Monday, December 14, 2015


By this time things should be shutting down but in some ways, things are heating up.  I missed writing on Friday but what happened then and continued into today was heightened concern over the actions of Third Avenue although the week-end relieved tensions a bit.  Nevertheless, high yield instruments and funds got hammered again today and the concern out there regarding the liquidity in the marketplace remains at elevated levels.  There is also a lot of scrambling going on to find cover for various positions which one should expect except that that in itself is causing addition concern.

I am pretty much clueless as to the various methods, real and synthetic to obtain cover these days.  Some I am sure are perfectly fine; others I am afraid, just like in times past, are figments of intense self-delusion; others, and here is where it gets scary, may exacerbate the problem.  What has been seen is the purchase of puts on an ETF as a manner of obtaining short cover against widely held positions in individual securities similar in profile to those in the ETF.  This is way over my head but some folks in whom I have a good deal of confidence tell me that there ain't nobody out there who, because of the nature of the beast,  know how a grouping of ETFs much less a individual ETF is going to behave if things get dicey which means there is probably not going to be solid pricing for the position which means--well, it can mean a lot, some of it not very good.  Suffice to say that people are treading very carefully towards the close of business this year...and the closing of the books.

However, coupled with what is going on Over Here , we should not lose sight of the latest problems facing the emerging markets that are looking at a classic case of possible credit default brought on by currencies getting whacked by impending interest rate rise, and exposure in foreign currencies on the part of indigenous wit, Russia, where the Ruble took a huge hit last week as did everyone else in the neighborhood.  We have seen the result of currency risk before; it's not pretty and this time around the world situation is tenser than it has been in a decade.  This is a not your every-day year end.

Then, of course, Wednesday is Janet's day.  The Big Rate Rise.  There were actually some folks out loose today arguing that she simply can't raise rates with all that is going on.  Maybe, but despite my losing another $.25 it looks like it's a done deal.  But if she doesn't....oh boy, would I have things to write about.  One can dream, can't one?

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