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Currency-Equity Divergence Accelerates As Stocks Now Ignore A Dollar That Has Completely Reversed Course
The stock market is no longer a one to one match for the DXY. Unless it is, and computers have yet to filter data indicating the it is now whack-a-bid time.
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Well...SPX has dropped over two points since the Beige Book announcement. I agree that the lag time of the indices the last two days in relation to currency movements is curious...
Andy, Such a move is nothing new. Take gold down 10$ happens all the time. The fairly new development is that there are up-moves of similar magnitude too. If those up-moves continue, it will not take long to leave the 1000 behind. Up to now, gold did not decisively break 1000 but neither did the price break down. It is still wait and see.
it's a massive tug of war between the government
and everyone else regarding gold....now that the
chinese have joined everyone else there is a
possibility that everyone else may have some
successes....
on the other hand, the government suppression of
gold will never ever end no matter what short
term setbacks it may suffer....
The Eur is complete trash, and much like our markets, I have no idea how it's trading where it is. I travel to Europe often and there is nothing going on there. Spain, Italy, and Greece in particular are total train wrecks and the banks in Europe have more mismarked assets than banks here. They are all being protected by their gov'ts to gloss over this mess as much as possible to delay the inevitable as much as possible. There's no reason it shouldn't be trading closer to par with the buck. Certainly has no fundamental basis to be over 1.10-1.20.
Your comment is a little too critical. As a European, I can safely say that we are amazed to see the USD defying gravity for so long!
+11
The Euro is Germany and France.period.
The train wrecks pay already hefty spreads on the German Bund and French OAT...but that is that.
And Germany took all the hits they had to take on toxic waste as early as they could, as France did.
The others are MUCH less relevant
true....the pigs cited above are not evidence of
euro difficulties - they will be thrown under the
bus if need be....
on the other hand, it is not roses and lillacs
for france and germany economically....however,
what most people fail to understand is that
economic conditions are not the same as
monetary conditions....
germany and france did not plunge headlong into
qe like bubbles bernanke did...consequently their
currency should be in better shape relatively
speaking....
Fed's way of keeping NATO, (the EU), shackled to their Afghanistan commitment.
Pull out of Afghanistan and we shank your currency!
just wait for the last 15 min. we may even get to 1040 for SPX...
TD, note the front page treatment in the NYT of the Stuy Town debacle. Presently the top story on the online version.
story covered on zh in February
maybe the cic will buy it
indexes on a nosedive atm
oh wow, these are self-updating
awesome!
excuse me Mr Dufresne but could you tell me how to post a chart. none of my methods seem to work.
elitism is beneath me
absolutely not. tis me who lives in the jungle.
with blowpipes.
now. the charts. v.v. important.
so what is above you then?
Andy, you answered a question I wanted to ask.
OK buster you got me. more fuckin bureaucracy. you win.
even GDX down 3%.
That's pretty cool Andy... self-updating... I had to refresh a few times to see the beauty... you have redeemed yourself in the world of posting pics :-)
rotflmao... what a concept.. I think it would go over really big with this crowd ;-)
Robo has likely already stolen your new concept and is working on self-refreshing Kathy Lee Gifford for his next contributor commentary...
so, you have finally posted, eh? how was it?
OK cut it out you two... this is not last weekend... we are in the middle of a work week :-)
aaah, but I am unemployed! ...since april 08...i may never go back!
well, you have a point there. I must admit I do miss the Dilbertisms.
Abject failure - Is a state where success is still possible if enough time can be given for the disaster to heal itself, with an extra 23.7 trillion kicker.
DXY just made a turn downward...let's hope any boost to stocks is mitigated.
If DXY hits below 71 in the next few weeks, well... we're all F^%ked.
I am a layperson who enjoys the Zero Hedge universe. could you explain in some further detail to a novice just why the 71 number is a precipitous turning point ? Thanks for all the banter some of which is perplexing but this site says things that I cannot find elsewhere. Mucho appreciado. Thomas Barton, JD
71 was its recent low in 2008 and thus for
technicians is a support level....if the usdx
falls below 71.xx it means new support needs to
be found at some unspecified but significantly
lower level...it is terra incognita for the
dollar...which makes such a prospect unnerving...
one can reasonably argue that it will - yet i
believe that the government has enormous
manipulation levers to pull which will keep that
target from becoming a guarantee....
people have been whining and wheezing about
an imploding
dollar for a year now and yet it still holds
above its 12 month low...
it could still go lower but it has to be analyzed
1 step at a time....rome did not fall in a day...
i place it at 50-60 at some point yet that will
take considerable time....then again it might hit
bottom at 75.....
