4th Aug LATE - stocks crash

Summary: Everything worse again. ECB panic-buys bonds, then Bundesbank tells it’s a bad idea. Very good time for the eurocrats to take their holidays and complete lack of policy coordination. CDS prices up heavily across the board, while yields were relatively calm (=did not surge), thanks to ECB. Surprisingly price of gold was down.

Views: QE3-talk getting stronger, but Europe is not going to get its act together.  The drop in gold price is somewhat surprising, given the trouble everywhere. This suggests to me that a large part of the longs are highly leveraged. Partly people are taking profits to meet margin calls everywhere, and partly because they cannot afford any drop in gold prices. I believe from this point on, gold is going to be a lousy safe haven.

Trades: Hope you covered any S&P 500 shorts, as advised. Keep Brazil short. Prepare to cover HALF of any EURUSD shorts around 1.4050-1.4100. Did you sell USDJPY @ 79.80? Take profit with a limit order @ 78.20 and lower the stop-loss from 81 to 79.30.

EURO CRISIS

(PDF) A European Transfer Union: How large, how powerful, how expensive? – DB Research

Euro Problems Need Fixing Before Financial Markets Lose Their Faith: View – BB

ECB to halt rate hike cycle, faces pressure on bond-buying – BB

CEBR’s latest analysis

Italy 'to default' but Spain may 'just' escape – BBC

FT: ECB must become the lender of last resort and all EU institutions must be completely overhauled.

Europe needs a bazooka – Pragmatic Capitalism

The War Against The Rating Agencies Begins: Italy Prosecutor Seizes Moody's, S&P Documents – Zero Hedge

News Just Keeps Getting Worse: Spain To Cancel August 18 Auction As Bundesbank President Says Opposes ECB Bond Buying – Zero Hedge

ECB Buys Italian Bonds, Third Major Central Bank Intervention In Past 24 Hours As Status Quo Panic Explodes – Zero Hedge

The War Against The Rating Agencies Begins: Italy Prosecutor Seizes Moody's, S&P Documents – Zero Hedge

The ECB realises inflation may not be Europe's biggest worry just now – Free exchange / The Economist

Large Banks in Europe Struggle With Weak Bonds - NYT

“Prime Minister Resists Calls for New Measures, Anxiety Spreads Across Continent”

Italy's Woes Weigh on Europe - WSJ

FINANCIAL CRISIS

Bernanke to the rescue? – Free exchange / The Economist

TED & OIS vs. LIBOR are jumping, interbank markets stressed

The name’s TED, remember me? – Pragmatic Capitalism

Macro Commentary: The Damned If We Do, Damned If We Don’t Global Economy – Zero Hedge

The reason the markets are diving – Ezra Klein / WP

OPERATORS

July Gains See Ken Griffin's Citadel Up 14 Percent This Year – Institutional Investor

OTHER

Do Realized Skewness and Kurtosis Predict the Cross-Section of Equity Returns? - SSRN

DIVERSION

An ETF For Our Troubled Age: Double-Long Gold, Double-Short Stocks - WSJ