Remember Napier from earlier this spring? Now when markets are closed, good recap time. We have another 1000 SPX points to the downside before Napier’s Long View is reached.
Many investors are “confused” with what is happening. We have Debt problems, countries about to default, equities markets supported by the central banks, HFT etc. But there is one biggest factor driving us lower, and eventually creating the big panic. The single most important driver of these abnormal moves, is Volatility having been mispriced for too many years. We have posted this year’s best vol report before, and now is time to reread it. In order to know the future, we must understand the past.
As we are approaching the Big Flash Crash, recall what it looked like last time. Action in GE during the 2010 Flash Crash.
Some renewed fear spreading in Europe after chatter of Greek Default this weekend. Stark is to resign due to “arguments” over bond buying. Also, Rehn sees “challenges” in Bank’s Funding. CDS blowing up, yields in Greece at ridiculous levels, Eur selling off and Equties digesting some of the news coming in, with the Banks falling hard.
Gold is trading at USD 1,836.60, EUR 1,330.90 , GBP 1,153.90, JPY 142,750 per ounce and reached a new record nominal high in Swiss francs at CHF 1,652.83. Gold was higher in all currencies prior to sharp selling was seen in the hour after the London AM fix.
Gold’s London AM fix this morning was USD 1,879.50, EUR 1,359.39, GBP 1,177.12 per ounce. Yesterday’s AM fix was USD 1,827.00, EUR 1,298.88, GBP 1,146.68 per ounce.
The speeches from Trichet, Bernanke and Obama were as expected and did not materially impact markets – but did belatedly confirm the extremely challenging macro environment.
Trichet’s angry outburst may lead to concerns about the long term health of euro. The outburst came after a question from a German reporter who asked what Trichet’s message was for German people who say their country should revert to the Deutsche mark.
Risk aversion has seen equity markets in the U.S., Asia and Europe fall again and peripheral European bond yields are edging up again, as are European CDS.