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Another Historic Milestone Passed As Implied Correlation Hits New Record

Tyler Durden's picture




 

The 10 Year under 2.5%, Bunds, Gilts, JGBs all following suit to record risk-aversion levels, the EURCHF at record lows, the USDJPY at 15 year lows, and now this: the CBOE Implied Correlation index has just hit another historic plateau, touching on 85 earlier in the day, which means that all those who believe relative value can still be found are about to be carted off. Aside from the fact that the current level of JCJ would be the highest closing level in history, the intraday high of 84.50 is a very troubling indicator, which once again confirms that stocks continue to trade not on fundamentals, and probably not on technicals, but on ever increasing amount of leverage applied to some indication of beta. Essentially, market participants are likely levered to the gills like never before and betting it all on another daily Hail Mary. Another way of looking at the reading, as we have pointed out previously, is that stock dispersion: the most critical indicator of a healthy market, is at 15%! And let's not forget we are currently still in the H.O. regime (and to all naywsayers we remind that the market has dropped almost 4% since the first Hindenburg Omen appeared). So many coincident records, can hardly be a coincidence... We look forward to getting Matt Rothman's thoughts on this increasingly disturbing trend, and for the NYT to pick up on this theme within 4-6 weeks.

 

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Tue, 08/24/2010 - 14:45 | 540965 trav7777
trav7777's picture

correlation, bitchez

Tue, 08/24/2010 - 14:49 | 540976 hedgeless_horseman
hedgeless_horseman's picture

...and for the NYT to pick up on this theme within 4-6 weeks.

Latency, bitches!!!!!!

Tue, 08/24/2010 - 14:50 | 540979 bull-market_3.0
bull-market_3.0's picture

You also spawn annoying imitators. 

Tue, 08/24/2010 - 14:49 | 540977 bull-market_3.0
bull-market_3.0's picture

You are the most annoying commentator in the world.

 

Tue, 08/24/2010 - 15:13 | 541019 UGrev
UGrev's picture

lack of a sense of humor.. 

 

 

 

...bitchez :)

Tue, 08/24/2010 - 15:59 | 541137 bull-market_3.0
bull-market_3.0's picture

Lack of creativity to think of something witty...

He's been doing this for well over a year and a half. What sense of humour makes this funny after a year and a half? On every article?

And humour is not what people come to ZH for. I'm pretty sure it's analysis from a different perspective...but certainly not to hear some guy say bitchez all the time...

Tue, 08/24/2010 - 15:55 | 541129 trav7777
trav7777's picture

jealous?

Tue, 08/24/2010 - 16:01 | 541141 bull-market_3.0
bull-market_3.0's picture

What could I possibly be jealous of? 

 

I'm done with this conversation I'm not wasting more energy so don't bother replying. If you do reply you win I don't care.

 

 

Tue, 08/24/2010 - 16:39 | 541273 MichaelG
MichaelG's picture

trav7777 was one of the few commenters making any sense on the hyperinflation pseudo-semi-intellectual-bukkake thread the other day. I'd rather read 600 'bitchez' comments than 600 'my econ. dictionary differs from yours' ones. (Not saying you were guilty of that, bull, just suggesting patience is a virtue. How difficult is it to scroll past a one-liner?)

Tue, 08/24/2010 - 14:48 | 540974 redpill
redpill's picture

148 new lows: http://www.cnbc.com/id/38832517

Rosenburg declares Depression: http://www.cnbc.com/id/38831550

Lowest Yields ever: http://www.cnbc.com/id/38828882

Faber says get out of Treasuries: http://www.cnbc.com/id/38826085

When all that hits CNBC, you know the ship is going down.

Tue, 08/24/2010 - 15:02 | 540998 johngaltfla
johngaltfla's picture

It's not official until the Kudlow "we're not in a recession nor will there be a double dip" economists come on television and say to calm down, all is well.

Tue, 08/24/2010 - 14:49 | 540975 SheepDog-One
SheepDog-One's picture

'Naywayers', suck it, bitchez

Tue, 08/24/2010 - 14:50 | 540978 HEHEHE
HEHEHE's picture

You have to ask yourself at this point what is holding the stock market up.

Tue, 08/24/2010 - 14:53 | 540983 SheepDog-One
SheepDog-One's picture

Its obvious whats 'holding it up', FED armed hold-up men using grannies 401k pension money! Reality bites.

Tue, 08/24/2010 - 15:14 | 540987 Nihilarian
Nihilarian's picture

I hear a another flash crash a comin'

Tue, 08/24/2010 - 14:55 | 540988 newstreet
newstreet's picture

Does this mean I should buy more Euros?

Tue, 08/24/2010 - 15:03 | 540999 AccreditedEYE
AccreditedEYE's picture

It's magic hour boys and girls!! Let's see what the other team pulls out of their hat this time...

Tue, 08/24/2010 - 15:04 | 541001 cocoablini
cocoablini's picture

Faber is always talking crap about treasuries, and in reality sure they are trash. But, for now, they look better than equities. Saving your money from the stock market and moving it into an asset that people can easily get is the prime directive right now.
Gold and silver may be the best long term bet, but very hard to get into physical and then again, the laws force us to declare gold purchases.
So, if Faber's vision comes true, the US government is going to TAKE it anyway and give you treasuries as compensation. So let's just skip the gold confiscation part and get into Japanese debt ownership right away

Tue, 08/24/2010 - 15:59 | 541135 NotApplicable
NotApplicable's picture

I don't know where you live, but there are no laws I'm aware of that force anyone to declare gold purchases.

