Market “Inverse-Plunges” But Not Everyone Happy
by Zero Hedge - November 30th, 2011 4:11 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Today’s tremendous rally in equities was well supported by broad risk assets as financials took off this afternoon to end the month down only 4.8%. The 6.2% rally in financial stocks today was not so evident in corporate bond-land where we saw net-selling overall. Copper slipped well off its highs of the day but ended very well as Oil was only able to match USD weakness on the day while Gold and Silver outperformed (with the former touching $1750). VIX was a popular topic as it dropped below 30% but we note that implied correlation did not drop from the open suggesting macro-hedges remained more bid than underlying sentiment might suggest. IG credit outperformed (relatively speaking) which seemed more a squeeze move into the month-end close but HY’s move was impressive as an early afternoon fade in HYG reverted to end at its highs. Equities and Credit ended back at 11/14-15 levels with IG and HY ahead of equity.
Credit and Equity surged to get back to mid November levels and we note that IG credit appears to be leading – not exactly a hugely high beta sentiment really and more like a squeeze on low-cost hedgers.
We have talked about the relationship between index vol (options) and the vol of the underlying components a few times. The green line in the chart measures the relationship between index vol and the underlying vol of the components of the S&P 500. While VIX futures (red) did indeed drop significantly, the fact that Implied Correlation did not suggests that there remains an underlying bid for more macro protection than underlying single-names – or more differently correlation is expected to remain high as risk-on / risk-off remains the regime.
More shortly.
Charts: Bloomberg
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Digg“China Will Not Hesitate To Protect Iran Even With A Third World War”
by Zero Hedge - November 30th, 2011 4:09 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Fast forward to 2:08: “It is puzzling to some that Major General Zhang Zhaozhong, a professor from the Chinese National Defense University, said China will not hesitate to protect Iran even with a third World War… Professor Xia Ming: “Zhang Zhaozhong said that not hesitating to fight a third world war would be entirely for domestic political needs….” And don’t forget Russia, which recently said it is preparing to retaliate against NATO and has put radar stations on combat alert: “Russia is another ally of Iran, with similar policy to that of China. Toward Iran.” Watch, and please forward the entire video, for an explanation of how China is approaching the situation not only in Iran, but a perspective of how they view the western “threat”, as well as what tensions they face domestically.
h/t Scrataliano
BioMarin Announces Buy Back of Naglazyme Royalties From Adelaide Health Authority for $81M
by Insider Scoop - November 30th, 2011 4:00 pm
Courtesy of Benzinga.
BioMarin Pharmaceutical Inc. (Nasdaq: BMRN) today announced that it has completed the buy back of certain intellectual property from SA Pathology, a unit of the Central Adelaide Local Health Network located in Adelaide, Australia for an upfront payment of $81 million.
The intellectual property includes patents related to the purified form of Naglazyme and the method of using the enzyme in the treatment of MPS VI, which expire between 2022 and 2023. Prior to this transaction, BioMarin licensed this intellectual property from SA Pathology and paid a five percent royalty on net sales of Naglazyme.
For more Benzinga, visit Benzinga Professional Service, Value Investor, and Stocks Under $5.
14th Consecutive Week Of Stock Outflows: Retail Refuses To Go Back Into Stocks No Matter What Market Does
by Zero Hedge - November 30th, 2011 3:50 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
So much for engineered stock market “rallies” and global “bailouts” – per the latest ICI update, we can now confirm that no matter how or what the market does, retail investors have firmly decided that the ridiculous market volatility is simply too much for most, and have withdrawn another $3.7 billion from domestic equity funds, and have now taken out money for 14 straight weeks ($44 billion) since the US debt downgrade (but, but, the S&P barely lower), or 31 weeks ($130 billion) if one ignores the statistically irrelevant blip of a $715mm inflow on August 17. Perhaps instead of trying to fabricate a makeshift price for the SPX which nobody believes any more, the Fed should focus on moderating the insane volatility which is the primary reason preventing any normal investors from putting cash into stocks. And yes, $6.2 billion went into bonds, despite the record low yields. Said otherwise, retail investors have withdrawn $214 billion from domestic equity mutual funds since the beginning of 2010. Put a fork in stocks: America’s infatuation with the stock market is officially over.
Is The Risk-On Rally Real?
by Zero Hedge - November 30th, 2011 3:29 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Whether its non-confirming volumeless rallies in stocks, hard-to-find collateral, sovereign risk, counterparty risk, USD funding stress, GDP growth dislocations, EM credit dispersion, or equity market outperformance, Nomura’s EEMEA FX and Fixed Income team has a little for everyone in today’s ’10 Things We Did Not Know’. Today’s obvious risk-on knee-jerk-response rally is perhaps not so broadly supported.
1) Did you know that volume is not confirming the recent rally? On a 2-day average basis, Monday’s volume was lowest y-t-d despite a 3% jump in the stock markets…(clearly some well-informed managers knew something though as we discussed).
In 2010 volume patterns were similar
But Did you know that in 2010 two days including Black Friday also had the lowest average volume if we exclude trading in the last days of the year? The main difference, though, is big pick-up in volume in December, with a rising trend in the S&P500 and a very bullish market at the time.
The search for balance sheet (collateral) continues…
2) Did you know that both EUR and USD FRA-OIS spreads are above May 2010 levels and continue to rise? As the chart shows the European banking system suffers more as the spread between EUR and USD widens.
