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It's Never Different This Time

Tyler Durden's picture




 

Japan's years of quantitative easing, forced financial repression, and Koo-nesian stimulus efforts are an altogether too accurate test-tube for the accelerated policies that Bernanke has engaged. A glance at the charts below and one wonders how many times did Japanese investors look at the equity market's exuberance relative to bond yields and scoff greedily; how many times did Japanese equity managers ask "what are you gonna do, buy JGBs?" But time and again, the Japanese equity market realized the errors of its ways and attempted to 'creatively destruct' the status quo - only to be dragged kicking and screaming into the next bubble. What awaits the US?

Japan from the 1990/1 highs - time and time again the equity market pulled away in exuberant hope only to have its Koo-nesian heart broken... The pump-priming failed as the carburettor was flooded... Since 2009, Japanese equities finally stopped kidding themselves and sank along with JGB yields...

 

S&P 500 from the 1999/2000 highs - one can't help but wonder where stocks go next. The timing is so similar to Japan also... (2-3 year after highs stocks decouple higher and 8 years after they recouple; then decouple again... in Japan this second decoupling was around 4 years - which is about now for US equities)... Greenspan tried to pump-prime in the mid-2000s and that ended badly, now Bernanke has tried even harder...

 

If history is any guide, we will see US equities revert (just as Japanese equities did) - and with current rates implying an S&P 500 below 400, that would be quite a show.

But of course - it's different this time...

Charts: Bloomberg

 

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Tue, 12/04/2012 - 23:05 | 3034547 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Let the crash commence!!! No more magic dollars generated on BS debt to be paid back by future generations. By the way, fuck you Bernanke!

Tue, 12/04/2012 - 23:07 | 3034550 Enslavethechild...
EnslavethechildrenforBen's picture

Quanitative Theiving

Tue, 12/04/2012 - 23:14 | 3034572 Jack Burton
Jack Burton's picture

"Quantitative Theiving" Brilliant!

Wed, 12/05/2012 - 00:22 | 3034735 Oh regional Indian
Oh regional Indian's picture

That S&P/10Y chart looks like the gaping MAW of the Leviathan.

When it clamps shut, you better hope not to be in the midst of things, searching for a chair to park a fat ass on.

Rising interest rates and a crashing stuck markets,....and no exits as the algos rape you on the downside...

ori

Wed, 12/05/2012 - 08:01 | 3035011 GetZeeGold
GetZeeGold's picture

 

 

You go first.

Wed, 12/05/2012 - 08:34 | 3035041 negative rates
negative rates's picture

I ain't Jane Fonda, but I got a motor in my Honda!

Tue, 12/04/2012 - 23:16 | 3034580 So Close
So Close's picture

I guess the good news is that we know what the bottom for rates are.  Until they go negative that is.

Tue, 12/04/2012 - 23:07 | 3034549 fonzannoon
fonzannoon's picture

TPTB salivating over S&P 500 at 400. They will make you an offer your 401(k) can't refuse.

None of it means anything until the great bond bull market finally cracks. That's when people get a whiff of austerity.

Tue, 12/04/2012 - 23:09 | 3034554 hairball48
hairball48's picture

It's gonna be a lot more than a whiff of austerity when the bond market bubble pops.

Tue, 12/04/2012 - 23:08 | 3034551 F22
F22's picture

Gold Bitchez....

 

Tue, 12/04/2012 - 23:10 | 3034558 inevitablecollapse
inevitablecollapse's picture

Bart: A man drink like that and he don't eat, he is going to die. 
Jim: When?

everytime is see one of these posts on comparisons to past lead ups to an 'event' reminds me of this exchange in blazing saddles

http://www.youtube.com/watch?v=9Ugux2CYdf0


Tue, 12/04/2012 - 23:12 | 3034561 ebworthen
ebworthen's picture

God, those poor folks with money locked in a 401K, Pension Fund, or personal savings.

The Wall Street and Washington leeches and tapeworms have a strong blood lust for those assets.

You think 2008 was bad?  You think 2002-2012 was ten years of not much?  Just wait!  Holy Hannah.

Tue, 12/04/2012 - 23:14 | 3034566 Samsonov
Samsonov's picture

I consider Japan to be the best-case scenario.  When considering the numerous examples of recently collapsed economies--Zimbabwe, Argentina, Japan, Russia, Iceland, etc.--it's obvious how much better Japan has handled the inevitable than almost anyone else.  Except Iceland.  Iceland did it right, of course, by just taking their lumps and moving on, and now they're fine.  But it's too late for us to follow that model now.

