The $1 Billion Armageddon Trade Placed Against the United St [General]

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User Info	The $1 Billion Armageddon Trade Placed Against the United St in forum [General]
Thomasaquinas Posts: 310 Incept: 2007-11-29	Any guesses? http://www.marketoracle.co.uk/Article294.... Quote: Jack Barnes writes : Someone dropped a bomb on the bond market Thursday - a $1 billion Armageddon trade betting the United States will lose its AAA credit rating. In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world. The massive trade wasn't placed in bonds themselves; it was placed in the futures market. The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01. The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it. However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio. You only do this if you see an edge. This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up. I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out. This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn't. The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross's PIMCO, and the U.S. and Chinese central banks. Paulson already scored big - about $6 billion big - on a similar trade years ago when he bet against subprime mortgages, the investments that helped bring down Lehman Bros. and many other investors. Whoever was behind it wanted a trade on ASAP, and didn't care about the ripples they would cause. 2011-07-25 23:12:22 Permalink
Txin1880 Posts: 4735 Incept: 2009-02-25 Texas	Soros ---------- Realization - Rage - Resolve - Rifles - Rope - Recovery - Rinse - Repeat 2011-07-25 23:14:09 Permalink
Arpwatch Posts: 3051 Incept: 2009-11-06	Damn that was my guess too. Well...maybe Bill Gross? Last modified: 2011-07-25 23:17:27 by arpwatch 2011-07-25 23:16:33 Permalink
Fraudster Posts: 4170 Incept: 2011-05-10	HOW could we (the people) allow it to ever get to this? ---------- *"Let China sleep, for when she wakes, she will shake the world."* - Napoleon Bonaparte *"Circulation ceases first at the outer edges [Europe and Japan]. It will take a while yet for the decay to reach the heart [America]."* - Foundation & Empire by Isaac Asimov 2011-07-25 23:20:17 Permalink
Mo Posts: 12158 Incept: 2007-06-26 Pa.	Goldman. ---------- Welcome to Pottersville 2011-07-25 23:22:49 Permalink
Mayorquimby Posts: 13907 Incept: 2008-09-18 The Archaic Past	Fraud- ---------- They who wish to hurt you, work within the law. - Morrissey Gold is theft. 2011-07-25 23:24:05 Permalink
Fraudster Posts: 4170 Incept: 2011-05-10	Mayor - what is this a chart of? ---------- *"Let China sleep, for when she wakes, she will shake the world."* - Napoleon Bonaparte *"Circulation ceases first at the outer edges [Europe and Japan]. It will take a while yet for the decay to reach the heart [America]."* - Foundation & Empire by Isaac Asimov 2011-07-25 23:35:35 Permalink
Scrood Posts: 4097 Incept: 2008-05-17 There's Gold in Them Thar Hills!	Anyone thinking of copying this "bet"? ---------- CTRL-GALT-DELETE 2011-07-25 23:36:46 Permalink
Fraudster Posts: 4170 Incept: 2011-05-10	TBT? ---------- *"Let China sleep, for when she wakes, she will shake the world."* - Napoleon Bonaparte *"Circulation ceases first at the outer edges [Europe and Japan]. It will take a while yet for the decay to reach the heart [America]."* - Foundation & Empire by Isaac Asimov 2011-07-25 23:38:49 Permalink
Arpwatch Posts: 3051 Incept: 2009-11-06	Scrood, if I knew how and had the resources I would give it a go. 2011-07-25 23:39:09 Permalink
Shado Posts: 414 Incept: 2007-07-08 Idaho	Quote: Anyone thinking of copying this "bet"? I was until I took it up the ass @ 10:46 (ET) this morning. That move out of nowhere was really frustrating. Not sure I want to get back in the water until this resolves and it starts trending one direction or the other. 2011-07-25 23:42:48 Permalink
Kylafoon Posts: 2455 Incept: 2009-02-05 Zombie Portal Lookout	Futes just popped a boner... ---------- "...But whenever we see things done wildly, but taken tamely, then the State is growing insane..." - Gilbert Keith Chesterton 1910 "I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works." - Alan Greenspan, October 2008 2011-07-25 23:43:36 Permalink
Hotdrop Posts: 522 Incept: 2007-09-14	Its a pretty good bet especially if you can undwind your position into the panic you just stirred up. 2011-07-25 23:48:27 Permalink
