naked capitalism

maniam says:

i think the plunge protection team/working group is working overtime.

maff says:

It seems like a good end-game quant strategy to me. Kick off algo selling, take out all the snoozing investors stops on the down side then buy back up to where you started. Hey presto, profit! Moral of this story? If your clock speed is less than 1THz don’t be looking to make productive investments in the western world right now.

jm says:

We know that several hedge fund operators (e.g., Paulson) figured out ways to make money by getting other market participants to hang themselves.

We also know that there are a lot of computerized trading operations out there executing trend-following algorithms and/or front-running others’ trades. And, of course, stop-loss orders are always there. This creates potential for a downward positive (i.e., regenerative) feedback loop.

Did someone perhaps figure out a way to dupe the trend-following and front-running algorithms into thinking that the market was headed down rapidly, so that they would join in the party and push it down even more rapidly, generating huge profits for someone short the market?

purple says:

Like previously written, models were based upon similar trigger points and all sold at once. Has to do with exchange rate volatility, and this is the reason for G7 – lords of finance – meeting (i.e. China not necessary).

charles says:

Your reader Hubert has a curious view, though widely circulating in the anglo-saxon press, of the possibility
of the ECB using the nuclear option. First of all,it already
broke its book last monday with the acceptance of ‘junk’or
‘near junk’rated Greek bonds, second the direct purchase
of sovereign bonds is explicitly forbidden by its statutes.
Thus, unless today’s Eurogroup decides otherwise ( see
the letter sent ‘jointly’ by the German Chancellor and the
French president ahead of the summit to Mr Barroso and Mr
Van Rompuy: http://www.bundesregierung.de/nn_1272/Content/DE/Pressemitteilungen/BPA/2010/05/2010-05-06-brief-englisch.html ), they seem to have other priorities in mind
when it comes to the ‘urgent structural reforms’ they are urging for.

Imho, if they intend to break the rules of the ECB, I trust
the Germans will stongly oppose, time will tell

sg hammer says:

My ‘Delineator’ showed an end to the up cycle on March 19th and that any subsequent move in price above that day was unsustainable and an opportunity to lock in profits. Markets give you several chances to sell at higher prices, and few opportunities to buy at lower prices. The warning signs are there if you know what to look for.

chad says:

This is exactly why I’ve been completely out of the market for the past year or so. I don’t trust it at all.

I can make a more consistent return doing odd programming jobs on the weekend then I can in the markets.

lambert strether says:

“It’s a good life.” Here in Peaksville.

Doc Holiday says:

More Fat Finger Snaxs

Featuring Richard Olsen of Oanda Corporation
“We want to create tools of finance that are as slick and elegant as the most sophisticated tools of technology,” he says. Toward that end, Olsen Ltd. operates a feature called a BoxOption, which allows traders to define a specific strike range in time and price with a mouse click

Olsen responds that exposures at
most banks are dominated by just a few
risk factors. “Limit it to instruments
where you have big exposures – you
don’t have to run it across your whole
book,” he says.
http://www.algorithmics.com/EN/media/pdfs/risk_highfrequency.pdf

JSTOR: The Annals of Statistics, Vol. 34, No. 1 (Feb., 2006), pp. 493-522
In the light-tailed case, the limit theory is based on the CLT for stationary ergodic finite variance martingale difference sequences. In the heavy-tailed case such a general result does not exist, but an analogous result with infinite variance stable limits can be shown to hold under certain mixing conditions which are satisfied for GARCH processes. It is the aim of the paper to give a general structural result for infinite variance limits which can also be applied in situations more general than GARCH.

Richard Kline says:

*Sigh* The problem with The Sick Man of Euro (Greece) is a political problem masquerading as a financial problem. The financial modalities to intervene in the short run, and to appropriately constrain domestic fiscal policies in the long run have been jealously guarded by the former sovereignties of the one-time nations of Europe, specifically being held out from the centralizing institutions and their treaty bases of the Eurozone so that formerly national authorities could continue to use them for their own, local political ends. That is the European way, but it doesn’t make for rapid decision making or clean and focused policy actions. More integration is the obvious solution, but to that the former nations of Europe are generally dragged kicking and screaming, and in any event dragged slowly at a pace that won’t produce new mechanisms in real time. And the present financial problems are real time problems.

ECB intervention was the first best option for containing a speculative run against the euro using CDS as the modality and the periperhal cripples to start the process. But the ECB was specifically designed so as _not_ to be able or minded to interven early and often. But we are well past that due to the lack of common mechanisms, so losses are of course going to be far greater than they had to be. And no, the Germans don’t get any of this. What we are really seeing is still individual leaderships of the former nations of Europe maneuvering for their individual advantages without seeing that this is a self-defeating exercise. Myself, I don’t see this as a cause for despair: this is a learning experience for Europe as a whole: they are a whole, and cutting off the blood supply to their nose to spite their face just means shared pain and risk of gangrenous contagion. Europe learned that ‘national’ airspace management is a flop in an integrated transport regime. They are now learning the same in an integrated financial regime. And all of this talk about ‘the plunging euro’—to levels that were ‘normal’ not at all long ago, and which are very advantageous for the exporters amongst the zone members. The process looks ugly as hell, no question. I’d bet on the pound blowing up before the euro, though.

Leave and go where, pray tell? Or better prey tell? If the spreads on Greece’s Euro debt are bad, what do you think they’ll be on drachma debt? No one is going anywhere via ‘the suicide option.’ Ultimate haircuts on existing Greek debt seem pretty likely, though.