Tue, 12/04/2012 - 23:17 | 3034586 So Close
So Close's picture

You make a good point.   What is the "inflation ratio" for being the reserve currency?

Tue, 12/04/2012 - 23:19 | 3034590 Jack Burton
Jack Burton's picture

Japan started it's fall from a position of a major export economy, large trade surplus, world renowned manufacturer, net saver population, it's debt held by Japanese savers.

NOW, shall we recap where America stands as we start our fall? God help us! We are starting from a nation of debters, debt held by foreigners, net importer, massive trade deficit, net spender population, etc. etc.

We are not Japan, we are ten times worse. Perhaps our saving grace will be the US agriculture and new US energy production boom. These are our only aces in the hole. Otherwise, we are totally screwed.

Oh, not to mention Japan had no war debts, we have trillions in unpaid for war debts, with more piling up every day. God help us!

Tue, 12/04/2012 - 23:23 | 3034602 Samsonov
Samsonov's picture

Okay, you killed my hope.  Argentina it is.  Or Russia.  But then, who will be our Putin?

Wed, 12/05/2012 - 00:30 | 3034744 Oh regional Indian
Oh regional Indian's picture

Jack Burton said:

"Japan started it's fall from a position of a major export economy, large trade surplus, world renowned manufacturer, net saver population, it's debt held by Japanese savers."

If you replaced Japan with USA, you'd be describing the United States of the 50's and to a somewhat lesser degree the 60's. Major difference being the Korean Mistake, the Vietnam mistake and the Cold war.

Add to that the fact that Japan was not allowed to spend on a military of any size/note/standing.

Really changes everything.

What I'm saying is that the US has actually been on a slide ever since the end of WWII, all appearences to the contrary notwithstanding. The 50's were the happy spillover effect of a war economy wealth effect.

Also, Japan funded the rest of the world's speculative bubles via the yen carry trade, sort of the Petrodollar effect...

No easy answers.

Butt, to samsonovs question, no Putin perhaps, but I can see Sarah Palin as your Poon-tin saviouress....

ori

 

Wed, 12/05/2012 - 01:42 | 3034833 Orly
Orly's picture

Palingensia, (or Palingenesis...)

These people are not chosen at random.  Ever wonder why she moved from Alaska to Scottsdale, Arizona- to the middle of the desert from an outdoor paradise?  It wasn't for the weather!  Scottsdale just happens to be along the 33rd degree north parallel.  (Masonic significance...)

33°30?N 111°56?W

In the Gospel of Matthew[1] Jesus is quoted in Greek (although his historical utterance would most likely have been in Aramaic) using the word "????????????" ("palingenesia") to describe the Last Judgment foreshadowing the event of the regeneration of a new world. Palingenesia is thus as much the result of, or reason for, the Last Judgement as it is directly the Judgement itself.

:D

P.S. I hope everyone who uses it on a regular basis gave five dollars to the Wikipedia.  Yeah, you prolly go there five times a day, don't you?

Wed, 12/05/2012 - 01:49 | 3034837 Oh regional Indian
Oh regional Indian's picture

You remember, eh Orly.

Palingenisis indeed. She will be back, no doubt. Probably tied in, in some twisted fashion, to give her Sheik-in-Awe blessings to Moar Mayhem in the desert sands.

ori

Wed, 12/05/2012 - 01:55 | 3034844 Orly
Orly's picture

A picture is worth a thousand words, ORI...

http://www.zimbio.com/photos/Sarah+Palin/Henry+Kissinger

Wed, 12/05/2012 - 02:03 | 3034850 Oh regional Indian
Oh regional Indian's picture

ick!

I remember, when her candidacy was first announced, the most common word-association with her, here on ZH, was MILF.Gun toting hunters would vote for her. Fer Shure.

Interesting times indeed, what with her and McCain (and Able..... Danger) good neigh-bores now!

ori

Wed, 12/05/2012 - 08:41 | 3035049 negative rates
negative rates's picture

I couldn't find anything of the sort. And I turned and twanged my neck lookin too, and it wasn't even cold out!

Tue, 12/04/2012 - 23:37 | 3034638 Zgangsta
Zgangsta's picture

To be fair, America has MUCH better military than Japan.

Tue, 12/04/2012 - 23:49 | 3034676 akak
akak's picture

You mean a vastly more EXPENSIVE (i.e., ultimately unsustainable) military than Japan.

When will people finally realize that having a bloated military is a liability, not an asset?

