Freaky Friday Potpourri: Martial Law For the Markets
The SEC takes hold of the financial fabric.
“Last Dance with Mary Jane, one more time to kill the pain.” Tom Petty
On the heels of one of the most strenuous stretches in the history of financial markets, we power up for the final fifth of our freaky week.
We offered on Wednesday that if Hank & Co. had any bunnies left in their magic hat, they would be pulled into expiration. On cue, global central banks injected billions of dollars of liquidity during the overnight session.
The rabbits ran rampant on Thursday’s opening bell but he was running scared.
Into that initial push higher, we mused that a messy press was not only likely, but necessary.
And boy, did we get a full court press.
State Street Bank (STT) was down 50%.
Mother Morgan (MS) hit a hat size.
Goldman Sachs (GS) dipped into double digits for the first time in years.
Panic—while not yet at levels seen during previous pain fulcrums—was palpable for the first time this cycle.
As we approached session lows near 1:00 PM, I penned two scenarios on the Buzz & Banter.
The first was that we were approaching a near-term trading low as expiration loomed and government bullets would be fired into the close.
The second was that we were in for a scary few sessions as price discovery permeated and natural levels were found.
Just as that post hit, we ticked at the nadir of the session.
The catalyst arrived from across the pond when Britain’s Financial Services Authority announced they were banning short-selling on all financial stocks.
We’re not talking upticks here.
We’re talking about short selling.
We wrote in real-time that “the mere specter of stateside adoption will be enough to jack ‘em, if only for a trade.”
And jack ‘em they did, igniting a furious flurry that took the tape all the way back to…Wednesday’s close.
Hank seized the moment to throw some fat on the fire, announcing that he was considering a “Resolution Trust Corporation style” vehicle to absorb the toxic debt on bank balance sheets.
It’s an option we discussed Friday in the ‘Ville and it was out there for the world to see.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at email@example.com.
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