Financial institution instability

Despite a US Fed bail-out of AIG, investment banks such as Morgan Stanley and Goldman Sachs felt the pressure today selling off as much as 40%. Energy prices rebounded as inventory data showed draws in crude, with more expected for next weeks reports. Traders reacted slowly but finally pushed prices higher based on the ongoing Nigerian conflict and short covering from recent sell-offs. Gold rallied sharply also as markets sought quality assets. Volatility remains high as we face one of the most trying financial markets (including commodities) on record. We must stress here that the NYMEX and ICE clearing models used by HCEnergy remain the most sound platforms for credit. OTC/ISDA contracts with companies such as Morgan Stanley could be at risk. We expect more derivative contract flow to move to NYMEX/CME and other cleared exchanges.

During these times of volatility, owning options is the best strategy versus trading futures.