The investment world wakes on Monday morning with expectations of a complete bloodbath as the world markets resume trading after Friday's horrific sell off in the North American markets. Futures are down across the board between 8-10% in Hong Kong, Japan and Korean markets, with Australia the only sore thumb showing a flat open.
The catalyst was a leaked report on Friday mid morning on Bank of America's expected Q3 results due Monday morning US time. Rumors on trading desks were touting a reliable source leaking out information that Q3 EPS was going to be a loss of 1.45, versus an expected gain of $0.20 per share.
The massive loss, due to a combination of dodgy accounting, and mark to market on European assets which were not disclosed by the company makes it the worse quarter loss ever in Bank of America's proud history.
In the leaked memo, the European assets were held in a segregated subsidiary, with a swap agreement with the Treasury Desk of Bank of America, which was booked under OTC Forwards.
The memo cited a 285 billion dollar derivative exposure to European assets, with a further 157 billion counterparty exposure to Goldman Sachs, Morgan Stanley and Berkshire Hathaway.
This follows Fitch's decision to downgrade BoA, and the shares crumbled 47% percent, closing at $3.30, an all time low.
Goldman Sachs, Morgan Stanley, Berkshire Hathaway all followed suit, falling between 20-25% wiping of billions of dollars in market value.
The Dow crashed on the back of panic selling in financials, which spread to insurers, and ratings agencies, falling 1200 points to within a whisker of 10000, a psychologically important barrier.
The sell off began at 3pm in the afternoon, and sparked a massive panic, sending the DOW plunging from being up 140 points to falling over 1000 points in 20 minutes, as investors digested the news of the leaked memo, sending shares plunging.
The Dow fall 300 points in the last 10 minutes of trading, as investors sold out positions for fear of any of the financial institutions going into Chapter 11 over the weekend.
The Australian market is expected to open unchanged, due to a massive swarm of retail buying showing support to the local banking system. Traders are flabbergasted the futures remain unchanged, and seasoned investor, who only wanted to be known as "BigDaddy" said that "We have a massive retail investor base who are determined to disconnect our markets with what's happening in the US of A."
Another private trader only known simply as "sck", said poignantly, "There are no bear markets. Only minor bull reversals."
Sitting at Macdonalds on the corner of Hunter and George Street, trend analyst extraordinare only known as "Martis" was left confounded that the Australian market was poised to open unchanged, interfering with his "C-Wave" theory.
"The market looks more like a flat line rather than a wave," he remarked dryly, before he added a caveat that he was merely an observer and not a participant.
Elsewhere, traders were licking their lips in glee as institutional traders and banks who were short the futures were baffled at the strength of the market.
Top operator Donald "She's going to a dollar" Churchill remarked, "This is testament to the disconnect we've been talking about for years. The world has finally woken up that Australia is a seperate place, in a different dimension, surrounded by an alternate reality"
While renowned permabear Lionel "Why is it green" Smish remarked, "Idiots. But they're winning and I'm losing so who's the bigger one?"
In the first time in SFX (Sydney Futures Exchange) history, the opening snap consisted of more retail orders than institutional ones.
Seasoned private volume analyst, only known as "Dgoransson", remarked "What we're seeing here, is the retail buying overwhelming sell orders, forcing institutions already short to cover their positions."
Disclaimer: This post is purely tongue in cheek. No such memo exists anywhere in this world, and is a figment of my imagination (wishlist). I also disclose that I'm shorter than a Smurf and urge everyone to pay no heed to my hung over rants that are due to an overdose of Patron and a lack of sleep. Further, any insult to anyone on this esteemed forum is not intended, and I realise my storytelling may be less lucid and poetic as others, and humbly beg indulgence.
(20min delay)