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Why You Should Believe Bonds And Not Stocks (Again)
Equity prices - and more specifically valuations - are becoming increasingly disconnected from economic reality. As Bloomberg's Jo Brusuelas notes though the Fed may be driving up asset prices without achieving their end goal of improving economic conditions - based on a number of recent economic surprises. As earnings expectations and a global slowdown continued to point to recessionary outcomes (with industrial and consumer data weak), the probability of a fundamental mispricing in stocks and bonds grows. But when we look over the medium-term at how bonds and stocks react to negative and positive economic surprises over time, it is more than abundantly clear that not only is the bond market more sensitive-to and reflective-of the economic state of the world (and its expectations) but the equity markets remain significantly less sanguine about reality (about 20% less!!).
Bonds are within 0.5bps of the change we would expect given fundamentals...
but stocks appear around 20% mispriced relative to economic expectations over the past six months...
As Brusuelas notes:
The relationship between economic surprises and bond yields is straightforward. As new economic information arrives, investors adjust their expectations about likely economic growth, which is followed immediately by changes in fixed income order flow. As those economic growth expectations shift, equities prices may later adjust.
Charts: Bloomberg Briefs
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Something HORRIBLe is going to be announced in AH today. LAst time I say it.
AH?
You must be talking about the debate toinight.
Must be a fucking asteriod heading our way, eh?
........or a hemorrhoid......
Or, half the Iranian Navy, all one of their destroyers, on maneuvers in Long Island Sound.
cool, care to elaborate or just throwig shit at the wall?
Come on Slaughterer! When is this news coming! I need to go take a dump and don't think I can hold it much longer!
Where? Not on CNBS, Blooom, or any of the major media.
Hmph so where is it? You know some people might lose money and get realllly pissed if u keep throwing sht like that around?
...is it still After Hours?
Uh-oh. APPL at that dreaded 666 again. HP (Hell's Peeps) plunging 11% and a flash crash in food - Kraft. These are not good omens.
Oil down 4%.....word is out Biden discovered the middle class is being crushed.
Actually, he said the middle class was being crushed and processed into a new form of synthetic crude oil. Code name "Oylent Brown". That's why oil is rolling over. New competition from renewable source. He's one fucking smart dude to think of that!
Stocks and bonds are both expensive, IMHO. They're both OK to hold, but, add some gold, silver and Pb to your portfolios!
Peanut butter?
Yes! Of course! TP too...
:)
yep, just not the Trader Joes one...
Plumbum - Latin for "lead", periodic symbol [Pb] . The term borrowed from ancient Rome gave origin to the English word "plumbing".
Get ready for the HORROR show AH. OMG. It sucks.
Is it a horror if you are short? Is it that bigtime drudge obama video again?
If you are short, the HORROR will be good for you.
I give you a lot of credibility slaughterer. If it is Moody's downgrading Spain I will be disappointed. This will lead them to ask for a bailout which will be bullish.
If it is Apple making a public apology to foxconn workers and offering them a 1000% thats another thing....
Don't get us all worked up like some lame ass hyped up Drudge video.
yeah haven't seen much of that fuktard, or is it fox-tard? CPL and his "America-changing event" today
ok slaughterer it's now AH... as Ted Knight said in Caddyshack: "we're WAITING..."
Maybe he was playing games with the hft guys and we were just pawns in his game. I feel so used.
... and there goes your credibility. Is there some sort of "ignore this user" option on ZH?
dude, slow down on the coke will ya? you're not going to make it to 30 at this rate
What's the big news? You didn't really jack of to a porn hub Suzie Diamond video.?
Romney's spray on tan was sabotaged and he will be forced to debate in black face?
they found an old Obama video where he talks like a black dude? wait, that was last night...
Osama walks onstage during the debate tonight, with a copy of Obama's real birth cetificate in hand.
I believe that my bonds will be paid off with inflation factored in so my yield will really be 28% in a distant future utopia.
Who fucking cares when both stawks and bawds are being manipulated by the President's Working Group on Financial Markets:
http://www.archives.gov/federal-register/codification/executive-order/12631.html
By the way oil is rolling over today (they are working hard to get gas down for Obummer) I wonder if it's signaling a role over in stocks.
No, its just the fucking speculators again. /sarc
The fine line between input costs and return is tighter than the string that connects Bernanke's ass and mouth. Pensions need stocks to stay up since bonds are giving investors no return, yet oil is taking any surplus away from the retirees.
If Bernanke wants to sacrifice high oil prices to the gods of the underworld he will have to do it by shorting it, otherwise he would increase the value of the DXY and collapse the stock market. Yet throwing fiat into the fire to keep a lid on oil will only last as long as it takes to burn a pile of dollars for warmth.
I'll give it a week.
Personally, I smell a margin raise in oil or SPR smashdown coming. Could be either with this magnitude of frontrunning.
You may be right. Too bad when they raise margins on oil people can't go out and buy physical...like we can gold.
Right you but Jamie will
They can't broadcast why oil is down and gas is up, sure wish someone would ask Carnak, meant Bernak, next meeting he has.
CNBC doing a big piece on Apple right now. Specifically how Apple owns the biggest hedge fund. They are crediting some no name underground thing called Zerohedge as their source....
Hoorah!
DavidC
Damn it fonz I went and turned on that accursed channel only to miss it.
What's with Slaughter and the word HORROR? He keeps using that word. Let's unlock this secret.
he watched Apocalypse Now a few too many times...
Please, just give me my Obamaphone and let me go home.
Short NDX (fu aapl)
this time it's different, equities are right... loaded up on homies and Robo-tard faves all day...
Bullish!!!!!!!!!!!!
I don't get much out of those charts. The don't seem all that out of whack with each other or predictive.
Looking at charts with the bald headed guy with the beard in charge is a waste of time. All you'll do is spend an hour or two looking at charts and end up buying more gold.
Everyone should be buying stocks that grow their earnings at 6% at 18x eps because they pay a 3% dividend. Just ask Bernanke...