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The Real Decoupling
With everyone focusing on Bernanke's liquidity pump and its favorable near-term consequences on US stock markets, which have shifted from a leading indicator to a liquidity indicator, one of the true decopulings, and not in the mythical China-US realm, as both those countries are joined at the vassal hip in perpetuity, has been the Nikkei's divergence from global equity markets, and from the S&P 500 in particular. In fact, over the past several months the Nikkei has been underperforming the S&P dramatically. As deflation has once again gripped Japan, after two decades of failed Bernanke-style policies, it is only a matter of time before it becomes all too clear that the Japan experiment is doomed to be repeated by the US, with the same deplorable results.
The first chart indicates the recent divergence in the S&P and the Nikkei:
The next chart presents a more recent perspective of the decoupling:
A very long-term comparison of the ratios of the Nikkei and the S&P indicates that the ratio has been at record lows for the last decade with the most recent reading once again scraping at the bottom. Ironically, as the S&P itself suffers the same fate as the Nikkei on an absolute basis, we look for this ratio to begin creeping higher, as the Japanese pain, on an absolute basis, is recreated domestically.
Lastly, and perhaps most importantly, is a correlation analysis between the NKY and the SPX. With the two market traditionally correlation quite effectively, at well over 0.5, the latest reading of -0.4235 is conclusive proof that the two equity markets have decoupled to a level last seen in 2005. Inevitably, a recoupling is imminent. The question is whether the S&P will be dragged down to Nikkei levels or vice versa. As the Bernanke experiment is percevied by more and more people to be an utter disaster, our money is on the former.
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Bearish Bitxez!
Still DRE, Rekanize!
http://www.youtube.com/watch?v=uUIQtSNgBSA
Yup. I noticed that also...total disconnect between Japanese market and the rest of Asia. I guess theres when the entire world is long and everything is shooting sky high, something has to be shorted. Right now its Japan.
Here's what I can't understand. Bernanke is not stupid. He must know that his policies have only one end, the destruction of the dollar. How can this ultimately be good for the TBTF's? What is he trying to accomplish?
The TBTF die right now if Bernenke doesn't. When has the FED ever given credence to long term considerations?
That's the problem with every politician. They never do what's best for the long term.
I don't claim to be sophisticated enough to know all of the fallout of never having done the bailouts in the 1st place but I do believe we'd be on much firmer footing today if we hadn't.
Agreed. He's buying time because there is no other solution. We should use the time he's buying to prepare, because the end of the game is, for the most part, inevitable.
Well since he sits on the board of the IMF. I think he's trying to accomplish an economic disaster followed by a bad loan to the US. Followed by the continued creation of a legitimate divorced ruling economic body on earth that's been ongoing for generations.
Those that who hid their eyes as massive waste was generated all around this globe, now want to be credit as mystic seers...ie : WE SAVED THE WORLD BY OUR DEBT ACTIONS...I'm calling BS.
Biden accusing the Republicans of giving bad advice by saying, (insert Jewish voice) we should listen to the same people that got us into this mess.
Oh the Irony.
And as for the Republicans...they would burn down our house to save themselves from dishonor, which is unfortune as they are very dishonorable, while preaching honor...so kiddies watch out for the preachers...of honor...methinks they protest too much.
Ok that was harsh...the fricking Democrats can't even stop/start a filbuster to change the lunch seating...damn
Who's the worst pussies
a. I ain't got the power so fuck you and everything you do...I don't care...I do what the hive mind tells me
b. You know, you've got a point there...maybe we can work something out.
c. The one's scared of bringing them here, instead of "bring them on" fighting them over there.
???
tj3
rem Nobody cares.
Uh dude, Biden is Catholic and presumably has a "Catholic voice".
Whatever the fuck that means.
Japan is a daisy-chain of fiscal, demographic and economic time bombs all set with a very short fuse. Needless to say, it could go off at any time and the Nikkei index is starting to reflect that fact.
The implosion of the world's second largest economy will be quite a sight to see. And by the way, not particularly bullish for global equities.
This is an unfair comparison. The Japanese don't have Bernanke and Geitner. Haven't you heard? They're like gods.
...difference being when the yen carry trade began; commodities hardly made a noticible blip or declined due to the GS, JPM flood of nonbacked futures contracts, whereas with the dollar carry trade, QE, and the printing press; we may have an impact several points higher in the richter scale as far as PM prices are concerned - if perhaps the global financial system were to melt down, ...for example, ...hey, just sayin'.
Aren't the Japanese just basically ahead of us in the real estate crash, debt crisis, QE, carry trade cycle? So where they are, we'll ... get to?
But we may get there a lot quicker if folks in Washington don't change course soon. The Japanese were prolific savers going into their quagmire. Fiscally, at both the government and personal level, the US is in much worse shape. While savings may tick up here and help absorb some of the huge treasury dumps coming down the pike, I suspect a lot of that "savings" is going to go to paying down debt, not buying gov't debt that is sadly becoming questionable.
Took a closer look at the Nikkei vs. the SP-500. They topped out in Feb. 2007, and had continuing negative divergences throughout 2007. Like the SP-500 equal-weighted, the Oct. 2007 high never surpassed the July 2007 high. Noticeable neg. divergence starting in mid-Dec 2007. Same thing again in early Aug. 2008. Yep. Does not bode well for US equities, or likely other markets for that matter.
I would insert some chart screenshots but apparently I'm not that tech-savvy, nor do I have a site to post them to and link from. Cie la vie.
Bernanke follows the decisions of the Government.
The Government makes its decisions according to:
- Lobby groups
- Voter base ("how many do we lose there and how many do we gain there")
- Wall Street and Banks
This is not economic policy, and it is not a market economy.
Therefore it will fail. Most people will not realize it, because they will buy a new Plasma TV. When changes occur slowly, you don't realize it. But when other countries acquire higher standards of living, you will realize it when you go there.
We are not the No.1 anymore, but it would be nice to try to remain at the "top 20".
Wish you all good health.
Lefteris
Philadelphia, PA