One Chart To Sum It All Up

The thing to remember about today's trade is that A) the world is interconnected by the banks and derivatives and B) that many more institutions and individuals these days own multiple asset classes.  

Regarding point A, this means that the mortgage default in Florida affects a Swedish bank as much as it could affect any American bank…and we've already witnessed this.  Point B simply means that if an institution or individual got burned in today's commodity slaugther and is getting close to or already received a margin call, they might be inclined to sell some of their other asset classes to raise cash.  That could be stocks, bonds, or whatever else they might sit on.  

The point I'm trying to make is that as a byproduct of globalization risks in markets have become much less idiosyncratic by asset or asset class over time.  If a butterfly in Japan can cause a hurricane on another continent, what implications could today's huge commodity selloff have on other asset classes?

Today's gigantic selloff in oil pretty much sums it all up.

Have a great night, get some rest, and see you bright and early in the morning.



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