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The 12 Charts Of Christmas

Tyler Durden's picture





 

After the success of the 'scariest charts for equity bulls', the following 12 charts are the most important, in CitiFX's view, to establish a 'starting point' for views on markets as we head into 2013. From employment trends echoing the 1970s, one-last-low in Treasury yields and '90s analogs, to EURUSD and its mid-'80s mirror, and the ongoing trend higher in gold; there is something here to scare equity and bond bulls and bears alike.

Via CitiFX:

What do we believe for 2013?

  • Initial claims will follow a similar path to that seen in the 1970s and begin to move higher in 2013. This will be the first indication that further trouble lies ahead. The 2’s – 5’s curve will eventually move higher also but not before posting one last move down.
  • U.S. 10 year yields will have one final push down towards 1%-1.2% at which point they could bounce up like a “beach ball let go underwater”.
  • EURUSD will fall towards 1.20 in Q1 2013 and possibly even 1.10-15 with parity a real possibility in 2 years. We also expect a rally on the USD Index this year of about 15% which suggests that this move will be predominately driven by EURUSD (57.6% of the USD-Index).
  • USDJPY will eventually move higher as the interest rate dynamic kicks in and we would not be surprised to see a move into the low 90s over the course of the year.
  • We expect Gold to move to $2,055 -$2,060 in the first quarter of 2013 a and ultimately a rally towards $2,400 in 2013.
  • Crude Oil (Brent) should rally to the 2011/2012 highs around $125 and possibly move to all time highs in 2013.
  • The DJIA will drop over 20% towards the 10,000-10,500 area.

 

The dynamic in this cycle is similar to 1973-1978 albeit at higher nominal levels. In 1978 this was a turning point which then saw these numbers head significantly higher again. However that, as well as a deterioration in economic activity and housing, was partially induced by a tightening Fed which given the present debt/housing/employment dynamic is highly unlikely even if we see some inflation in the system. However we think there is a real danger that higher yields (Bond markets) and a tighter fiscal dynamic could induce this move.

Bottom line we think the best may be behind us for now on this chart and expect renewed deterioration in 2013

This chart has been in our view, the best interest rate chart in the World for the last quarter century.

Our bias is that we have limited downside left here before we “pop”

Where initial claims go... the yield curve will follow.

We did not quite reach this base in late 2008 when it stood at 1.89%. It now stands at 1.05%. As yet we have not regained any levels of importance on the topside.

While we do not for a moment suspect that we would stay down there for long, we do think a danger remains for one last move lower as seen in previous trends. IF so, that low could be subject thereafter to a sharp bounce as seen in prior instances.

There are currently many scenarios at play which could be the catalyst to such a move. Candidates? 1. Fiscal Cliff and/or debt ceiling negotiations; 2. Europe’s sovereign debt crisis; 3. Middle East turmoil; 4. China slowdown

A little lower then a lot higher - for Treasury yields.

EURUSD set to weaken

USD strength is on its way

It may as yet be a little early for this move but if we get the expected bounce in bond yields expect USDJPY to power higher

The trend is clearly higher.

The present dynamic in Crude continues to remind us of the 1970’s when we got 2 supply shock moves. The first came in 1973-1974 at the same time as we had a collapse in the Equity market (1973-1974); a collapse in housing activity (1973-1975) and a sharp fall in economic activity (1973-1974). During the 1973-1974 period Crude pretty much tripled in price (low to high) over 18 months.

Then about 5 years after the 1973-1974 surge it “did it again” and once again virtually tripled in price in 1978-1979 over 18 months (backdrop here was the Iranian revolution and the Iran-Iraq war).

In 2007-2008 Crude virtually tripled in price over 18 months and we saw an equity, housing and economic dynamic very reminiscent of 1973-1975. Now as we head towards 2013 could we be setting up for another tripling in price over 18 months to 2 years? We hope not as that would put Crude close to $200.