Which will it be? They can postpone the DXY from going into the rabbit whole, but only if they pull the plug on the SPY. And even that is no gimme?
it's not necessarily either / or....the president's
working group on financial markets has the
wherewithal through various proxies to manage
all markets simultaneously....up to a certain
point....
as long as stock market volume stays relatively
low the sparc stations can tread water...so it's
just a lot of churn and commotion keeping the
market elevated but requires minimal resources
beyond the money which the fed has poured into
the market...
the dollar can be manipulated to some degree
through swap facilities which are already in
place....
eventually, like a juggler the working committee
will become overwhelmed and balls will start
crashing down....juggling on a fast moving
merry-go-round comes with limitations...
we have seen that doom is not instant gratification....
it took the dow 3 years from its initial plunge
to hit rock bottom - that is basically all i was
trying to say....
3 years from 1929 that is...
Very much in agreement with your points... that a very good analogy about the Fed juggling all these balls at once. The risk is, that instead of the equity market (for instance) being sacrificed for the great good, the Fed juggles so fast that many balls drop.
That wouldn't be so good.
And just as an aside, the Fed can certainly manuipulate the dollar/currency markets to an extent through swap arrangements.
It's more diffucult, however, for 2 primary reasons: (a) there are wider, more global infuences pinning the underlying demand (or lack thereof) for dollars; and (b) the Fed needs "willing agents" in the currency markets as well with equities; and dealing with a foreign central bank is more complex than dealing with profit hungry Goldman Sachs.
Fed pulling 48.023B tomorrow vFed pulling 48.023B tomorrow via TOMO http://bit.ly/2m9BjYia TOMO http://bit.ly/2m9BjY
is Silver Wheaton cheap at $11?
i think so
Me to. Forecast 2009 sales are 16 to 18 million ounces of silver and 17,000 ounces of gold, for total sales of 17 to 19 million silver equivalent ounces. From 2008 to 2013, annual silver equivalent sales are anticipated to increase by over 250 percent, with forecast sales of 39 million ounces of silver and 20,000 ounces of gold, for a total of approximately 40 million silver equivalent ounces, by 2013. No ongoing capital expenditures are required to generate this industry leading growth- so they say.
priced @ 12 ?
Pascua-Lama straddles the border of Chile and Argentina
funny fed says recession is over. Sales tax receipts in the county I live in with all the major malls for the multi county region just dropped another 10% for the quarter ending June.
How do they measure "over"
every possible metric out there points to further GDP shrinkage.
They have a captcha type metric they use to measure "over". Look, don't worry your pretty little head over it, they all have big Harvard degrees and whatnot. They'd explain in more detail, but it would make your head hurt.
My head started huring when I read "big Harvard degrees".
Degrees as in burning in hell?
WHAT?? what's happened to - "The White House budget office will also lower its deficit forecast for this fiscal year, which ends September 30, to $1.58 trillion from $1.84 trillion."
Were all F&&*^&ked anyway. When what the FED did to the economy happens. It falls apart afterward. Period end of story. It's just a matter of how and when at this point.
Maybe the dollar was allowed to gain a little steam so it could be driven down to fuel the EOD rally...
I've been watching the 30 year bond in relation to the EUR/USD. It seems that they're playing games....taking down the euro and rallying bonds. I made a simple indicator...I've been watching zbu9/(eur/usd) and it's amazing to watch the signals that it's providing....
http://displacedema.blogspot.com/2009/09/thinkscript-30-year-bond-eurous...
That little burst started one hour from the close. Didn't see that coming...
When it goes up people are buying something. Big. That's denominated in dollars. So they have to buy the dollars to buy the thing.
Can't seem to make dollar go down, gold go down, equities go up, Treasury yields go down, GDP go up, borrowing go up, defaults go down, consumer spending go up, exports go up?
Just talk it up in the Beige book and it will be so.
I dont have a fancy degree (computer science isn't fancy), but if the dollar is worth less and large cap companies are international, wouldn't the SPX go up as the dollars value falls?
I've kind of thought the whole rise in market value was a sign of inflation/weaker dollar.
Goldman CEO says pay backlash is 'appropriate'
WASHINGTON (AP 3:05 pm) -- Goldman Sachs Group Inc. CEO Lloyd Blankfein said Wednesday that the furor over bankers' massive bonuses often is "understandable and appropriate."
http://hosted.ap.org/dynamic/stories/U/US_GOLDMAN_CEO_BANK_BONUSES?SITE=...