Tue, 12/04/2012 - 23:53 | 3034683 Karlus
Karlus's picture

You say that until OPEC gets the bright idea to sell oil in something other than dollars. Right about that time a military comes in handy

Wolverines!

Wed, 12/05/2012 - 00:18 | 3034726 Zgangsta
Zgangsta's picture

No, I mean a military that has the ability to blow up more stuff than any other.

Expense doesn't matter if you can take over every other nation in the world whenever you wanted to.

Wed, 12/05/2012 - 00:28 | 3034734 akak
akak's picture

 

Expense doesn't matter if you can take over every other nation in the world whenever you wanted to.

Yeah, and that is why the Roman Empire continues to rule the world to this day.  Likewise, how the sun never sets on the British Empire, and how the USA won the Vietnam War in a cakewalk.

The shallow simple-mindedness of your "argument" positively underwhelms me.  Honestly, have you EVER studied or read any history at all?

Wed, 12/05/2012 - 00:33 | 3034750 Oh regional Indian
Oh regional Indian's picture

Akak, it seems that when you have the MotherOfAllBombs (MOAB) to Shekinah the world, you make history as you go along.

Manifest DENSIty perhaps?

Or some such.

ori

Wed, 12/05/2012 - 00:38 | 3034756 akak
akak's picture

ORI, can you clarify the above post?

I am not sure what you are getting at there.

Wed, 12/05/2012 - 01:00 | 3034791 Oh regional Indian
Oh regional Indian's picture

Was agreeing with you while attemptng word play humor simultaneously.

It looks like having the largest military in the world makes you writers of history, so why bother learnin' any?

The MOAB and Shekinah is actually true history, replayed by the warmongers at DC.

Saddam, who has delusions of being Nebuchadnezzar, was done in by the Moab-ites...with the blessings of Shekinah....again. Convoluted reference, I know, but an interesting truth-dig, if you are so inclined.

ori

Wed, 12/05/2012 - 01:23 | 3034816 akak
akak's picture

Thanks ORI.

Forgive my obtuseness.

Wed, 12/05/2012 - 01:45 | 3034835 Oh regional Indian
Oh regional Indian's picture

;-)

 

Wed, 12/05/2012 - 01:15 | 3034808 Orly
Orly's picture

Also, ORI, if I may overstep any invitation here, what you are saying has many ironic aspects and the statement is quite clever and humourous.

Shekinah is the Hebrew word for the effiminate aspect of God.  Since MOAB (the Mother of all Bombs...) represents the "effiminate" aspect of the US military, it follows that to some, the military is all-powerful and it has even named one of its more potent weapons as a woman.

The ancient city of Moab is located in modern Jordan and ancient myth declares that it was founded by Lot, In the ancient myth, Lot's wife was turned into a pillar of salt when she turned to look back at the destruction of Sodom, not unlike those who perished in the nuclear holocausts at Nagasaki and Hiroshima, Japan at the hands of the mighty God, the US military.

In other words, the firm belief in the power of the military is hubristic at best and decidedly silly at least.  For such true power, they're looking in the wrong place and are certainly misguided.

:D

Wed, 12/05/2012 - 01:19 | 3034813 Oh regional Indian
Oh regional Indian's picture

:-) See above orly. You said it better.

I'll cast my Lot with you.

And interestingly enough, the planners of such military escapades know the power of these words and the his-story they are attempting to re-play.

To what end?

?

Wed, 12/05/2012 - 01:19 | 3034814 chump666
chump666's picture

So well said Orly.  Have you seen this http://youtu.be/tyxd9BJ9_5E Carl Sagan on the madness of self annihilation.

Wed, 12/05/2012 - 01:33 | 3034824 Orly
Orly's picture

I love Carl Sagan.  When my mind was being formed from being a selfish kid and growing toward looking at the "outside," I was lucky enough to stumble upon Cosmos.  I have never been the same since.

:D

Wed, 12/05/2012 - 09:29 | 3035135 tango
tango's picture

Considering the manner in which we treat our resources today - physical and social - I am firmly convinced that our massive advantages in both energy and food will somehow be squandered by the political class.  Either we will  regulate/tax/ban oil/gas exploration and greatly reduce its effectiveness or we will export food nations that "need" it or something destructive I have not even considered.

The political class is unable to step back and let the productive juices flow. They see what works and what doesn't and they inevitably choose the path that doesn't. I just don't get it.

