Feb 12. Black holes and gravitational waves
“The colliding black holes that produced these gravitational waves created a violent storm in the fabric of space and time, a storm in which time speeded up, and slowed down, and speeded up again, a storm in which the shape of space was bent in this way and that way,” Caltech physicist Kip Thorne said.
http://www.reuters.com/article/space-gravitywaves-idUSKCN0VK1RT
–Don’t have to be Einstein to realize markets are in a black hole. Implied volatility soared yesterday. Many puts were unchanged despite a strong rally in futures. I don’t think I’ve seen FV vol above 4.25 since the end of 2014. I marked TYJ atm straddle at 6.9. TYJ 131.5 straddle settled 2’30 compared to yesterday atm 131.0^ at 2’10 (just 6 weeks left).
–For the first time, some FF spreads actually inverted and closed at negative levels. For example FFH6/FFJ6 settled at -0.5 bp. The idea of a March hike has turned into thoughts of an ease at warp speed, Mr Spock. Eurodollar calendars continued to implode. For example EDH’16/EDH’17 (March/March) closed at just 7 bps, down 5 on the day. The market is starting to price the reversal of the hike, which was less than two months ago.
–As mentioned previously, financial stocks globally are getting slammed. Yesterday in the US: (in %) BAC -6.8%, C -6.5, DFS (Discover) -5.5, GS, MS, JPM all down 4.4. USB and PNC -4.1. European financial shares down over 30% in three months. Jamie Dimon in a show of confidence bought a chunk of his own JPM (even as JPM analysts suggest buying gold). Speaking of confidence or lack thereof, the surge in precious metals yesterday, with April Gold up $53 near $1250/oz, suggests that the Central Banks are losing their grip on things. I saw a note that said Canada has been selling off its gold reserves…remember what happened after the bank of England famously divested themselves of their gold reserves? Bad market timers. (Well, if you don’t remember, Gordon Brown engineered the sale at avg price of about $280 between 1999 and 2002. Never looked back.)
–Today’s news includes Import Prices expected -1.5 with YOY -6.8 and Retail Sales expected +0.1, Core ex-auto and gas +0.3.
–For the first time, some FF spreads actually inverted and closed at negative levels. For example FFH6/FFJ6 settled at -0.5 bp. The idea of a March hike has turned into thoughts of an ease at warp speed, Mr Spock. Eurodollar calendars continued to implode. For example EDH’16/EDH’17 (March/March) closed at just 7 bps, down 5 on the day. The market is starting to price the reversal of the hike, which was less than two months ago.
–As mentioned previously, financial stocks globally are getting slammed. Yesterday in the US: (in %) BAC -6.8%, C -6.5, DFS (Discover) -5.5, GS, MS, JPM all down 4.4. USB and PNC -4.1. European financial shares down over 30% in three months. Jamie Dimon in a show of confidence bought a chunk of his own JPM (even as JPM analysts suggest buying gold). Speaking of confidence or lack thereof, the surge in precious metals yesterday, with April Gold up $53 near $1250/oz, suggests that the Central Banks are losing their grip on things. I saw a note that said Canada has been selling off its gold reserves…remember what happened after the bank of England famously divested themselves of their gold reserves? Bad market timers. (Well, if you don’t remember, Gordon Brown engineered the sale at avg price of about $280 between 1999 and 2002. Never looked back.)
–Today’s news includes Import Prices expected -1.5 with YOY -6.8 and Retail Sales expected +0.1, Core ex-auto and gas +0.3.
