Deer Emerges As Stocks Slump Half Way To Reality

Tyler Durden's picture

The crowded liquidity-fueled pump-fest of the last few months is beginning to unwind. Look around at where the damage occurred. Equities and Credit were smashed; the USD is practically unchanged; Treasuries very marginally bid; commodities sideways (aside from Oil's oscillations).

But, But, But I'm Hedged...


The close did see some of the other asset classes start to catch down to equity and credit but based on our models, we see the S&P 500 having retraced about half its short-term mispricing relative to Treasuries. All the over-pumped sectors were the biggest laggards - Financials, Industrials, Materials, and Tech - but from the 11/25/11 beginning of the global coordinated central bank pump, there is still plenty of downside for stocks. Our greatest concern now is if high-yield bond ETFs are unwound (where so much liquidity is concentrated) and forces cash bond liquidations - there is simply no depth to soak up that move and the entire secondary market will reprice (and shut the primary market - which has lived on flows for so long).


So what happened...and why - well maybe this chart will help...

Gold is now almost 3% ahead of stocks on the year as the long-bond is catching up fast on the S&P 500...


but stocks have plenty of froeth from the beginning of the globally coordinated liquidity flush from 11/25/11...


the S&P 500 has now retraced around half of its pre-QE3 dislocation...


and equities are also catching down to high-yield credit's warning signs...but the reflexivity will begin in this pair shorly...


and for a sense of the relative calmness in non-equity/credit markets today... with ETFs all moving as one big liquidity block (left) but FX, Treasuries, and commodities were unimpressed having already made their moves... (right)


HYG crossed below its 200DMA and equalled its largest drop in over six weeks (with serious volume)...


and the last few days shows that when the selling begins, it will squeeze the cash market (the lower pane) just as the wash of liquidity drives the cash market via the ETF on the way up in HYG... Critically, we saw a big bond dump at the open today to catch down to HYG's 'price' and then HYG kept going lower all day to leave yet another big gap...


Evidently, as we have said again and again, the surplus of liquidity has been soaked up in the synthetic instruments (ETFs for instance). It's all fun and games on the way up - just ask Bruno Iksil - but when the unwinds begin and the 'real' market can't soak up that risk (consider dealer inventories!!) then price adjustments are rapid and gappy - everywhere...


Finally, the long-term CONTEXT view of where we stand...


We would imagine that every repo desk margin call is currently going directly to voicemail...


Charts: Bloomberg and Capital Context


Bonus Chart: AAPL's last week...VWAP finally snapped


AAPL Shareholder's perspective...


Facebook's 12% rise (coincidentally on record daily volume and perfectly ending at the big gap-down day's VWAP close...not sure this one holds up here) and for one more crazy coincidence (which by now we hope you do not believe in) - today's closing VWAP of $21.62 is EXACTLY the same as the aggregate VWAP from the 10/24 high volume ramp til today...

and Facebook putholders...

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NewThor's picture

You wanted him, you got him!


SilverTree's picture

What is zero divided by two?

NewThor's picture

Not true. I had chili for lunch.

If only my car ran on ass fumes.

I think I need to buy a gun's picture

everything is fine you guys worry too much

BLOTTO's picture

Someone please fan the fire faster...


This limbo state is the fuckin worst.


Spirit Of Truth's picture

The stock market has eerily been following the same crash pattern that unfolded in 1929 and 1987.  If the analogy holds, we just went over the cliff:

EnslavethechildrenforBen's picture

A few years from now, all the shit that you have laying around won't be worth an ounce of GOLD

by 2020 you will wish that you had sold everything you owned and bought gold bars with it

hedgeless_horseman's picture



All right, we're gonna be displacing and falling back like crazy sons of bitches.  So you got to be Johnny on the spot with the ammo, or we're dead.

NewThor's picture

Geithner says 1 million.

Barney Frank says 1 Bwillion.

Paul Krugman says 100 trillion.

Ben Bernanke says "Shhh. Go back to sleep. Everything is ok."


TruthInSunshine's picture

Everything's fine.

At least housing is roaring back ("The Joes" said so; LaVorgna & Weisenthal):


WSJ: Housing Agency (that insures 84% of New Mortgages) Close to Exhausting Reserves

The Federal Housing Administration is expected to report later this week that it could exhaust its reserves because of rising mortgage delinquencies, according to people familiar with the matter. That could result in the agency needing to draw on taxpayer funding for the first time in its 78-year history.

