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OMO vs S&P500
Due to popular demand, we present a chart overlaying the S&P500 and the Fed's Treasury OMO actions (not accounting for agency and MBS purchases). No comment on what may happen once QE is eased out of as expected by October.
And for the statistics fans out there, here is the correlation:
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Sounds a little crazy but this almost makes you think equity rally wasn't about discounting a stronger than expected recovery and was more about liquidity. But thats just crazy.
You hit the nail on the head. All that liquidity needs to go somewhere - and it went via the Goldman prop desk into equities.
This is a gov't rally, nothing more.
A magical liquid which glistens and flows upon Flooring By Fed.
Hmmm. I wonder what that roaring sound is that I hear in the distance.(?)
Fake higher than lower on SPX
hurr :)
Alas, correlation does not equal causation....until October?
Everyone keeps saying the shit hits the fan in the Fall, more specificially October. Why? Is this 'cause the Fiscal year for the govt starts then? How the hell do they expect to keep selling debt to keep up this ridiciously high deficit with tax receipts so low?
when everybody's expecting that october will be bloody, nothing will happen. (or even the opposite like "sell in may")
b/c POMO Treasuries ends then.
my comment wrt october, had to do with QE coming to a halt...
I see. But will the QE really come to a halt?
down downdowmn
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
well, my friend, that is really the 64 thousand/trillion dollar question......
a coffee and a donut that there's no way they're going to end it... they can read this chart as well as anyone and know the importance of the markets to consumer confidence and ergo consumer confidence to recovery hopes. Expect an extension.
The markets are already reacting to Bernanke's announcement of the pending non-renewal of QE. He had to do it to save the Treasury market. IMO he is at the point where he has to pick one: Treasuries or Equities. Let's see, support the government or the public's 401(k)s?
Tough choice.
sigh............ it looks like goldman is at work again...pumping up stocks in the mid morning ..
Yup, you can bet your life they will control this selling. One thing GS, JPM and others cannot have right now is a mass selloff, one day where the market loses 3-4% or more. They know that this will trigger a much larger selloff, therefore it will be controlled. Every person I know who discusses the market with me has their eyes on the market constantly, and a finger on the sell button.
So I am guessing that GS and JPM will end up owning the entire market before it is over?? At some point they are going to have to realize that the market is much larger than their balance sheet (or the FED's) can handle.
Meaning, they can slow the wave down, but cant stop it.
TD you are light in the darkness, thanks for write.
I live in South America, I follow you man.
keep bidding it up...if the market doesn't close down only 100 points you get no bonus!!
Cognizant that equity is the first loss tranche the Federales are constructing a Treasury firewall or a BLINGFENCE.Push enough debt out with an insatiable demand because OTC derivative destruction is a liquidity sponge and all of a sudden you have trillions of low-cost pesos. Federales will have a lot of powder to wait for all that BLING to get back to a value that they can then mop up with.
Did you just coin the term "BLINGFENCE" or did you pick i up somewhere else? I'm going to make it a point to use it once per day.
I too, like, nay love, the term "BLINGFENCE".
How best to use it...?
what did the chart look like from Jan - march ?
what did the chart look like from Jan - march ?
Give free money to the banksters so they can push money into the stock market so they can make bumper bonuses again, how nice for them
That distribution curve looks like someone is givin' us taxpayers the bird.
What correlation? October is not going to be a very fun month.
Forgive the perhaps silly question but why is OMO the dependent variable and not the independent variable? Is the point not to imply the SPY is affected by the level of the OMO?
The state pension funds and insurance companies will all die if the stock market dives.
This is a direct funds transfer from the Fed into ailing pension funds. If the pensions die, then the apocalypse.
thats how it works
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
That, my friend may be unavoidable at this point.
Before Greenspan, it might have ended in a severe recession, now the world is caught in an ever expanding credit bubble. It must pop at some point
Ah, so Cramer will be reading another super secret Goldman
report on Mad Money that insurance companies can't fund their
annuities, huh?
http://www.cnbc.com/id/27706066
Matt Taibbi should have nailed them on this one too!
.
^ A graphical representation of why shorting has been like walking in front of a bullet train.
TD,
I plugged this data into the HS function on my Bloomberg. Am I reading the correlation funciton(53) correctly by assuming the .6923 level means the fed is responsible for rougly 69% of the move i.e. .69 fed dollar pumped into the system = $1 spx dollar rise?
Heres some science instead of conspiracy theories
http://www.cxoadvisory.com/blog/internal/blog8-10-09/
Those guys at CXO are big on evaluating others' work but hide their own bad calls. This from my newsreader, September 20, 2007
The post was deleted. No got. I took a screen shot though and saved it because I knew they were full of it.
that blog is completely useless and it said nothing new, only recycled well-known data ... either GTFO or learn to respect the environment in which you try to send your message. and i know, getting traffic to your site can be a pain in the ass, even more if the site is complete crap
Not my site. I don't care either way I don't trade off of that stuff.