Stay Far Away From Equities...

Every bounce off this trend line on the VIX since 2007 has been followed by a sharp move lower in the S&P (average 23% over 4 ½ months)

 

Charts: CitiFX

 


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Thu, 12/13/2012 - 18:24 | Link to Comment surf0766
surf0766's picture

!

Thu, 12/13/2012 - 18:26 | Link to Comment edb5s
edb5s's picture

Your pre-edit comment was much better

Thu, 12/13/2012 - 18:28 | Link to Comment surf0766
surf0766's picture

I usually do not comment like that. Not sure where that comment came from.

Thu, 12/13/2012 - 19:51 | Link to Comment Fredo Corleone
Fredo Corleone's picture

True enough, Tyler, but even in the 1970's, the government still had a sufficiently uncrippled balance sheet to afford the minting of a .950 copper penny.

Much has changed since.

Thu, 12/13/2012 - 20:09 | Link to Comment SAT 800
SAT 800's picture

You got dat right; Don Corleone. Isa ona thing I sure of; itsa not 1970.

Thu, 12/13/2012 - 21:33 | Link to Comment old naughty
old naughty's picture

Nice charts.

But, but... I am confused, USDJPN to go higher, EURUSD to weaken...

And yet repeat red-down arrow for USD-index...

So long CNY?

Good, more exports (but what)?

 

Fri, 12/14/2012 - 00:10 | Link to Comment goldfish1
goldfish1's picture

Queen trotted out for Bank of England gold vault pics:

 

"Her Majesty" examines the stacks of gold bars stored in the Bank's vaults

Read more: http://www.dailymail.co.uk/news/article-2247578/Queen-gives-Bank-chiefs-ticking-orf-crash-visits-vaults.html#ixzz2EzoemQb8

 

Thu, 12/13/2012 - 18:29 | Link to Comment camaro68ss
camaro68ss's picture

Marry x-mas bitchez, now eat your peas

Thu, 12/13/2012 - 20:31 | Link to Comment knukles
knukles's picture

Nobody celebrates Christmas anymore.  It's racist.

(pickin' out mah rainbow kwanza outfit)

Thu, 12/13/2012 - 20:38 | Link to Comment akak
akak's picture

Now, if only Jesus had been a gay/lesbian/bisexual/transgendered HIV+ differently-abled ADD Hispanic black woman with Asperger's Syndrome ...

Fri, 12/14/2012 - 04:27 | Link to Comment HD
HD's picture

Jesus WAS a dark skinned "socialist" jew. Just sayin....

Thu, 12/13/2012 - 20:54 | Link to Comment Body of Lies
Body of Lies's picture

Not in DC ... Christmas Cheer all around ... " Nearly 14,000 people will attend a White House party or reception this holiday season"

Fri, 12/14/2012 - 06:36 | Link to Comment ISEEIT
ISEEIT's picture

Along those lines.....I noticed a 2013 UPS calender at work yesterday and felt inspired to check out on which day Lent begins. Lent wasn't mentioned. Not a big deal I thought...So I keep thumbing through the calendar and then see that the beginning of Ramadan IS mentioned. Now to me that isn't a big deal either in and of itself. What bothered me (only a little), is the inclusion of one and not the other.

Just one more proof that the inmates are in fact running the asylum.

Thu, 12/13/2012 - 18:49 | Link to Comment overbet
overbet's picture

MERRY CLIFFMAS!!!

Thu, 12/13/2012 - 19:03 | Link to Comment I am more equal...
I am more equal than others's picture

Baaaaaah humbug

Thu, 12/13/2012 - 20:15 | Link to Comment surfersd
surfersd's picture

Seems like traders could make a fortune next year. Trade of the year be long front month WTI vs the back months. Buy June Sell Dec at -50 make $2.00 go on vacation in May. By being long the fronts you can also sleep at night as opposed to be short the spread and waking up to some Iran/Israel disaster.

