Trying to pull things together down there

[solarbird]

Today was not good.

No-link reports: "Bloomberg radio is saying that 'many' P&G and Accenture trades will be busted, and expect many other names to have a re-painted tape. 3M was also mentioned, but the sentence was interrupted and there was a subject change."

Report: "Citi about to hold press conference and full-court press on news TV; Bloomberg is saying that Citi will say that their total futures dollar volume today was only $9 Billion, and will insist that the $16 Billion shove had to come from elsewhere. Citi is planning on a doing a flood of press tonight proclaiming their innocence, and have warned media to be careful about tying Citi with any improper act. Citi is swearing that they played no role -- Citi about to do a big round of press on news shows starting immediately."

Report: "Government regulators are now said to be digging deeply and are looking to suspend licenses." Whup, here's a link to a breaking story confirming that.

All this is because of the period of no bid. Accenture traded at 1¢. Exalon traded at 0.0001¢. Centerpoint traded at 0¢, yes, zero. Boston Beer Company (Sam Adams Beer) traded at 1¢. Rydex traded at 14¢. IBM reportedly traded at US$41 and that one might not get painted. (edit: ...and may've. The latest "daily low" for IBM is up over $112 again.)

A lot of people are trying to talk about this being triggered by a fatfinger trade on P&G triggering a spike down in the DJIA, which triggered a lot of programme trading - but that doesn't line up with the actual trades. The DJIA started cratering before P&G moved, if the ticks I'm seeing are correct. Karl Denninger is screaming for the high volume automated computer trades to be shut down immediately. So's Senator Ted Kaufman (D-DE).

This article includes a lot of comments from traders about the panic. And it was absolutely a panic. Key: "There is no real liquidity out there, it's all machine and phantom." Which is what a lot of people have been not quite willing to say for a long time, and a few people have been willing to say but are ignored. Most of this rally over the last few months has been on machines trading back and forth with each other.

The midday loss set a record in terms of absolute points lost on the DJIA, according to Marketwatch; the second biggest swing ever, which is different.

Rumours are flying about a "managed" open for the markets tomorrow. I don't have any good data on that but if they're going to be repainting a lot of tape, there'd almost have to be. Amusingly, the "Hindenberg signal," indicating that a crash is possible, is screaming red on, tho' it wasn't on when the bounce crash today actually happened. (The indicator is "75 new highs and 75 new lows on the same day" for individual stocks, and indicates extreme volatility. Today's new highs: 152. Yes, 152 record highs. Today's new lows: 442. I can't remember seeing this before.)

Here are some things I've been noting before today and saving in tabs for my next econ post:

Retail sales were not good in April - down from March. They're blaming the weather and Easter, which is amusing since they also blamed March's numbers not being as high as they could've been on... Easter. Yeah, whatever.

The three-month LIBOR rate is up a bit, and the TED spread is at the tip now over the top of the Federal Reserve range. Nothing to be alarmed about here yet, but the trends are in the wrong directions as measures of European bank risk spike to record highs and CDS rates on Euro debt skyrocket. Todd Harrison at Minyanville comments on the European Central Bank's desperate search for a way out of this mess. The Euro absolutely tanked today.

Freddie Mac lost several billion dollars in the first quarter of this year, and is looking for another US$10.6B from the Federal government. Meanwhile, the Federal Reserve is quietly lobbying against any reform effort, particularly an audit.

Greece's parliament has voted for the bailout package - which will suck - and the Greeks want no part of it. Neither do the official opposition New Democracy, which decided to vote against the bill - and which torpedos any hope for its long-term viability.

California's April tax receipts came in much lower than expected or usual.

The TSX, by the way, did pretty well, despite a big kick in the face midday; it closed down 0.28%, or 32.7 points. The Globe and Mail has this article on climbing Canadian debt. The Bank of Montreal is alleging "huge" mortgage fraud, suing hundreds of people in Alberta. Garth at GreaterFool.ca says this is the bubble blow-off, and this bubble is in the process of popping.

US home sales jumped a bit in March, hitting a five-month high as home purchase tax credits spur demand. And ADP job projections in April look kind of okay.

