Via Christoph Gisiger of Finanz Und Wirtschaft,
Wall Street veteran Art Cashin warns that bankruptcies in the US oil industry could cause severe stress in the financial system. He believes the rate hike of the Federal Reserve was a mistake.
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.
Following an epic stock rout to start the year, one which has wiped out trillions in market capitalization, it has rapidly become a consensus view (even by staunch Fed supporters such as the Nikkei Times) that the Fed committed a gross policy mistake by hiking rates on December 16, so much so that this week none other than former Fed president Kocherlakota openly mocked the Fed's credibility when he pointed out the near record plunge in forward breakevens suggesting the market has called the Fed's bluff on rising inflation.