I don't any take credit for the drop that is continuing into the pre-market (was over -3% from yesterday's high's earlier). We were not as precise on the timing of the drop as we should have been. The models predicted it was coming, staying stubbornly short during the later days of the ramp. It is indeed hard to predict so many people's stupidity, even in the face of such bad economic numbers.
Actually short the Nikkei would have been better as that fell over -9% from it's day highs earlier, before it was halted and Closed down -7.32%. 10y JGB's are also going haywire with biggest intra-day range in 10-years. You may remember the IMF had a report out on Japan in 2012. Buried rather ominously (or maybe humorously?) on page 13 we find:
"4
According to BOJ estimates, a 100 basis point (parallel) rise in market yields would lead to mark-to-market
(MTM) losses of 20 percent of Tier-1 capital for regional banks (not taking into account net unrealized gains on
securities), against 10 percent for the major banks."
I have always maintained it's flow that counts (central banks always believed until recently, against all logic, that it was stock held) and when markets move to reality, central banks will not have enough to stem the tide. $85 billion a month is not enough. These are $trillion markets. Reminds me of a quote Soros once said back in 1992 on the eve of Black Wednesday. It was in reply to a reporter asking him about the Bank of England stating they had billions available to defend the pound by buying sterling, and did it worry him. As I remember Soro's response was "What are they going to do in the next minute?". He was just stating the obvious, that billions are only enough to defend for a short time if everyone else is selling. What has been keeping the markets up is everyone's belief in Central Banks, not the reality of what they can actually do.
Interesting post script on the volume point I mentioned yesterday, even though it was the highest in volume in S&P500 stocks in over a month and the highest in SPY since December 2012. It is still below average and more than -30% below the underlying S&P500 stock average volumes in 2008.
