Business

Credit markets have been warning of a looming crisis for months...

And as the cost of protecting against credit collapse has soared so the cost of protecting against equity downside (VIX) has started to awaken:

However, as we detailed previously, more than a few market participants have turned to deep out-of-the-money options to protect themselves against drastic downside (pushing the skew - the relative cost of crisis protection over 'normal' protection - to record highs).

Exceprted from Doug Noland's Credit Bubble Bulletin,

A few dots are starting to be connected now that we have exposed the debacle of The Fed's decision to allow banks to mark-to-unicorn their energy loans. "Something" was wrong in recent weeks as the TED-Spread surged (implying rising counterparty uncertainty among banks) and then the last week - since The Fed's alleged meeting with banks - has seen financial credit and stocks crash.

Back in August, we explained why the great petrodollar unwind could be $2.5 trillion larger than anyone thinks.

China’s effort to “control” the glidepath for the yuan devaluation led to a dramatic decline of Beijing’s FX reserves and pushed reserve liquidation to the front of the market’s collective consciousness.

Submitted by Pater Tenebrarum via Acting-Man.com,

Economic Conditions Continue to Worsen

It must be China. Or the weather, which is usually either too cold or to warm – somehow the weather is just never right for economic growth. Surely it cannot be another Fed policy-induced boom that is on the verge of going bust? Sorry, we completely forgot – the Fed is never at fault when the economy suffers a boom-bust cycle. That only happens because we have “too few regulations” (that’s what Mr. Bernanke said after the 2008 bust – no kidding).