Risky Sovereigns in some countries, risky countyerparties in others…
3) Did you know that in Germany and France markets have signalled much higher counterparty risk, while Italy signals higher sovereign risk? In UK and US, counterparty risk is rising, according to markets.
Demand for dollars is at a peak once again, but not everywhere…
4) a) Did you know that not only EUR basis has moved significantly to the right, but the same has happened in NOK, SEK and JPY? USD funding in these countries has become much more expensive.
4) b) Did you know that cross-currency basis in AUD, KRW, GBP and CAD has not experienced any significant moves lower and in CAD basis is even increasing?
In EM we look at hard currency demand…
5) Did you know that in EM the basis has moved to the right, but while moves in PLN and ZAR were contained in HUF and TRY they were very significant?
Probably, the only good news for the bulls is the market is short EUR/USD again…
6) Did…
Cup of “hope” for Dollar bulls?
by Chart School - November 30th, 2011 3:20 pm
Courtesy of Chris Kimble.
CLICK ON CHART TO ENLARGE
Is a “Cup of Hope” taking shape in the Dollar?
Dollar bulls need this Cup and handle to come true since the Dollar still finds Fib resistance at hand.
For The First Time In History, Fed Will Buy AND Sell Treasurys At The Same Time On Friday
by Zero Hedge - November 30th, 2011 3:20 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Following today’s unprecedented POMO failure due to “system difficulties” (one would hope the Fed’s POMO machine does not start and stop every time someone pulls the plug from the socket), Brian Sack’s team (not to be confused with the PWG team of Eric Mindich) had to reschedule the literally failed auction. As it turns out, the first opportunity to sell $8-$8.75 billion in 2013 bonds is on December 2. And unlike the December 21 “reverse” POMO which is due to take place at 1:15pm, the rescheduled bond sale will instead occur at its usual time of 10:15-11:00am. Ironically, this is also the time when the Fed will be buying $2.25-$2.75 billion in 2036-2041 bonds. In other words, for the first time ever on Friday the Fed will be literally selling and buying bonds (although selling 4 times more than buying) at the same time. If this is not the pinnacle of deranged monetary policy which does not even attempt to offset monetization by a few hours, then nothing ever can be.
Source: NY Fed
Watch Obama’s Remarks On Payroll Taxes Live
by Zero Hedge - November 30th, 2011 2:49 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
It is another TOTUS session, this time the teleprompter has some thoughts it would like to share with the president and some high school
students regarding payroll taxes. Watch live here. Not sure what the shot keyword is today. Probably “taxes” – so every time he says “tax”, “taxes” or “tax cut” do a shot.
VIX Reflecting Skepticism About Rally
by Chart School - November 30th, 2011 2:20 pm
Courtesy of Bill Luby of VIX and More
With the S&P 500 index up 3.4% as I type this and the VIX down 7.8%, it is clear that there is a fairly substantial disconnect at the moment between those who are buying stocks and those who are trading options on the SPX. The picture is even more dramatic if you look at the upward trend in both the SPX and the VIX since the open. The graphic below is not ideal for deciphering the relative movements, but the unusually high correlation between stocks and implied volatility is unmistakable when looking at today’s intraday price action.
With the VIX typically moving about 4x as rapidly in the opposite direction of the SPX under ‘normal’ market conditions, it appears as if many investors are skeptical about stocks continuing to rally in the face of ongoing uncertainty about the Europe-driven news cycle. Following an initial pop, the euro is selling off and after it dropped into the 27s, the VIX now looks content to remain above 28 for the balance of the day, the bullish action in stocks notwithstanding. One simple explanation: investors are snapping up options, including put protection, at what look like bargain basement prices.
Related posts:
- VIX Suggests Investors Don’t Believe Rally Is Sustainable
- Fearogram Maps Recent VIX Complacency
- The Week in Fear
- How Fearful Were We Last Week
- SPX-VIX Daily Correlation
- Performance Implications of VIX and SPX Divergences
- More Thoughts and Numbers on the SPX-VIX Correlation
- High Positive Correlation Between VIX and SPX Often Signals Market Weakness
[source: FreeStockCharts.com]
Disclosure(s): none
Egan Jones Downgrades France From AA- To A; Negative Watch, Sees Debt/GDP Rising From 91% to 117% By 2013
by Zero Hedge - November 30th, 2011 2:11 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Only the first of many French downgrades, this time by the rating agency which is always ahead of the pack. And like in Italy’s case, EJ sees a soaring French debt/GDP, rising to 117% in 2013 from 91% currently.
Summary note:
Disastrous trend and the worst has yet to come. Over the past two fiscal years, the Republic of France’s debt has grown by 21% from EUR1.32 trillion to EUR1.59 trillion. Meanwhile, FYE GDP declined slightly from EUR2.13 trillion as of 2008 to EUR1.93 trillion as of 2010. As a result, debt to GDP rose from 61.8% in 2008 to 82.5% in 2010 and is near 90% currently. As the EU growth slows, and France’s unemployment rises, budget pressures will rise. An item which is hard to quantify but is a growing concern is the health of France’s banks; the assets of the three largest banks equal 240% of France’s GDP. Given France’s propensity for supporting its banks, France might soon be confronting a substantial additional liability.
For the most part, over the past 18 months France has been exempted from the rise in funding costs. However, as the crisis evolves, we expect that France will be pressured. The deterioration in France’s credit metrics combined with the needed supported for France’s banks are likely to pressure the country. A major catalyst is likely to be the year end financials for France’s banks; watch for a significant support program to be announced over the next couple of weeks.
Full note – link
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