|
As the END GAME approaches, rumors,
speculation, and plain old misinformation will rule the day. With
global economies plunging, and financial markets schizophrenic due to
unrelenting bad news and government interventions, investors are on edge
regarding the next “shoe to drop.” It’s gotten to the
point that I have a hard time finishing a thought, much less a paragraph,
before the next jarring headline emerges.
Last night, the internet was abuzz with
chatter of the CME’s announcement that maintenance margins would match
initial margins as of Monday afternoon. Per the ZeroHedge article
below, this was universally interpreted to mean maintenance margins were
being raised to the level of initial margins, and thus
margin calls would be issued to any underwater account as of the close of
trading Monday.
http://www.zerohedge.com/news/cme-goes-margin-defcon-1-makes-maintenance-margin-equal-initial-everything
Fortunately, the CME issued a
clarification this afternoon, stating that instead of raising the maintenance
margin, they will be lowering the initial margin. This
change will also make initial and maintenance margins equal, but with the
OPPOSITE EFFECT of loosening credit, and thus increasing the
allowable risk-taking of frenetic hedge funds and black box algorithms.
Moreover, they specifically cited the MF Global bankruptcy as the reason
behind the change.
“The intent and effect of
these changes is to decrease the size of any margin calls resulting from the
bulk transfer of MF Global customers to new clearing members, not to increase
them.“
Yes readers, covering another paper
failure over with yet more paper. It’s quite amazing the CME
could have put out such an ambiguous press release in the first place, as the
current market environment is hair-trigger, to say the least.
http://www.zerohedge.com/news/cme-issues-clarification-margins-usher-more-risk-less-liquidity-mf-aftermath
While on the topic of misinformation,
there is plenty to go around this weekend, very little of it positive.
Coincident with hearing of the CME press release misunderstanding, I learned
that MF Global’s missing $658 million, which apparently emerged from the
ether Friday afternoon into a JP Morgan account, may not be there after
all.
The MF saga will likely continue for
some time (in the worst case, triggering a major market disruption), so I
think I’ll just wait and see on this one. Clearly, there is a whole
lot of FUBAR going on in Europe and the States, and consequently,
“official” communications are becoming less and less reliable.
http://freerepublic.com/focus/f-news/2802690/posts
To wit, last night the big
“Breaking News” was the Greek government achieved a political
“victory” when it survived a no-confidence vote by the scant
margin of 153-145. While in the gym yesterday evening, CNBC was touting
this as a major positive catalyst, a breakthrough of sorts sure to usher
Greece through its woes.
http://www.zerohedge.com/news/g-pap-wins-vote-confidence
Of course, nothing about Greek politics
these days is remotely positive, and today’s news is far less sanguine,
suggesting escalated infighting within the Greek government.
Irrespective, it’s the MATH that matters most, and the MATH states
Greece WILL default, likely sooner rather than later.
http://www.zerohedge.com/news/meanwhile-greek-coalition-government-news-or-goodbye-g-pap-hello-l-pap
While frustrated at being whipsawed this
weekend, the new era of confusion is upon us, and it is my job, and duty, to
WARN you to the best of my ability. The CME press release was
fortunately misinterpreted, but draconian actions such as what was initially
intimated can emerge at any time, and WILL do so as economic, political, and
social conditions worsen.
Consider today’s drama to be a
test of the “financial emergency broadcast system.” Think
long and hard of the damage such actions would have caused to your financial
well-being, and take action to reduce your exposure to such risks.
I hope I didn’t scare you, but
believe me no one was more worried than myself!
P.S. Like I said, I can’t
finish a paragraph before the next “horrible headline.” Per
below, if the ECB stops buying Italian bonds, who will? More about that
on Monday…
http://www.zerohedge.com/news/ecb-issues-ultimatum-italy-threatens-halt-bond-purchases
|