It's academic research, do what you will with it, but it's a little more rigorous than making wild claims about market manipulation while pointing at two lines that are cointegrated. see: predicting S&P returns using bangladeshi butter production
You guys are clowns
It's academic research
That does not make it valuable, or even true, and grasping for authority to confirm your argument is a weak form of debating an issue
You guys are clowns
Also, ad hominem attacks are the lowest possible form of contra-argument, and serve no purpose, and if you still have the same opinion than you should not be here. move on
making wild claims about market manipulation while pointing at two lines that are cointegrated. see: predicting S&P returns using bangladeshi butter production
this approach was never conducted here, nor presented here; so it is not even an argument but a metaphorically based fallacy
Now, we can continue to argue, and i can mop the floor with you in that debate; or you can simply move on knowing that your entire post was just garbage
bottom line. who is making money. spending time on research is great, but making money is what matters.
you know that line from 40 yo virgin " don't put the pussy on the pedestal ", well my boy the same thing goes for money; the more you put it on the pedestal, the less you have it. I made my money and did so by not doing one thing illegal or un-ethical. And, can say with fair certainty, that i have it more than you. But money, as all other possessions, is just a tool not a goal. So, don't put money on the pedestal, and you'll have it more.
certainly. i think my post above was misunderstood.
this was is in reply to the research site poster.
yes being profitable is important, but being in the right trade for the sake of the
"beauty of the trade" matters more. nevertheless, cheeky, thanks for the
look on the focus of money. factual research posts are great, but
insight like such a post creates value. no clowns operate like that.
glad i found a place where i can converse with traders whom add
value to the investment decision making process.
F-ing Great!!!
It's against my country's rules (USA) but I'll make an exception
(I'm assuming you're not a US citizen CB)....
Cheeky for President... +500
Snake eats tail. More at 11.
A 150 point drop in the Dow is considered a black swan event nowadays it seems....so I guess this was the apocalypse we have been waiting months for.
Recouping 50% of my losses today...lets see if it sticks by close or end up like friday
Similar thoughts This is how they control it, me thinks. That ramp up in 30 min on friday really means we are down close to half of it should have been.
US spinmeisters ..."The US has a strong dollar policy"
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Let me bounce this thought off you guys in here that are much smarter than me: I've been looking at long term charts of stocks since the crash, and a lot of these companies were cheaper in the 2001 crash than they were during the Nov and Mar crashes.
A prime example is this FCX chart:
http://finance.yahoo.com/q/bc?s=FCX&t=my&l=on&z=l&q=l&c=
How do you explain this? I'm thinking commodities are still hugely overvalued by this yard stick.
Tyler, You frequently post interesting charts, with provocative implications, but I think serious readers are left a little puzzled by what exactly is being plotted. "OMO" is not a sufficient descriptor and it's a pain to have to dig into Bloomberg just to figure out what your argument is.
OMO= Open Market Operations (basically what the Fed is up to)
You can read a more indepth writeup here:
http://www.zerohedge.com/article/open-market-operations-and-statistics
If you click on the Tags (i.e., POMO) under the title you will get all other articles that discuss this issue. And there are many...
I keep on clicking on the "<help> for explanation." on the chart but it does not do anything.
Just kidding - So when the line of coke running up the screen runs out the party is over. Did I get that right?
Maybe this helps:
http://www.omo.com/
LOL - that helped a bunch - Dirt is good! I get the message. Let me write that down, dirt is good. That fits with the overriding theme of the market!
Mortgage companies are getting keys to HOTELS now. Not houses HOTELS. When they start getting the keycards to massive buildings in a few more months and that starts becoming a working reality you are going to see the banks and the fed show you a spchincter that doesn't want to screw itself with it's own dick right when it's realizing that is just what is happening.
It's rather fitting being that the homeless are being housed in hotels...
Here's the probable order of most commercial foreclosures:
1. land
2. hotels
3. retail
4. office buildings
5. warehouses
6 apartments
Just a general order of where the bulk of them will be. In other words, due to the fact that hotel rooms get priced daily, their value goes down quicker than an office building where leases are 2-10 years.
Do you mean something akin to this occurance? (Maguire Properties Inc., the largest office landlord in downtown Los Angeles)
Maguire to Surrender Buildings, Says No Bankruptcy
http://www.bloomberg.com/apps/news?pid=20601103&sid=ao8sd0ZascRo
Ya your fucking stupid fed and banks gameplan. Grab everything and wait for it's asset value to go back up. But without giving money to people it will never go back up. Slavery will start to look and smell like slavery and it's game over. By the time they figure out the cause and effect relationships behind it the S@P will look like it has been carpet bombed by 1000 sorties of B-52's.
Rally manufactured by gubmint via a few selected WS firms. Same firms are out now claiming the recovery is at hand. For those retail investors playing at home let me interpret it for you "Please take these overvalued shares off our hands by believing our bs statements that a recovery is at hand".
FYI - this chart might be a bit easier to read - part of a post a week ago:
http://evilspeculator.com/wp-content/uploads/2009/08/2009-08-04_pomo.png
Beautiful, thanks.
An R (squared - editing not working) of .759 is very significant. As the Macro-economic article stated a few weeks ago - it's tradeable.
The OMO are nearly 100% responsible for the run up. Since the PD didn't have to use capital to buy T's, they bought up the market. The weird volumes since March is more evidence that this is manipulation. The 10 sigma event/anomaly that was GS's trading success in the second quarter is more proof.
The correlation between OMO and the market before March don't matter AT ALL. It was before QE easing. Before they started PRINTING MONEY.
IMHO, this is one of the most obvious and clear cut cause and effects of all time. Seriously. If you hear hooves, think horses not zebras.
correlation is bogus because both time series have unit root
Dear TD:
By now you should know your site is drawing a large number of new readers.
I am one of them. I am a highly educated professional with considerable investment experience, but not educated in the world of finance as many of the people posting to your site seem to be.
I love the sarcasism, wit, and humor of the people posting here. But us Newbies could use a little more explanation on some of the articles and posts.
Could everyone please offer a "translation for Newbies" or a "TD For Dummies" comment to their post.
Thanks,
Horace Manure