LLoyd also said the backlash against GS shoving a red-hot poker tipped with glass shards up our asses was also understandable and appropriate. When asked will they discontinue such activity, he peered over his glasses, roared, and retorted, " Is this your first rodeo, sonny?" " That is a hoot"
Man, that really got my knickers in a bunch! Talley Ho!
The nerve and the arrogance of these bastards never ceases to amaze me.
So Lloyd, give the AIG money back and we will hate you a little less.
"Sentiment picture has taken an unexpected turn for the better"
http://www.marketwatch.com/story/sentiment-picture-surprisingly-brightens-2009-08-21
more room to run for the 'longs'.
Completely off topic, but does Bloomberg have the absolute worst headline writers in the business? Someone is paid, probably pretty well, to write and post things like this:
"Sleep-At-Night-Money Lost in Lehman Lesson Missed With Bent's $63 Billion"
Whuh?
The bastard bullion banks managed to defend $1000 even with a crashing DXY earlier in the session...Goddammit. The mechanics of this "breakout" (or is that a fakeout?) are not what I expected.
lol
they own the gold; they make the rules....
i may have spoken too soon....barrick has
essentially defaulted on its gold hedge
obligations...
rather than using the capital proceeds from a
new stock issue to buy
gold for delivery to liquidate its positions it
is simply cashing out on the obligations....
in other words gold is not available at any
price....barrick is also taking a 5.6 billion
dollar charge to earnings to unwind the positions...
this coupled with china's repudiation of derivatives
short covering is the biggest news of the year
and perhaps the seminal event in massive gold
explosion...
i have been annoyed with gold price permabulls
because they have been crying fire for a year
with only modest results to show for it but these
two events are highly unique and of special
significance....
if barrick is defaulting it must know something
about the price and supply of gold which a lot of conventional analysts do not know or understand....
+1
I think it's all connected...
1: China stops trusting the bullion banks and demands delivery of their physical bullion to HK
2: Bullion banks shit themselves because they know they don't have it (just a bunch of IOUs)
3: Triggers a flow of allocation calls which follows the paper trail all the way back to the source.
4: ABX is a source. When they sell forward gold they haven't mined yet, then it's a source of paper.
5: ABX have to hit the market to find real gold to service their obligations to their paperlord (most probably JPM). They need money quick so dilute their shareholders. If they can't find physical then it's going to keep bouncing around in paper land until someone breaks.
I said from the start that, on news that China wanted delivery, that there would be a pop as everyone in paperland scrambled. After that I expected China to write fresh paper and bring it all back down. But then I found out about China encouraging citizens to take physical...
Seems like they're going for it. When a major player like ABX is forced to cut its own throat then you know it's serious. If the BRICs are lining up to take delivery on contracts from Sep-Dec, then the bullion banks are in deep shit and will have to fall back on CB and IMF PM stashes. China has the ability to break the carry trade, but does it have the will?
I have a sneaky feeling that we are going to see something big go down 3 trading days before the end of September (big COMEX default). Probably just getting overexcited but we'll see.
i have said long and loud that if you want to
see a dramatic increase in your gold assets then
you MUST take physical delivery....and we see
that happening left and right...with various nations
demanding repatriation of their gold supplies....
the central banks are short on gold and may not
be able to bail out comex when goes into convulsions
the end of this month....if that happens bank
holidays and wars are only moments away....
china and gata have been working together on this
issue and many other key players around the world
have been working on steps to knock out the gold
cartel....we have seen major steps already:
1. repatriation of sovereign gold
2. reneging on short covering (china)
3. ramp up in gold price
4. a major fund moved out of paper gold into
physical bullion
5. encouragement of gold ownership
6. removal of chinese and russian gold from
market as they have become net buyers - not sellers -
of gold....
the gold cartel is probably sitting on some steep
losses right now so we will witness an epic
struggle over the next 3 weeks over the price
of gold....it will see-saw like you have not seen
before....
Absolutely. Already seeing battles between HK and NY (although HK were quiet today).
Just dug up an old article from 2003 by Dietmar Siebholz, reading it again, man oh man, he was a few years early, but damn, was he on the money. This quote seems timely:
"It is therefore clear that contrary to assertions by the parties involved in gold forwards, leases, swaps or other purely financial constructs based on gold yet to be produced - which in itself carries the risk of changing economies, political, environmental and a host of other imponderables - do carry an exponential risk factor. If, for any above reasons Barrick cannot service its delivery obligation to JPM, then JPM would be facing an insurmountable obligation to re-deliver the physical gold to the lender/lessor of last resort. An explosive short squeeze would probably tear apart the fabric of today's monetary system, as would have been experienced by the LTCM fiasco in 1999. It was only averted by the N.Y. FED blackmailing involved counterparties into a costly bailout of the renegade hedge fund. In the final review, one can only speculate that JPM may be held incommunicado by the PTB … and Barrick, too?"
