Monday, October 3, 2011

Investment Bank Carnage and Crude Oil

Ugly. Bank of America down almost 10% at 5.53, Citi down  9. 78%, Morgan Stanley down nearly 8%, JPMorgan almost 5% !
GS was only down 4.5%.
Volume punched up as they closed on the lows.
Some of this was being anticipated in the CDS market last week, as noted in various places like Zero Hedge.
Speculation was that exposure to a China hard landing weighed heavily on MS , see Hang Seng and Shanghai overnight, or was it the exposure to French Banks? I'm losing track. You can't turn around without bumping into a fresh or recently revived threat to TBTF banks and their guarantors (us).
But the point of all this, aside from the imminent destruction of civilization as we know it (more on that later), is the huge % of Crude Oil and Products Open Interest carried by the Investment Banking sector.
The combined Nymex and OTC notional Open Interest (not net) in Crude and Products held by Investment Banks was 54% in July 2008, pls see Sept. 16 post,
In Case You Were Wondering .
Morgan Stanley was way out in front. Doubt that has changed much....so far.


Meanwhile WTI is heading for new lows overnight along with the Euro, and with so many looking for the 75ish area to provide support, it ought to prove a very interesting week.

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