Hasn’t anyone heard of “silence is golden”?
Since I was somewhat long going into the afternoon session last Wednesday, a week ago, this might sound like sour grapes.
However, I can’t help but be a bit annoyed and frustrated, as is anyone with any longs in the market, with the seemingly constant blindsiding of the equity markets by regulatory bodies, politicians, governments, the FED, and especially the ratings agencies.
Let’s review the bidding a little.
A week ago Wednesday, 11/16, the S&P futures were trading around 1250-1255 and looking ready for a nice year-end push into the traditionally bullish Holiday season and perhaps a recapture of the 1300 level by Thanksgiving.
We then had, in the middle of the trading day, Fitch Ratings deciding it was an appropriate time to remind the markets that “Eurozone contagion might have a detrimental effect on global banks.” This was fairly coincident with a Moody’s downgrade of German banks. The S&P futures promptly dropped almost 20 points and the DOW about 150.
Now we all know that ratings agencies have the right, and indeed the responsibility, to issue ratings changes, positive or negative, as they see fit. But we also know that ever since the ratings agencies were roundly criticized for “missing” the mortgage crisis, they have been on the defensive and ready to downgrade just about anything with a pulse. (Last I heard they were going to downgrade Princess Kate for wearing jeans to an elementary school visit this week.)
We will not go through this chapter and verse and point by point market drop over the ensuing six trading days, but suffice to say that the verbiage and actions coming out of the guilty parties listed above have destroyed market confidence and shown a remarkable lack of timing or sensitivity to the global market fragility.
Since the Fitch “bombshell” we heard:
- numerous ill-timed remarks by Angela Merkel
- Fitch weighing in again on Eurozone risks and warnings on France and Portugal
- Moody’s chiming in on French debt
- U.S. politicians finger-pointing on the failed debt deal
- Germany’s Meister helpfully pointing out that “no new relief bazooka” is to be forthcoming (that would actually be ‘die Panzerbuche’)
- the ECB’s Draghi throwing a public hissy fit and trying to deflect criticism of the ECB lack of action
- the FED’s announcement of Draconian new bank stress test requirements
- and an assortment of inflammatory comments from numerous Eurozone politicians at any time of day and for any random reason they see fit….
…just today, Thanksgiving Day in the U.S., the German DAX was sporting a very nice rebound rally until Ms. Merkel decided she just had to slam the idea of joint “Eurobonds” once again, dropping the DAX about 150 points in less than an hour and helping the S&P futures fall from over 1170 to 1156. Nice.
OK, mission accomplished. U.S. and European markets have been virtually straight down since the Fitch “no news is bad news” report and we have given back roughly 100 S&P points. Our Holiday wish, aside from world peace, is for everyone to please think before you speak and perhaps have some recognition that the markets do indeed hang on your every word, as silly as that seems.
Good Trading!
David W. (aka The Underground Trader)
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