The Credit Crisis Financial Stocks Short Journal

Yep. IB's policy is extremely dangerous. I've been aware of it before and always made sure I am not vulnerable to blowing up on a bad set of prints, but it seriously handicaps the ability to trade in a crash like yesterday.

Basically IB's policy means anyone using $1 or more of margin or hedging can blow up at any time. Obviously this is a ridiculous risk to take. IB therefore has a risk of losing ALL their brokerage customers (except the total noobs) in the next few weeks/months if they don't address this. They are a ticking time bomb and I am strongly considering buying OTM puts on the stock.

 

Jeezus.

 

Another meltdown in eurodollars, I'd say the odds the Fed-ECB swap lines comes back during the weekend is decent, specially now that it looks like Germany will pass the bailout. This might provide some kind of relief rally

 

SO fading the TED spread would be a good play now?

 

Exhibit A:


If you fade it here, you'd be selling at arnd 41.

 

There is a crucial difference here, after LEH there was a clear belief among many participants that the government would let some institutions fail. That only changed after the market internalized the idea from the G10 statement that there would be no more Lehman's(it took a while but eventually people believed)

You can see in the chart that during the panic from Jan to Mar 2009, the spread blew up by something like 30bps

I wouldn't be playing around with that spread but I'm holding back any kind of bearish trade here. If we do get a rally I plan to short the EUR against either USD, Gold or Francs

 

"Fed's Plosser: Greece situation a risk to outlook"

 

Zero Hedge makes a good point, when CNBC will issue a retraction over the ridiculous story of the fat finger by Citi?CME has denied usual activity by Citi, yet CNBC had reported 'multiple sources'
It appears the the whole thing was caused by panic leading to people to shutdown their eletronic programs which pulled liquidity from the markets removing the floor, kinda like the market makers refusing to answer their phones in 87

 

I was in my car listening to Bloomberg on satellite radio, and they put the Citi rumor out there several times as well. I believe it was Tom Keene who said it more than once. Don't know if they've issued a retraction.

 

It's a nucular morning in Europe...