Paulson's main 2 funds are being hit with redemptions from CITIGROUP as was reported yesterday, what is Paulson's best performing and maybe only performing position? GLD, so when the time comes, which may be now, GLD will be sold to cover the redemptions , which at this point is reported to be at least $500 mm from CITI alone; forget the other 89% of underperforming funds.
As for the market, it seems the downside moves are getting a bit larger than average, volume is picking up, these are all signs of a head fake move, except when it really confirms the moves and volume will be notably bigger, look at BIDU as an example. I don't think you can separate hedge fund performance and the what will come out of that from the market action now, better for them to sell up here now in anticipation of redemptions next month than at lower prices when there may be no demand a mont from now.
I told you early in the week, someone is betting on volatility to rise and rise it is, the VIX has seen its biggest 3 day gain in a month after just making a 5 year closing low. ES (S&P E-mini Futures) also dropped the most in a month and on volume, something that has been missing lately.
Overnight the fact that Greece is in trouble again is bothersome given how many bailouts and plans have been made and how quickly everything has fallen apart, but the market uncertainty of how this ends is causing deeper panic as markets hate uncertainty and while it seemed for a bit that there would be some concessions made or at least talk of them, a top MP from Merkel's party said overnight that the Greek deal can't be renegotiated and the Euro would survive without Greece, which would mean the current Greek deal is effectively worthless as they are in a deeper hole than the deal encompasses and they got there in record time, by the time a new deal is agreed to they'd be even deeper needing another new deal, that's what austerity does to an already dead economy that has no way to control its own currency. Remember Samaras is visiting Merkel today and expected to ask for more time to meet the financial deadlines that they have missed so badly, possibly up to 2 years, so a higher up in Merkel's party making those comment today doesn't bode well for Greece.
The German Finance Ministry is also said to be studying the costs of a Greek exit, trust me they'll be huge as Greece will stiff everyone, they'll have no choice, maybe the IMF would escape unharmed, but the banks, ECB, Germany, they all will get zilch. It's almost like Greek Bond-Holders revenge. Several notable and not so notable countries are backing the idea of a Greek exit, the Euro and ES didn't care for this talk, see what happens when Merkel is on vacation and when she comes back?
As for Spain, rumors yesterday that Spain would seek a full sovereign bailout from the EU have been sort of denied as the EU says today that they have received no formal request. We predicted this the day the EU Finance Ministers okayed a $100 bn Euro Bazooka bailout for the Spanish banking sector, we said that this would lead to a full scale sovereign default, not just a banking default because the banking bailout would contain terms that made the EU loan senior to all Spanish bond-holders, soon after that the Spanish bonds broke above 7% which is unsustainable and keeps them from going to market, and this happened for the EXACT reason we predicted that very same day!
Remember all of the excitement caused by Draghi's TALK, but then when it came to the meeting he punted on bond buying, well get ready for more deflation of the balloon of excitement that the ECB may actually do something soon. As Bloomberg reported, the ECB will wait until the German Constitutional Court rules on the ESM before making a decision about the bond buying, if you were paying attention last week, you'll know there were two more suits brought against the validity of the ESM that will likely delay the German Court's ruling even longer, so the ECB excitement over bond caps may have just been shot down as well.
In the US, we saw Durable Goods at 8:30 am
| Released On 8/24/2012 8:30:00 AM For Jul, 2012 | |||||||||||||||
The headline number was a solid beat, remove transports and defense spending and things got much darker, but few look behind the headlines. Ex transports DG was down -.4 on consensus of +.5, with June revised down from -1.1 to -2.2. Nondefense capital goods excluding aircraft crashed in July to -3.4%, below consensus of a -0.2% print, with the previous print revised from -1.4% to -2.7%. This report is the epitome of a pig in lipstick. |
Here's The EUR/USD and ES overnight.
ES including Wed/Thursday night, Thursday regular hours and overnight in to the open.
However in my opinion, the more worrisome charts for the market are the $AUD pairs.
With the carry trade off, the risk trade is off.
Opening indications coming next.
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