 

Wed, 12/05/2012 - 13:12 | 3036129 marathonman
marathonman's picture

They are paid to pass rules that limit competition to existing business.  Lobbying is effective in killing off competition even if it means a little higher operating cost.  Politics is about creating the illusion that you are helping people while your actively making rules that are against their interest.  Once you get your head around it, it's not hard to get.  Getting your head around the idea that those SOB's are out for themselves exclusively was hard for me at first (oddly enough).  Now I accept it and it all makes sense.

Tue, 12/04/2012 - 23:16 | 3034582 rawsienna
rawsienna's picture

I am no equity fan but real rates in japan were never negative - so our situation is somewhat different.  In Japan, you earned real returns in bonds - In the US you are getting your pocked picked in bonds. Gold should outperform. 

 

Sad reality is the is no evidence that QE works or has ever worked -- meaning a successful policy is one that is BOTH implemented and unwound - Nobody has ever escaped the QE trap.  As the lyrics of one of the great songs on Raw Sienna "When you are married to H you are married for life". 

Tue, 12/04/2012 - 23:19 | 3034589 Cyclerider
Cyclerider's picture

Keep updating this chart periodically.  Can't wait to see if your prediction comes true.

It looks like it will only be 2-3 years before we hit 400.

Tue, 12/04/2012 - 23:26 | 3034611 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Let's all buy bonds and get a yield that doesn't beat inflation.

That sounds like the winning trade.

Tue, 12/04/2012 - 23:42 | 3034653 edb5s
edb5s's picture

Good news is we all know what to do when it recouples:  BTFD

Tue, 12/04/2012 - 23:43 | 3034656 dolph9
dolph9's picture

If one accepts the premise that the Fed will ultimately have to choose between the equity vs bond market (just as the government has to choose between warfare and welfare), then the equity market will be sacrificed.

 

If this is true, it means equities are vastly overpriced and make poor investments.  It also means bonds are an even worse investment, because they are the last bubble, government supported.

Wed, 12/05/2012 - 00:29 | 3034680 gjp
gjp's picture

US dynamics will likely be very different than Japan, partly because of the debtor/creditor contrast between their positions but more because with the US the global fiat system is at stake. Japan is very much a best case scenario, and unfortunately a low probability one.

Wed, 12/05/2012 - 04:31 | 3034915 besnook
besnook's picture

everyone assumes japan has been crushed by 20 years of deflation but never in that entire time did they suffer anywhere near the cataclysm the usa economy has suffered in the last 5 years or what europe is facing now.

Wed, 12/05/2012 - 11:24 | 3035631 AynRandFan
AynRandFan's picture

Hasn't Japan always maintained a positive trade balance?  The U.S., on the other hand, has been exporting its wealth for a long time and won't be nearly as resilient.

Wed, 12/05/2012 - 00:04 | 3034700 Quinvarius
Quinvarius's picture

I don't see it.  I see the Japanese market moving in tandem with the US stock market starting with the tech bust.  For evey down arrow, you could draw an up arrow, but did not.  What I see is every time we blew up our money supply, and everyone elses, Japan got a rally to match ours until the tsunami/nuke.  Treasury and JGB yields have been dropping the whole time.

Besides, there are plenty of examples where the printing press has exploded the markets rather than imploded them...

Wed, 12/05/2012 - 00:23 | 3034736 orangegeek
orangegeek's picture

SP500 weekly below shows pretty much the same thing.

 

http://bullandbearmash.com/chart/sp500-weekly-marginally/

 

 

Wed, 12/05/2012 - 00:23 | 3034738 1eyedman
1eyedman's picture

somebody's hot for euro's right now, 1.311 to 1.3124 in 12 min straight up....several days now, straight the f up....gotta be swap rollover time...

 

Wed, 12/05/2012 - 02:02 | 3034848 Orly
Orly's picture

And the EURUSD and the USDJPY are trying to decouple here.  If my charts are correct, the spring-loaded U/J could rocket, retesting new highs from mid-March 2012 @~83.7.

Could be they're losing their grip on the Euro.  No other reason to make such drastic, blatant and dramatic ramps in the pair than to try to draw in more and more longs to keep the ponzi going.  It may be breaking down here.  If it does, it won't stop until it reaches 1.27.

We'll see.

:D

Wed, 12/05/2012 - 00:46 | 3034765 q99x2
q99x2's picture

Oh, snapdragons, my favorite flower how long before you close your petals unto me?