From the WSJ:

"Overall, the FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from one year ago. That represents around 9.6% of its $1.08 trillion in mortgages guarantees.


The FHA's annual audit estimates how much money the agency would need to pay off all claims on projected losses, against how much it has in reserves. Last year, that buffer stood at $1.2 billion, representing around 0.12% of its loan guarantees. Federal law requires the agency to stay above a 2% level, which it breached three years ago.


The decision over whether the FHA will need money from Treasury won't be made until next February, when the White House typically releases its annual budget. Because the FHA has what is known as "permanent and indefinite" budget authority, it wouldn't need to ask Congress for funds;

[...wait for it...] would automatically receive money from the U.S. Treasury."



Whew!!! Thank God that the U.S. Treasury is so flush!!!


Housing "Investors" v2.0

ziggy59's picture

I wonder how many 10000s of flooded and wrecked houses will enter the foreclosrue status over the next 6 months?

giddy's picture

...oh my... haven't laughed that hard in ages... just think... the folks running FHA are the same genuis's that ran Freddie and Fannie... yippee

TruthInSunshine's picture

Laughter is often a reflexive reaction to pure, unadulterated insanity...

...point're normal.

ACP's picture

This ain't half way to reality, not even close. I'll start to get excited when we start approaching 1/4 the way to reality.

quasimodo's picture

The obamaphone fat assed bitch could care less. Stupid f-ing sheep

Stock Tips Investment's picture

The market may face serious problems during the following months. The fall registarda since October has been significant. The market is currently oversold. It is very likely that tomorrow or the next day we see a rebound on Wall Street. However, if the market is unable to reach a new high, we will see a major setback. Will be more than a correction. I think we should be very careful and remember that you can always make money in the market. No matter if the market goes up or down. Only matter which side we say.

Bicycles and Beer's picture

"What is zero divided by two?"

depends on which compiler you ask.

Anonymous peon's picture

That's easy, half of zero.....or whatever else I want it to be because I know "new math" and I always "feel" good about my answers.

redpill's picture

I love that fuckin' deer.  Soon as Donkey Kong shows up I'm headed to the bar.

NewThor's picture

You can probably find a better date than Donkey Kong,

but if big monkeys are what you're into,

then go as Jane Goodall as you please.

SwampHonkey's picture

That shit was too funny.

Zero Govt's picture

she'll be no good if this turns into a stampede

try Nancy peloski, that batty bitch can wiggle out of anything

Tijuana Donkey Show's picture

I voted you down for saying Nancy Peloski and wiggle.

slaughterer's picture

Major sell-off in junk bonds today.  Next comes investment grade.  Then comes pure quality (gold among other things).  

Bodhi's picture

" The British in India will be slaughtered. Then we will overrun the Moslems and force their "Allah" to bow to Kali.  And then the Hebrew God will fall and finally the Christian God will be cast down and forgotten."

Things that go bump's picture

The Mutiny was over 150 years ago - a little late to the party aren't you?

Bastiat's picture

Gold selloff?  I hear China's buying.

Tenshin Headache's picture

I agree. We seem close to a serious scramble for liquidity here.

seek's picture

I agree as well, loathe as I am to say anything about gold going down, past history has shown then a crash hits, there's a liquidity-ification phase as people sell anything of value (e.g. gold) to cover margins and whatnot. Just remember that we saw a 10% drop in the first two weeks of September '08 during the last crisis, and a 20% increase off that bottom a month later.

Dealer's picture

I love the deer, but I like the riot dog more.

konputa's picture

EUR-USD has been freaky over the last 3 days, basically flat. I'm shocked at the lack of volatility. Up only 20 pips in 3 days? How the fuck does that happen?

HaroldWang's picture

YES!!! Now my day is complete!

fuu's picture


kevin come out and play

JeremyWS's picture

Bullish.... no, I mean Bull$hit.

Silver Bug's picture

Don't worry they will print another couple trillion dollars soon to keep the binge going. The good thing, this will only strengthen the fundamentals of gold and silver.

The Shootist's picture

I was hoping dow would finish on the lows... it's all good.

Thecomingcollapse's picture

All we need is a good war by God

NewThor's picture

GO LONG on Sinkholes. Salt domes. Navy Maps. and Edgar Cayce predictions.


Rathmullan's picture

One quarter of the way. The inauguration, I suspect, will be a very somber day for the bulls(hitters).