Found this story very interesting in light of our research….It is a prime example of how panic could be created with a relatively small amount of money under the right circumstances. Many have argued that our markets are much too large for any one player to have an influence. Keep in mind that George Soros is credited for "breaking the Bank of England." His fund is just one of many with the financial capabilities to have placed this trade. We have already demonstrated that Gaddafi had more than $50 billion in Western markets. Sovereign Wealth Funds in the Middle East and China have trillions of dollars. Of course, this simply could have been a hedge fund worried about the status of the dollar and Treasury. Even then, it makes our point because not so long ago, we were told that this would never be an issue.
It will be interesting to see if this ever is widely reported. We are attempting to verify the story now. We are concerned that, if true, this could be perhaps the first of many trades like it. In that case, pundits will likely tell us that it was inevitable, purely economic with no sign of terrorism involved. We will know better.
The $1 Billion Armageddon Trade Placed Against the United States
JULY 28, 2011
BY JACK BARNES, Contributing Writer, Money Morning
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.
FROM THE ARTICLE: "You can see how this trade caused fear to be unleashed in the market once it got out and the implications hit by looking at U.S. Treasuries. People who were long 30-year Treasuries panicked as they saw the huge short put on the futures market, and started to unwind their long exposure.
What you, as investors, should do now is look at the bond exchange-traded funds (ETFs) that provide a positive rate of return when U.S. Treasuries drop in value. Yields are going up sooner rather than later, if the person behind this Armageddon trade is correct."
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