- Dietmar Siebholz, 2003
http://www.gold-eagle.com/editorials_03/siebholz062903.html
i have not thought through the implications for
the counter-parties....is jpm one of them? to
whom does it owe delivery?....with much of the
hedging being forward sales you have to believe
that there will be some unhappy campers who are
not going to receive the gold they were promised...
i think that this may be bigger than i think....
Also occurs to me that China is using this to hold the West over a barrel. Look at how fast the UK, Germany and France were to scramble when China decided to buy SDRs. China diverting to SDRs is a way to take the heat off PMs, so they're basically saying: "pony up or we kill you".
Would be interesting to get Project Mayhem's take on this, he's more in touch with politics.
I keep hearing about hedges being bought back, but I haven't heard anyone say for a long while "miners always buy back their hedges at the top."
Relax. It's just base camp one.
You're 'old gold' right?
Awesome. Couple more drops like this and I'll be ready to start buying again.
I can see borrower's defaulting, moving to another location before a credit jam and getting a GSE mortgage which will ALSO probably default within 10 years.
this market just wants to go up, bad economic news, good economic news, higher jobless. lower jobless, dollar up, dollar down, p/e high, p/e low,
just buy any old junk it will go up, and in fact the worse the junk the better cos it will soar on shorters been squeezed
I agree -- enjoy the ride with options as protection. Retail investors didn't move the markets up 50%.
apply kevlar, machine gunning in progress
Robo update:
http://www.zerohedge.com/article/hal-9000-readies-obamas-re-coronation
The market will rally until the economy improves. That appears to be the operating rule here. Could I hate this market any more than I do? NO. Our financial markets are ruled by vampires.
"Our financial markets are ruled by vampires."
vampire Squid you mean..........
maybe allot higher price then any of us thinks possible since it will probably be rising from a much higher pace and another major liquidity drain sell off may be epic...just a guess.
Another night, another OUCH. JPY Machine Orders in at -9.3% vs exp -3.5% m/m. That's -34.8% y/y, and this is no small economic number.
Currencies yawn; computers happy they have a short 15 minute break from selling USD and buying SPY futures.
China trying to create Force Majeure on the US Fed and Comex? China bitching about tire trade wars and Obama threatening to add 55% tax on Chinese tires.
There are some serious hardballs flying around-and it's going to be ugly for both countries.
China, if pissed enough, could throw treasuries up in the air but I suspect it's beating Tiny Tim bond vigilante-style. The dollar will be forced up or destroyed-it's up to Fed and Tiny Tim. Playing chicken with the country's future. 2 IVY schmucktards(Tiny Tim went to Dartmouth-the party Ivy.)
tiny turd can go fuck himself...
Oh, ho, ho. Aussie job losses come in at -27,100 vs exp -12,500. Less good than expected, two nights in a row. Silly people selling off the AUD by .5%; don't they realize that it will be back to making new highs against the USD when New York wakes up?
There is a range for the dollar where weakness helps equities in my view.
There is no panic dollar trading today. It is just working its way lower. A cheaper dollar makes stocks look cheap on a comparable basis. If on day one we look at Barclays, Deutche and JPM and put a value on these stocks and then on day two nothing changes but the Pound and Euro are 2% higher then all things being equal JPM has to go up or the B and D have to go down. It does not work like that on any given day, but the forces are there to make global capital move. Same argument could be made for chemical producers, Steel, agriculture, etc.
There will come a time when the dollars role as a store of wealth will come into question in a serious way. That will be crunch time. The S&P and the Dlr. charts will line up then. We are months away from a crisis. So it is still party time.....
i'm not sure that i buy the weak dollar helps
equities argument....and certainly i don't if
it is trending down....
if i hold euros i can certainly get into dollars
cheaper but i am not sure that would drive up
price on domestic stocks...i guess i disagree with the premise
that jpm, db, barclays must be viewed as
opportunity cost trades....there would have to
be a lot of
interest by euro and pound holders to move the
price on jpm and i just don't see those
currency holders as market movers on domestic
stocks for the sectors you describe...
foreigners would simply be able to buy assets
for cheap without necessarily benefitting the
stock price....
now if they planned to hold until the dollar
recovered and believed that the stock
would rise, i could see the logic....
maybe i am missing something but i am not feeling
the linkage...