Rumors

by Larry Levin

Yesterday in Spiegel we read...

 
German Finance Minister Prepares for Possible Greek Bankruptcy
 
German Finance Minister Wolfgang Schäuble, who is reportedly doubtful that the country can be saved from bankruptcy, is preparing for the possibility of Greek insolvency. Officials in his ministry are currently reviewing scenarios for handling such a situation, exploring what it might mean for the rest of the euro zone. Under the first scenario for a Greek bankruptcy, the country would remain in the euro zone. Under the other, Athens would abandon the common currency and reintroduce the drachma.
 
The European bailout mechanism, the European Financial Stability Facility (EFSF), is playing a key role in those considerations. Soon the EFSF is expected to be given new powers agreed to by European leaders at a special euro crisis summit in late July. Two instruments at the EFSF's disposal are at the forefront of the Finance Ministry's scenarios.
 
Today's headline is "Rumors" but not for the Greek drama noted above; after all, Greece is well beyond broke.  It is undeniable.  The Greek 1-YR Note yield traded at an amazingly high 139% today.  If the market hasn’t declared Greece bankrupt, then what will?  Certainly not the brain-dead politicians.  The politicians have said today that Greece will indeed receive another EUR2 billion cash infusion, as they continue to throw good money after bad down the drain while simultaneously forcing the Greek populace to follow their demands.
 
The actual rumor came via "unidentified Italian officials" that purportedly said Italy would be selling large amounts of bonds to China.  Said another way, the fact that the Europeans WILL NOT buy the Italian junk bonds is not concerning, the Chinese are stepping in to buy up the boot.  
 
Is it true?  One wonders.  Shortly after the rumor was floated we read via Reuters "Italian Economy Minister Giulio Tremonti said on Thursday that Asian investors are reluctant to buy Italian bonds because it sees they are not being bought by the European Central Bank."
 
And despite the conflicting nonsense, the market rallied hard.  Why would Fraud Street allow a rumor (when bullish) to go to waste?  In very short order, the S&P exploded nearly 25-handles as the HFT robots took the market from a big loss to a nice gain.
 

 

Trade Date: 9/12/11

E-Mini S&P Trades*

(before fees and commissions):

1. VA sell @ 9:21am at 1145.00 = +1.00 & +3.00 (2 lots)

2. OTF sell @ 10:34am at 1142.25 = -0.75 (1 lot)

3. FT sell @ 12:51pm at 1134.00 = -0.50 & -1.50 (2 lots)

4. Algorithm positions (4)

5. "Reading the Tape" positions (2) ...combined Secret's, Algo, & "Reading the Tape" total...+6.00

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