Everyone is looking for a bottom. The problem is that the street is busy trying to figure out who has the energy derivative old maid and is not focused on bidding up the market but instead they are interested in protecting themselves from counter party risk. This commodity disaster has wiped out trillions behind the curtain and someone big is in tremendous pain. The TED spread blew out in the month of December tipping us off to the fact that all was not well within our banking system. If this market can’t get its sea legs here then we are likely headed a lot lower. When we do find out who has the old maid we hopefully put in a durable trading bottom. In my humble opinion any rallies should be sold until the dead body of the financial institution (or institutions) floats to the surface. Could we get rallies here? Sure…but I trust nothing until the purging. Usually once the news is out we usually get a relief rally. We rallied in 98 on the LTCM bailout news, and in 2008 on the bankruptcy news of Bear Sterns. However, I don’t think it will be The Bottom but a short covering rally for several weeks to a few months before more pain and despair.
Many people think it’s $WFC. I’ve decided to short $C and $GS.
I’ve read – of “short selling by holders of high-yield energy paper, where that paper is virtually untradeable in any kind of size. Thus, they are trying to reduce their potential risk by shorting oil.”
You have been writing about the old maid for awhile now.
You are getting close and she is about to get laid.
Liking junk and high yield as macro-themed shorts. Plus technicals. And oil. Who stands the most to lose when cheap money going to oil companies dries up, and said companies can’t even keep operating cash flows stable? Reserves are being written off and eventually, the lack of capital will choke off cash flow, compounded by the continual plunge in oil. Apocalypse… when? I’m guessing this year.
Blue youve been pretty much spot on in anticipating all of this. Major hat tip sir.
Hat tip.
Thanks for the analysis, Blue. Also, class act for not kicking everyone while they are down even though it seems lots of people liked to fling feces in your direction most of last year
DB getting murdered for like 2 years now. Methinks all is not well there with respect to many things, energy debt among them.
Thanks all,
For kind words. I have zero interest in gloating. Traders are big boys and girls and can take care of themselves. I feel bad for the retirees and folks told to stay the course. If I am right they will be hurt very badly.
BLUSTER IS GoD –
While I love carnage, the AH market is a bit unnerving. Speed has been ferocious. Will we open down 20, 40, 60 handles lower?
We’re back at the scene of the crime and the questions is… will we bounce.
*typo*
I am with helicopterben me thinks DB. their derivatives book is multiple times the size of German GDP. GS is on the other side of it – as always.
actually the sell side actually thinks GS has the old maid
in 2days regulation environment you cant take the other side of your own trade anymore. Hopefully they figured out how to get around that but if not, I think they’re screwed.
Haven’t seen the Old Maid card in many years ….she now looks young. Yeesh.
BlueStar – Thoughts on when we get a short squeeze higher b4 going lower into the next few months ?
Probucks,
The easy short money has been made for this phase. We either bounce here for a few weeks or the bounce starts in a few weeks from lower. much trickier here.
First they ignore you, then they laugh at you, then they fight you, then you win – great posts, BlueStar. Thanks for the insight.
Everyone, bulls and bears alike, expecting bounces.
We had the bounce, back down we go.
Nice -5 point pop in IBB today.