Feb 11. Aint got no brakes, it’s freewheelin’
–Thanks to colleague TonyP for the summary to the day’s end from Little Rascals… (go to 3:00). https://www.youtube.com/watch?v=bewsgoidxsA
–Apparently, the market wanted Yellen to be more overtly cognizant to the risks facing the US economy from global turmoil. She wasn’t. “Testimony’s over? OK…where are the 100 calls?” (EDZ7 100c traded 7 bps late). By the end of the day TYH had closed at a new high settlement. Vol was surprisingly sold heavily on the day; sales which are likely to be unwound over the next few sessions.
–Once again euro$ calendar one-year spreads made new lows and are getting to levels indicative of crisis. For example, EDZ6/EDZ7 (Dec/Dec) made a new low of 19 bps, down 2 on the day, and traded 17.5 before the electronic close. I had recommended a long here, but a close below 15 stops me out.
–$/yen has plunged over the last few sessions, 111.71 as of this writing, got as low as 110.99 today (!) from 120.99 on February 1. Gold is now zooming higher (up $28) and stocks are tanking. Sweden cut their key rate to -50 bps. (Even as OECD’s White said yesterday that negative rates are dangerous). Kyle Bass out with a report that China is a lot worse than 2008 subprime crisis. Shipping giant Maersk also says conditions are worse than in 2008. Freewheelin’.
–On the plus side, the Mexican Peso continues to plunge, so travel there is reasonable. MXN over 19 this morning vs 13 in the middle of 2014. On the other hand, the Director of National Intelligence says that “…falling energy and commodity prices will foster instability across the world.” He also warns of cyber terrorist threats. The report is in this link Hillary, in case you missed the original memos. http://www.businessinsider.com/these-are-the-main-global-threats-for-2016-2016-2
–On top of it there’s this article from AEP in the Telegraph yesterday:
http://www.telegraph.co.uk/finance/economics/12149114/Europes-doom-loop-returns-as-credit-markets-seize-up.html
“People are scared. This is very close to a potentially self-fulfilling credit crisis,” said Antonio Guglielmi, head of European banking research at Italy’s Mediobanca.