Curbyourrisk Posts: 3587 Incept: 2008-08-19 Farmingdale, NY	Jim Rogers... and he has more to bet too!!! ---------- Time is up. I hate to burst your bubble, but there is no Santa Claus, the tooth fairy does not exist and American justice does not involve the courts. 2011-07-26 00:03:07 Permalink
127001 Posts: 3516 Incept: 2008-05-21	well, those kinda of dollars certainly provide an explanation for why the ratings agencies suddenly care. Perhaps the USA has alot of meat on her bones and has attracted unwanted attention? As for speculating on Soros, Paulsen, Gross, etc. Why not look bigger? What does Italy, Ireland, and Spain have to gain? What about the ECB in general? 2011-07-26 00:24:50 Permalink
Bozonian Posts: 19871 Incept: 2007-09-01 Saratoga Springs, New York	The Federal Reserve, to sucker in shorts (How dare you bet against the United States of America!) ---------- Forget about blaming, fighting with, or crediting other people. The only real challenge in life, is with yourself. -- Me Everything I write is my opinion and not to be considered proven fact. Nothing I write should be considered financial advice. 2011-07-26 00:49:41 Permalink
Eaglewwit Posts: 6054 Incept: 2007-11-30 SoCal Banned	Boz +1 2011-07-26 00:57:55 Permalink
Patmcgroin Posts: 8215 Incept: 2007-09-12 Chicago	5000? Who cares. 100K was bought in 10 minutes yesterday. Now THAT is what they should be talking about, not a couple of blocks that are approximately rounding errors in size. ---------- "I know a few arcane, obscure financial acronyms that the general public doesn't know and that's about it." 2011-07-26 14:37:31 Permalink
Pika-steph Posts: 54689 Incept: 2007-09-11 Live Free Or Die; US Army Est. 1775	100K?! I'm assuming that was not all from the same buyer. Still, I'm guessing these somebody(s) are part of the TBTF gang. Seems to me one would be a whole lot more confidence in taking this risk if for some reason they thought they'd be sheltered from failure. ---------- Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org/ "The only regulation that really works is failure."--Rick Santelli 2011-07-26 14:44:07 Permalink
Patmcgroin Posts: 8215 Incept: 2007-09-12 Chicago	Why not? Any larger (large!) fixed income should could mobilize the $180MM of margin necessary for a new position. Or, using SPAN, much less... I'm not saying it WAS, but I bet a sizeable chunk of it was a single buyer. For comparison purposes: http://www.cmegroup.com/clearing/trading.... Note similar size blocks today... Now look at that FAR more interesting straddle blocked 20K. Oh - AND, for every buyer there's a seller so for somebody this a the "The [not] $1 Billion Armageddon Trade." Even though it's not $1BB. ---------- "I know a few arcane, obscure financial acronyms that the general public doesn't know and that's about it." Last modified: 2011-07-26 15:08:30 by patmcgroin 2011-07-26 15:04:06 Permalink
Jeffrey_thomason Posts: 7079 Incept: 2009-03-11	Is it really a "bet" at this point though? A downgrade is practically a sure thing at this point. ---------- When they turn the pages of history, when these days have passed long ago. Will they read of us with sadness for the seeds that we let grow? 2011-07-26 15:11:17 Permalink
Patmcgroin Posts: 8215 Incept: 2007-09-12 Chicago	Look what happened to Japan... ---------- "I know a few arcane, obscure financial acronyms that the general public doesn't know and that's about it." 2011-07-26 15:12:07 Permalink
Corn1945 Posts: 4167 Incept: 2009-04-30	Don't wait for the bond market to tell you anything. 2011-07-26 15:13:39 Permalink
Level9 Posts: 2796 Incept: 2007-10-28 Circling the Drain	Anyone relying on ratings agencies to determine national solvency at this point deserves to lose all of their money. The real question is one I have not seen asked or answered among all of the fear mongering: is there any material impact due to a ratings downgrade? ie. forced selling, etc? 2011-07-26 15:20:51 Permalink
Patmcgroin Posts: 8215 Incept: 2007-09-12 Chicago	The real risk implicit to Sov. Debt is currency risk not credit risk. ---------- "I know a few arcane, obscure financial acronyms that the general public doesn't know and that's about it." 2011-07-26 15:27:12 Permalink

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