Wed, 12/05/2012 - 01:36 | 3034829 skepsis101
skepsis101's picture

Samy, our "Putin" was going to be "Betrayus", until it wasn't.  Do not think that alot of those 4-stars didn't get the message. The real question now is, does the POTUS have the balls to continue to tighten our noose around central asia and the arabian peninsula and hold the entire rest of the world at bay, hostage to the petrodollar/world reserve currency, or not.  We do indeed live in interesting times, god forbid!

Wed, 12/05/2012 - 04:05 | 3034871 Lord Of Finance
Lord Of Finance's picture

I THINK WERE TURNING JAPANESE , TURNING JAPANESE , WERE TURNING JAPANESE, I REALLY THINK SO

I THINK WERE TURNING JAPANESE , TURNING JAPANESE , WERE TURNING JAPANESE, I REALLY THINK SO

 I

 

    THINK

   

        WERE

      

           TURNING JAPANESE,

         

                       TURNING JAPANESE,

           

                                   TURNING JAPANESE

 

C'MON! EVERYONE SING!

   IT'S OUR NEW NATIONAL ANTHEM.

Wed, 12/05/2012 - 03:25 | 3034885 Manthong
Manthong's picture

I see Audrey.

Wed, 12/05/2012 - 05:01 | 3034921 Supernova Born
Supernova Born's picture

Yeah, but those other countries don't have the magic paper in the box at the National Archives that keeps us safe from bad people.

Wed, 12/05/2012 - 05:33 | 3034944 GreatUncle
GreatUncle's picture

Think Japan's position is where all economies end up in the end in the modern world. All the financial manipulations occuring everywhere all lead to this position and there is no way to prevent it.

Sure one side thinks they can spend their way out of this (increasing debt) or the other thinks they can cut everything (contracting the economy increases the debt again).

You have no way to spend one cent and earn 2 real cents in value to be able to say you are moving in the other direction. Even with accountable spending of a cent you only get close to a cent back = a roughly flatline economy.

By 2020 a decade will be lost and no better off and more likely in the same position. when that arrive we will be talking of 2030 before the recovery arrives. Comical really and every politician / banker pretend the good times are around the corner when all I see is a continual extension in time for the problem.

Wed, 12/05/2012 - 06:15 | 3034953 hugovanderbubble
hugovanderbubble's picture

Spanish Covered Bonds = (Cédulas Hipotecarias ) all are in default. Be careful Asset managers if you hold any of those junk products.

Spanish Covered Bonds Market is the BIGGEST FRAUD EVER DONE.

 

RON PAUL PLEASE - CRASH SPAIN, 

Spain has to drop 50% vs current valuation till 3.950 INDEX (IBEX)

 

INTERNAL DEVALUATION

DEBT HAIRCUTS

BACK TO REALITY

SELL SELL and more SELL ( SHORT SELLING)

 

Italy the same, and France.(SHORT CAC)

Wed, 12/05/2012 - 06:41 | 3034967 Never One Roach
Never One Roach's picture

The CEO of Hostess Brands is getting widely criticized for taking his full salary while cutting everyone else's pay by 8%.

 

 

http://money.msn.com/now/post.aspx?post=f2d05306-bb26-4e35-9eb4-47f4b490...

 

'Salary cuts are for the Little people.'

Wed, 12/05/2012 - 07:49 | 3034996 Why Not
Why Not's picture

One difference is valuation. Japanese large cap stocks traded for ~70x in 1990. It took 10-12 years for valuations to get in a normalized zip code, but that still leaves 10-12 years in zombie land. US large cap and growth stocks were ~30x (excluding AOL, CSCO, etc.) in 1999, but value stocks were 12-15x. That is not to say margins cannot fall and/or multiples contract, taking US equities much lower. Bernanke will work night and day to avoid that, however. It is all surreal nonetheless.

Wed, 12/05/2012 - 07:48 | 3034997 Why Not
Why Not's picture

One difference is valuation. Japanese large cap stocks traded for ~70x in 1990. It took 10-12 years for valuations to get in a normalized zip code, but that still leaves 10-12 years in zombie land. US large cap and growth stocks were ~30x (excluding AOL, CSCO, etc.) in 1999, but value stocks were 12-15x. That is not to say margins cannot fall and/or multiples contract, taking US equities much lower. Bernanke will work night and day to avoid that, however. It is all surreal nonetheless.

Wed, 12/05/2012 - 11:18 | 3035601 AynRandFan
AynRandFan's picture

Problem solved, says the economics professor that taught Japan's central bank governor.  Just print more.

http://www.bloomberg.com/news/2012-12-05/japan-deflation-beatable-in-mon...

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