 

Thu, 12/13/2012 - 18:25 | Link to Comment Mongo
Mongo's picture

When this is over there will be enough toilet paper to wipe the ass of every organism on the face of the planet

Thu, 12/13/2012 - 19:10 | Link to Comment lemonobrien
lemonobrien's picture

toilet paper was one of the best inventions; especially for health reasons.

Thu, 12/13/2012 - 18:45 | Link to Comment Ghordius
Ghordius's picture

EURUSD is not the Dollar Index, dammit

Parity. How? Magic?

Thu, 12/13/2012 - 20:06 | Link to Comment SAT 800
SAT 800's picture

It started out at .80 something cents. I don't see why it requires magic. It still sounds like a health problem to me; I couldn't believe they were serious about the name; "Doctor I'm having Euro Problems again".  A little less German Exports; a little more French Socialism, a little more Spanish Bankruptcy; this doesn't sound like magic to me; it sounds like a realistic program  for 2013.

Thu, 12/13/2012 - 18:36 | Link to Comment VulpisVulpis
VulpisVulpis's picture

i say "meh"rry xmas, bitchez

Thu, 12/13/2012 - 18:39 | Link to Comment Essential Nexus
Essential Nexus's picture

"After the success of the 'scariest charts for equity bulls'..." <- Doesn't the prediction have to prove itself correct before you call it a success?

Thu, 12/13/2012 - 18:42 | Link to Comment swissaustrian
swissaustrian's picture

Projection

 

Gold

in 1975: $170

in 1980: $850 (x5)

in 2012: $1700

in 2017: $8500 ?

 

Silver

in 1975: $5

in 1980: $49 (x9.8)

in 2012: $32.5

in 2017: $318.5 ?

Thu, 12/13/2012 - 19:21 | Link to Comment SAT 800
SAT 800's picture

sounds reasonable.

Fri, 12/14/2012 - 01:30 | Link to Comment cynicalskeptic
cynicalskeptic's picture

Bread - in 2017:   $30 a loaf  (or free if you participate in gladiatorial combat)

Gasoline - in 2017: $50 a gallon (with a ration coupon)

12 ga 00 - priceless

Thu, 12/13/2012 - 18:44 | Link to Comment icm63
icm63's picture

GOLD strength and USD strength at the same time. Wont happen for long, one will be wrong. 

 

Thu, 12/13/2012 - 18:57 | Link to Comment swissaustrian
swissaustrian's picture

USD strength won't be tolerated for long, in fact already is beeing countered since September and moreso since yesterday.

Thu, 12/13/2012 - 19:27 | Link to Comment SAT 800
SAT 800's picture

It's not exactly "strength"; it's just relative to other paper craps. it's like pretty good quality crap. I mean, really, the strength is the gold value of the stuff; and that will be going down; but the master plan is make the US look good; especially in the mass mind, (NO WEAK DOLLARS HERE; MOVE ALONG, NOTHING T O SEE HERE). This is all just coming clear to me; these are wonderful charts. Every once in a while Tyler does something that seems so worthwhile I feel like contributing money to his website; but I always get over it again.

Thu, 12/13/2012 - 19:36 | Link to Comment SAT 800
SAT 800's picture

I believe our masters in the Eccles Building believe they can engineer an "acceptable" us economy with a "strong" (relative to the Euro, for instance), currency. They have access to a lot of stats. that I don't; but even the ones I do have access to show a surprising health in manufacturing in the us. I believe the master plan is to export Pain to Europe and deflect criticism/questions/credibiity issues from the US Dollar economy by "tooling up" a "strong" dollar. I've already gone short the Euro for Sept. '13; so I better be right about this; but it feels so much like I just got a peek under the magic carpet that I can't resist.  I think you're a little behind the curve there on your dailies; I just took profit on my long AUD/USD and short USD/CAD positions last night. The dollar is "poised"; and the Euro chart looks like it's all set to fail overhead; once again.