It's gotten much harder again to take capital out of the US, as it is now enforcing capital controls. You basically get a 30% tax on outflows now over $50,000.

...which brings us back to today.

Everything here says that the markets bounce tomorrow, maybe for a few days, but confidence is trashed. Charts are trashed. Anybody who tells you they really know where we are is full of it, including me. Everything large smashed through all their trendlines except oil (south, gave it a shot), and stayed out of range even after the bounce. I stress: the late recovery didn't fix these things. Gold shot north liek woah, breaking all its trendlines on the high side, which is, as they say, "indicative of sovereign risk."

Fundamentally, something today went very wrong. I don't know what. If I'm pushed against a wall, if it's not some sort of fantastically successful fraud and hack (which will destroy anything left of confidence in the trading systems), I'll guess that somebody very large needed a lot of money and needed it right now at any cost, and, well, they're probably in Europe. And that smashed through the paper-thin computer-driven rally of the last several months - and the accompanying complete lack of actual confidence - to create a true market panic. Sure, half of it was high-volume automated trading, but about half of it was organic, and the panic was absolutely real. There were multiple minutes of no bids on stocks. None. No. Bids. That's crazy talk but reality. How long this period lasted depends upon source, but the shortest no-bid freefall number I have from a good source is two minutes. That's eternity.

And then somebody even larger than the main sellers, with even more money, conveniently already in dollars, stepped in to pop the markets back from the brink. I don't know who, but my list of candidates is pretty damn short. I imagine yours is too. But even with this bounce, today's paper losses were around $500 billion. It'll take a lot of repainting to cover over that.

Comments

[(Anonymous)]

Long story short: we heard about market troubles during tea-gossip at work. Went to bank down the street with several other colleagues over lunch. Drew $3000 to $8000 apiece (everyone has their own needs in such matters) on the general principle that we could see a cash shortage in next week or so, and it would be handy to be able to settle immediate debts in cash, in event that retail systems seize up for a few days. Which my very smart economist friend thinks might happen.

Anonymous because a) I know what I'm doing and b) yet would hate to see a general unravelling, unprotected and c) I'd rather not have people know that I am walking across town with an extra five large in my purse this evening.

Good luck. We **all** need it. Okay to unscreen this if you wish. ^_^

[gwendally.livejournal.com]

Have you ever see the Chris Martenson "End of Money" series? It's a bit much to take in all at once. I recommend you have dark chocolate and whiskey on hand before trying. But I wouldn't be surprised if you already have seen it.

http://www.chrismartenson.com/crashcourse

[sunfell.livejournal.com]

I heard that the whole mess was caused by a typo.

Yeah, right.

"oops!"

[gwendally.livejournal.com]

That was the initial propaganda. Not panning out to be true, though.

[dogemperor.livejournal.com]

Yeah, they're pretty much now confirming it was not a glitch and have pretty much officially stated "We really have no idea WTF happened".

Which is not exactly reassuring. :P

[403.livejournal.com]

Meanwhile, the headline of my favorite right-wingnut columnist this afternoon is "I told you so". (He plays the K-wave game, and has been expecting a sizable drop for a while now. Sooner or later, negative predictions that aren't actually nuts tend to come true.)

[solarbird]

A lot of bears who have been saying "look, this is coming, I don't know when exactly" are doing the "I told you so" routine.

[mojave-wolf.livejournal.com]

When I first heard about this I assumed it was related to events in Greece, and possibly Portugal and Europe generally, as much as anything local. (not that there aren't reasons for people not to have faith in our current financial system being well grounded, but why suddenly a giant epiphany today?). I take it my assumptions are not generally shared and/or are clearly off?

[solarbird]

We're seeing a pretty strict inverse correlation with the US dollar index, which is, in turn, seeing a pretty strict inverse correlation with the Euro. So, yeah. It's related to the Euro, which is being shaken to core by the Greek crisis. So yeah, it's related.

[l33tminion]

Centerpoint traded at 0¢, yes, zero.

How does that even work? Does the exchange not prohibit shares being sold for nothing?

I'll admit I don't understand the basics of this. What does it mean to have a period of no bid? Will stocks get sold for whatever unreasonably low price a buyer offers at that point?