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EQD Flow Sales working for an European IB covering Real Money Accounts
  • Waiting For Godot
    Yesterdays market movements strongly remembered me about the play written by Samuel Beckett. We re stuck in sitting and waiting for a person (in fact we re waiting for an event) which we don t really know too much about and its outcome.
    What we observed was a –compared to last week- relatively boring day in equities  with only 1% intraday moves which resulted consequently in a collapse of vol & skew. Equities closed in green territory supported by Googles $ 12.5 bln bid for Motorola Mobility Holdings.
    The Euro gained reflecting both unwinding of safe haven trades and optimism ahead of the German French talks today. Bunds & Gold traded relatively stable while CDS levels widened slightly. So overall mixed signals what people are expecting from Godot´s arrival even if we feel that there s some optimism that an announcement will hint into the direction of Eurobonds as pressure rose to present a sustainable solution for a still burning European debt crisis, which finally spread into core Europe.
    Many experts say the only way to ensure affordable financing for Europe’s most financially distressed countries would be to issue joint Eurobonds and some even say that the euro zone faced collapse unless leaders went beyond an agreement reached at the last emergency summit on the debt crisis in July.
    Despite the risk of causing disappointments both, France & Germany are trying to manage expectations as the German government sees no major breakthrough at the Paris talks, a spokesman said on Monday, while the French president's office said the creation of common euro zone bonds will not be on the agenda which would close the circle to Becketts play as the characters are waiting in vain for Godot´s arrival.
    We ll see if we re facing the same destiny at 18:00 cet.
    Aug 16 3:21 AM | Link | Comment!
  • We have seen this before, donĀ“t we?

    We observed a very choppy session with markets finally rebounding caused by a mixture of short covering & profit taking, bottom fishing, a clear statement of the French regulator about the sound conditions French banks are in and rumors about a short selling ban.
    Given high Put call ratios, technically extremely oversold conditions and already well hedged market participants this was more something which had to happen then anything else – a category we want to classify the correction in Bunds & Gold in as well. Looking at Asia which trades in red territory again we see our impression confirmed that it s mainly about position closing before the weekend as the cut of the Japanese growth forecast to 0,5% from 1,5% this year remembered investors of the global growth fears.
    With the established short selling ban, raising deposits from banks at the ecb & interbank rates rising as well as the Euribor – OIS 3M Spread we hear an increasing number of people talking about some Lehman 2.0 scenarios as such chatter cld become a self-fulfilling prophecy. While we have to agree that there may be some analogies we would even more underscore the differences which are by far more important:
    * French Banks have a broad base of retail banking deposits they can use for funding which wasn t the case for most of the US IBs
    * The dependency of overnight funding was reduced as consequence of the experiences in 2008
    *Neither the central banks nor the politicians will let make a mistake like the 2008 one twice

    Besides this, the well known macro problems persist and we see only one option to solve the European debt issue: common euro zone bonds under the principle of joint debt issuance or guarantees as a 1st step towards the federal states of Europe. Even if we recognize that a transfer union is an anathema in Germany right know we simply want to draw your attention on the past 15-18 months. There were so many things German politicians say they would never do and they did it as they realized they have no choice!
    Nevertheless it s still a long way to go and we don t even see that Politicians really turned into that direction. Therefore we stay bearish waiting for the 1st step into the F(ederal)S(taates) of E(urope) to turn our mind

    Aug 12 8:16 AM | Link | Comment!
  • A Spark of Insanity
    It becomes painfully true: The short dated optimism caused by the FED was even shorter lived then expected and the longer dated – still negative outlook – proved to be the dominant one. After a friendly opening in Europe taking Equities up roughly 10% rumors about at French downgrade fetched back investors into reality. What happened from then can only be described as the Storm of the Bastille as investors were selling everything looking like to be linked to financials and especially French financial stocks on the back of a bunch of strange rumors. Neither Rating Agencies confirming the French Rating nor the affected companies denying the rumors or politicians have been able to stop the bleeding. Consequently we observed the biggest widening in the benchmark index of European credit default swaps since the credit crunch in 2008 as we feel an increasing fear that the Sovereign Debt Crisis is spreading into the private sector.
    Gold printed new highs well above 1800 and Government CDS widened further while German Bunds rose strongly…. everything pointing towards a flight into safety.
    With Asia recovering from the lows and Vol & Skew being sold the whole day in Europe – pointing towards an already very defensive market positioning (?) – we hope that the Motto of the City of Paris is also true for its banks:
    Fluctuat nec mergitur  -  It is tossed by the waves, but does not sink
    Aug 11 2:48 AM | Link | Comment!
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