Nov 29. MF Global writ large

–Monday started with substantial moves but ended little changed.  For example, crude oil was north of $100 but settled below 98.  Ten year note was as high as 2.07 but came back at the end of the futures session to 1.96.  SPZ rallied but stalled around 38% retrace from Oct 14 high 1275 to Nov 25 low 1147.5 (1196.00).  50% is around 1211, which appears to be a target for today.
–Rating agency downgrade warnings are being greeted with a yawn.  Fitch put the US on negative outlook.  Every other day France is rumored to be facing a downgrade. Moody’s threatens to cut european banks.
–There’s a Bloomberg article today about MF Global, and Corzine’s bets on  Spain, Italy…which were covered by shorter term hedges.  http://www.bloomberg.com/news/2011-11-29/corzine-pushed-fatal-europe-bet-to-11-5-billion-as-mf-global-board-balked.html  The article notes that if hedges couldn’t be rolled then risk exploded.  It also mentions that the board of MF was uncomfortable but didn’t really do anything. “Directors believed that rejecting the trades would have been an affront to the veteran trader and would have been tantamount to firing him, said the person familiar with the board’s deliberations.”
–MF Global is a small model of europe as a whole.  The rise in bond yields threatens to take down the entire structure.  The IMF and ECB are sort of like Price Waterhouse, whose audits meant nothing.  There are a series of short term “hedges” to buy time. The directors, or heads of state, are afraid to “fire” the euro, even though it isn’t working for every country.

Posted on November 29, 2011 at 8:09 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply