Sell-Off

 

 

by Larry Levin

 

I was asked by several family members and friends this afternoon what had happened to the markets today; why did it sell-off so much? Much of the following is well known, but I have tried to add a few extra details that have recently developed.

What is scaring the market?

1. North Korea attacked South Korea today and South Korea responded with something like, “If this happens just one more time, we will respond with full force.” Clearly, another war in the world will not be good for the markets.
2. Ireland’s government is falling apart. Here’s the problem: citizens losing complete faith in government leads to hell in the streets…and this feeling is spreading in Europe.
3. Portugal’s CDS spreads widened to its highest levels ever. This leads to much higher borrowing costs for Portugal, which it cannot do since it is broke, thus pushing it closer to bankruptcy.
4. Spain’s CDS spreads widened to its highest levels ever. This leads to much higher borrowing costs for Spain, which it cannot do since it is also broke, thus pushing it closer to bankruptcy.
5. A bankrupt Spain could bankrupt Italy, which will bankrupt the entire European Union (EU). The Euro currency could fail to survive.
6. The insider selling case is even bigger than we originally thought. New mega-companies on Fraud Street are receiving subpoenas like; SAC Capital, Citadel, Wellington Management, and Goldman Sachs all named today.
7. Next to be investigated may be the HFT firms.
8. Bank runs have been reported in Europe.

Trade Date: 11/23/10
E-Mini S&P Trades*
(before fees and commissions):

1. No “Secret” trades were filled today.
2. Algorithm positions (8)
3. “Reading the Tape” positions (5) …combined Secret’s, Algo, & “Reading the Tape” total… +6.00

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