Also, how hard is it to go to the local gold store and purchase silver and gold eagles? I hand Mr. Shopkeeper a handful of fed notes, he hands me some coin, and I'm out the door. Takes all of 15 min. out of my lunch hour.

As for your "take it anyway" assertion, well that is mere speculation, that if thought through, isn't all that convincing given that "they" (TPTB) already hold the vast majority of physical while "we" (the people) hold next to none. If threats are made, they will be merely for fear-mongering in order to keep people like yourself away from the safety of gold, instead relying on government IOUs as a form of currency/savings.

Good luck with that.

Tue, 08/24/2010 - 16:27 | 541222 Almost Solvent
Almost Solvent's picture

I think he may have been referring to a proposed IRS regulation that all transactions over $600 must be memorialized with a 1099, which of course would result in a butt-load of $599 transactions.

Wed, 08/25/2010 - 00:05 | 542286 cocoablini
cocoablini's picture

The congress passed it. In the healthcare bill of all things- all sales of gold over 600 dollars have to be reported to the IRS.
As if it's not expected? The government has to pretend they are the last word in "real money." they are going to gang your gold in the next 10 years or TAX ownership of prescious metals by like som insane amount. if I wanted a ponzi scheme to continue, that's the way to do it.

Tue, 08/24/2010 - 15:05 | 541003 cocoablini
cocoablini's picture

Dammit, this iPad double posted again! Sorry

Tue, 08/24/2010 - 15:09 | 541012 The Franchise
The Franchise's picture

But Lips Bartiromo said that this M&A is just the beginning.... (how many deals have been done again?).

Tue, 08/24/2010 - 15:25 | 541047 Panafrican Funk...
Panafrican Funktron Robot's picture

M&A after the crash is going to be epic.

Tue, 08/24/2010 - 16:03 | 541148 NotApplicable
NotApplicable's picture

I was thinking of buying a county. Then I thought about all of the "citizens" and their expectations.

Perhaps I should partner with a warlord?

Tue, 08/24/2010 - 23:18 | 542215 StychoKiller
StychoKiller's picture

Sure would save having to deal with "barbarians" yourself, no?

When I first read your comment, dyslexia made county in country -- I get dibs on Tahiti!

Tue, 08/24/2010 - 16:31 | 541244 mephisto
mephisto's picture

You mean China and the US?

Tue, 08/24/2010 - 15:22 | 541036 JR
JR's picture

“We look forward to getting Matt Rothman's thoughts on this increasingly disturbing trend, and for the NYT to pick up on this theme within 4-6 weeks.” Tyler Durden

According to Gallup.com: “Americans continue to express near-record-low confidence in newspapers and television news—with no more than 25 percent of Americans saying they have a ‘great deal’ or ‘quite a lot’ of confidence in either.  These views have hardly budged since falling more than 10 percentage points from 2003-2007…

In addition: “The Pew Project for Excellence in Journalism’s annual report on the State of the News Media found...only digital and cable news sources growing in popularity, while network news, local news, and newspaper audiences shrink.”

This lack of improvement is bad news for mainstream media as newspaper prospects continue to decline even as major papers fold.  When you get down to one-newspaper towns, they’re still declining, even if they have a monopoly.  On the other hand, ZH is experiencing 200,000 readers a day, at the same time forcing other media outlets to play catch up with the more truthful take on economics and economic politics.

Tue, 08/24/2010 - 23:20 | 542220 StychoKiller
StychoKiller's picture

Guess "Sheeple" are shorting lies and feel-good articles these days.

Tue, 08/24/2010 - 15:34 | 541070 firstdivision
firstdivision's picture

The other milestone was this historic rise of 1%+ on no news.

Tue, 08/24/2010 - 16:30 | 541237 mephisto
mephisto's picture

Another way of looking at the reading, as we have pointed out previously, is that stock dispersion: the most critical indicator of a healthy market, is at 15%

No thats not what it means. Dispersion = 1 - correlation is not true.

Check the intraday chart

http://www.bloomberg.com/apps/quote?ticker=JCJ:IND&n=y

It means in a panic this morning veryone loaded up on SPX vol and ignored the less liquid stock vol. So JCJ spikes on the open and on the gap down. Then during the day, especially on the POMO rally, SPX vol cools and equity vol goes bid as traders have time to see which stocks are likely to suffer. Finally the spike just seen at the close indicates buying of SPX puts in the last 5 minutes as traders worry about Japan, Greece and Hungary imploding before they even get breakfast.

Best way to think of these indices is as a ratio between stock and index implied vol, ie as vol dispersion, not necessarily as equity dispersion. They can go over 100%, sometimes way over, and there is no arb. Now the cliche is correlation goes to 1 in a crash, ie if you are long SPY puts and short the stock puts you will make a killing. So the index can also be seen as showing the professional vol markets pricing of expectations of a crash.

When the equity market is behaving as it is currently so that the Hindenburg clock is ticking, and JCJ rises, for me that's at least a sign of a healthy, liquid vol market. 

For a practitioners look at dispersion trading, this is kind of classic

http://www.scribd.com/doc/17850488/Dispersion-A-Guide-for-the-Clueless

 - and although academics are way behind practitioners in this subject, this is interesting

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=891115

 

Tue, 08/24/2010 - 21:45 | 542038 BearishFeijoadaSushi
BearishFeijoadaSushi's picture

baltic dry index being useless at this point despite its HUGE rise

Fri, 10/01/2010 - 06:32 | 617691 Herry12
Herry12's picture

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