Thu, 12/13/2012 - 19:31 | Link to Comment max2205
max2205's picture

A gold crash will be the biggest surprise of 2013

Said it

Thu, 12/13/2012 - 19:39 | Link to Comment SAT 800
SAT 800's picture

Well, it would be a bit difficult to arrange with 85$B new dollars being printed every thirty days; some of this of course is being syphoned off to insure that our new dependents in Europe don't make a mess on the carpet; but a lot them know that; and they buy gold too; or even more so. It certainly would be a black swan event.

Thu, 12/13/2012 - 21:18 | Link to Comment Esso
Esso's picture

I would guess that the only possibility of a gold crash is if there is a huge spike in the price preceeding it. Yeah, if gold goes north of $5,000/oz, look for a crash.

Thu, 12/13/2012 - 21:47 | Link to Comment klockwerks
klockwerks's picture

I hope so as that would be my buying opportunity as it's a little high right now. Have silver and it's lonesome for some company and gold would be a nice neighbor

Fri, 12/14/2012 - 01:36 | Link to Comment cynicalskeptic
cynicalskeptic's picture

Paper price on COMEX could very well drop to near 0 - as could GLD shares....paper promises

of course the price of PHYSICAL metal (unencumbered and not in some bullion bank or third party's possession) will be a different story 

Thu, 12/13/2012 - 19:59 | Link to Comment SAT 800
SAT 800's picture

Remember the Sherlocke Holmes story about the Dog that didn't bark? A huge, huge, event has taken place in the last few years; that we never hear anything about. there was a plan in place for all the central banks to sell off their gold reserves; on a controlled process; they were all going to Gordon Brown themselves, but in a controlled way; because; after all it was a useless relic. Now we live in a world where net Central Bank purchases of Gold; un-controlled and un-planned; and as far as possible un-anounced and un-noticed are incresing every year. And they don't buy ounces; they buy metric tonnes. It's pretty obvious from the complete lack of reportage of this amazing about face that it's not the list of things we're supposed to be bothering our furry little heads over. But suppose we do think about it? What does it mean? What purpose will these reserves serve? I don't really know; but I can't think of any scenario that indicates this will be hurting the metals market prices.

Thu, 12/13/2012 - 20:05 | Link to Comment akak
akak's picture

The dog did try to bark, but his barking was declared "against national security" and an "economic terrorist threat", and he is being held indefinitely in a 3' X 3' kennel in Guatanamo Bay.

Thu, 12/13/2012 - 20:39 | Link to Comment knukles
knukles's picture

Only evidence to support the accusation that he barked was not heard by anybody except the no such agency which couldn't release information as to whether he'd been overheard without a warrant or not because it would violate his privacy.

(squeezing thighs together and squishing eyes shut)

 

Thought Balloon: Come to think of it, maybe I oughta take my picture off of here so they don't know who I am.

Thu, 12/13/2012 - 18:46 | Link to Comment buzzsaw99
buzzsaw99's picture

They are out of their flippin' minds. This ain't their grandfather's recession.

Thu, 12/13/2012 - 18:50 | Link to Comment NotApplicable
NotApplicable's picture

Chart 1, for instance, will be redfined into oblivion.

Thu, 12/13/2012 - 18:57 | Link to Comment buzzsaw99
buzzsaw99's picture

It reads like an xmas list of shit they want to happen instead of an unbiased projection.

Thu, 12/13/2012 - 20:37 | Link to Comment knukles
knukles's picture

Some people.... think they're like Goldman...
Delusions of Grandeur and Influence....

Thu, 12/13/2012 - 21:41 | Link to Comment Esso
Esso's picture

You mean wishful thinking doesn't translate into reality?

Egads! Eeeeek! We're doomed.

Fri, 12/14/2012 - 12:14 | Link to Comment neutrinoman
neutrinoman's picture

No, it's their great-grandfather's recession.

