder kegs = FRE/FNM
Next ammo? Following the pattern does it look like FRE?
Or is the unsecured lines player / credit cards?
Or is it the commercial REITs? Their spreads are up today despite the rally in stocks.
Or again, the regional banks because it is hyper-pumped from the low.
MS, STI, ZION, PNC. Even FED seems to have joined the party now.
When do you expect the topping to happen? in 5 days or more like 20 days?
FED joining the party? oh,well, .... :D
Should not be too far from here.
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