Merry Cliffmas, and to all a good fright!

Thu, 12/13/2012 - 18:49 | Link to Comment mumbo_jumbo
mumbo_jumbo's picture

how is oil, gold AND the dollar all gonna rise? isn't the opposite usually the case.......only this time it's different?

Thu, 12/13/2012 - 19:00 | Link to Comment swissaustrian
swissaustrian's picture

The dollar as measured by the DXY is just the opposite of the euro and a few other crappy currencies like sterling. If all the issuers/central banks print into oblivion, we'll get higher commodity prices and maybe a stronger dollar relative to other fiats.

Thu, 12/13/2012 - 19:17 | Link to Comment SAT 800
SAT 800's picture

Ah; a swissaustrian; two of my favorite countries; and the name of my all time favorite economics theory. Yes; you get the cookie with the spinkles on top; that is the right answer.

Thu, 12/13/2012 - 19:14 | Link to Comment SAT 800
SAT 800's picture

Oil and gold rise because of inflation; because we own the printing press. the dollar will rise because we own the printing press. Yes, this time it is a little different. We are doing dollar swaps with the (extremely broke) Europeans; but WE OWN THE PRINTING PRESS; AND ALL THE GUNS. So, they get buy with a little kindness from strangers; us. a little kindness. just enough kindness. but not enough kindness to make our dollar look bad. Get It? People buy gold when they get nervous in the service; and if this shit doesn't make them nervous they must have some really good pills in Europe. Oh, by the way, the Chinese are going to be nervous too.

Thu, 12/13/2012 - 21:58 | Link to Comment klockwerks
klockwerks's picture

I caught the info on the fed swap line with the EU central banks this morning.. We have done this before and my question was at the time and still is, why do we want to swap dollars (the reserve currency) for Euros? The only reason I came up with last time and now again today was we are bailing out EU central bankers again. If the euro falls apart as everyone seems to think that it is going to, what protection do we have>

Fri, 12/14/2012 - 00:17 | Link to Comment smiler03
smiler03's picture

The answer is easy:

z * rainfall in Icleand / akak iq * 0 + NK GDP /0 // qwerty:basic / TD +2** mass Higgs Boson + mc2 + pi r7 / 8 on its side + 3.14159268 

oops I forgot the brackets....means....

Anybody's fucking guess

Thu, 12/13/2012 - 18:49 | Link to Comment ball-and-chain
ball-and-chain's picture

I really can't handle all this stress.

I'm going bat-shit crazy.

All I want is to eat Oreo cookies and listen to the Village People.

Will shit please get back to normal.

I'm begging.

http://www.angrysinner.blogspot.kr/2012/12/yesterday-dragon-lady-cooked-barbecue.html

Thu, 12/13/2012 - 19:04 | Link to Comment SAT 800
SAT 800's picture

Check out the Ganga-Ji series of meditation on your belly button videos on U-tube; it's very relaxing. Shit is always normal; by definition. it just looks different sometimes. holding silver dollars in your hand is very theraputic.

Fri, 12/14/2012 - 02:52 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

what happened to "f*cklloydblankfein"?

Thu, 12/13/2012 - 18:53 | Link to Comment Dr. Engali
Dr. Engali's picture

The "strong dollar" does not jive with rising gold. The only way that we get a "strong dollar"  rally is if one of the major currencies fall apart.

Thu, 12/13/2012 - 19:02 | Link to Comment SAT 800
SAT 800's picture

"Some people" consider the Euro a major currency; it doesn't need to "fall apart" lowly devaluing to 1.05 will be just fine thank you. Gold and the dollar frequently go up together. Europeans and Chinese buy gold when they're worried. they will be worried.

Thu, 12/13/2012 - 18:58 | Link to Comment SAT 800
SAT 800's picture

ORLY; LISTEN UP; IT'S TIME TO SHORT THE EURO. Right now. but get a real commodities contract with the CME; well; you're probably not going to do that. It's a much better deal for you; but anyway--short it now--where it sits. don't use too much margin; leave it a little room to wiggle; and put the rest of your position on in the months that follow; plan to still be shorting rallies next June. I'm short Sept. on the CME and I won't be covering; either I'll be adding to the position as the months roll on. So there you go.

Fri, 12/14/2012 - 03:36 | Link to Comment Orly
Orly's picture

Hey, thanks.  I appreciate that.  :)

The pair is topping out on the Weekly and failed to stitch the upper Bolli over the past few days on the Daily.  Hmmm.  What will happen to equities on tomorrow, Friday?

Thanks for the tip!

:D

Thu, 12/13/2012 - 19:07 | Link to Comment buzzsaw99
buzzsaw99's picture

all citi wants for xmas:

 

their two front teeth

(long-short t-bill arb back)

a nice red sled

(higher commodities coupled with a strong usd)

a warm sweater

(lower domestic labor costs)

Thu, 12/13/2012 - 20:42 | Link to Comment knukles
knukles's picture

a fuzzy warm peter heater

(higher gold prices)

 

a cuddly blow up vibrating sex doll

(higher longer term interest rates)

 

 

Thu, 12/13/2012 - 19:19 | Link to Comment Haager
Haager's picture

A whole lot of predictions -  and maybe two of them will turn out to be correct.

 

Thu, 12/13/2012 - 19:53 | Link to Comment chump666
chump666's picture

Good analysis.

Gold would bid with USD and oil on war, ignoring the pre-bombing run (Iran warm-up) on Palestine would be a grave mistake, China using Nth Korea to squeeze Japan some more.  So geo-political tensions will be the volatility cues for safe haven flows.

EUR is done.  Just saw a doc on Germany, actually Berlin re: 'The Dance with Death' so  Europe will blow apart in 2013.  With or without the madness from the ECB and EU.   As for America, well, HFTs + Obama losing his mind, riots and the Fed printing into Wall Street to stave off extreme lows. That will be the norm. 

Thu, 12/13/2012 - 20:01 | Link to Comment Lost Wages
Lost Wages's picture

Flip a coin, throw a dart or read some tea leaves. Your guess is as good as mine!

Thu, 12/13/2012 - 20:15 | Link to Comment PAWNMAN
PAWNMAN's picture

Gold at $2400? Logically you can make a solid case for it based on the worldwide race to debase currencies and the U.S. far out in front. Unfortunately, there is no logic involved in these "markets". Silver and Gold down huge the day after Helicopter Douche- Bag announces even more money printing?!? Can anyone give me a rational explanation PLEASE?

Thu, 12/13/2012 - 23:55 | Link to Comment are we there yet
are we there yet's picture

My take is investors see The future dollar less ugly than the Euro, and strangely see liquid dollars as a place to retreat to.  But this view is a form of quiet pre panic, and will change down later if true. Then Gold will eventuially go up either way.

Thu, 12/13/2012 - 21:24 | Link to Comment alp
alp's picture

This is funny. :) And good analysis.

Fri, 12/14/2012 - 04:44 | Link to Comment TacticalZen
TacticalZen's picture

There seems to be distinct groups of very human responses to this slow motion train wreck. 80% - complete denial. Nothing will happen. 10% - scared but frozen like deer in the headlights. 5% - fully aware, somewhat prepared. This likely describes most ZH fans. The rest - approaching doomsday peppers with bunkers and food stockpiled for years. JWR comes to mind. I fear he could be right, just early. I remain amazed at how well we are doing while running on fumes. Anyone want to speculate on the black swan event of 2013 that creates the next down leg? Richard Duncan proposes an actual solution in his book "The New Depression" but how likely is that when Washington DC can't avoid the fiscal cliff? Maybe more important, what triggers should we be watching? Capital controls? Mandatory US bonds in your IRA? Visas needed to leave the US. Those are the things I want to watch closely.

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