The One Chart Stock And Bond Holders Should Be Paying Attention To

Tyler Durden's picture


We have shown divergence after divergence as an indication of the market's relative exuberance. One of the key 'supports' for these hope-driven nominal levels has been forward inflation expectations. In fact, inflation expectations have become the anchor for higher equity (P/E) valuations and yet, they remain unconvinced that this time is different. As Barclays' Jordan Kotick notes, perhaps it is inflation break-evens lack of confirmation of new equity highs that is the chart to watch for the 'believers' to really think this time is different.

Breakevens are NOT making new highs...


even as stock valuations are...


Charts: Barclays and Bloomberg

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Wed, 02/13/2013 - 12:55 | 3240465 Iocosus
Iocosus's picture

That's the inedible inflation rate. Go food shopping, more like 10%.

Wed, 02/13/2013 - 13:01 | 3240483 goldnguns
goldnguns's picture

Strange.  My HP printer says I have too have experienced inflation.  I now require 4 sheets whereas I used to only require 3.  The key is buy the industrial quality 5000 page ink cartridges.  Money savers, those. 

Wed, 02/13/2013 - 14:17 | 3240651 Freddie
Freddie's picture

Food is more like 15 to 20%.  Some of the prices are getting insane.  Hope & Change. 

Wed, 02/13/2013 - 13:00 | 3240480 optionsman
optionsman's picture

he would be somewhat correct if the Fed wasnt soaking up so much long end Treasuries. the 2yr and 5yr curve points- seriously?

Wed, 02/13/2013 - 13:01 | 3240485 SheepDog-One
SheepDog-One's picture

There can only be so much 'expansion' the world is only so big, just can't support 50 new billionaires a day no way.

Wed, 02/13/2013 - 13:04 | 3240499 mattdubz86
mattdubz86's picture

inflation's heading lower? My cable bill just sent me a notice saying they are rasing rates across the board, the same box of wheat thins I've been buying has shrunk while the cost has stayed the same; my yearly raises don't even keep up with inflation.


but this is all bullish, so BTFD

Wed, 02/13/2013 - 13:39 | 3240563 Seasmoke
Seasmoke's picture

i have been fighting with cable companies and water cooler companies the past 2 weeks........they are $3 me here and $2 there, but not RAISING the base price, but charging new fees .........its a disgrace and i have been rude to some ladies, who have nothing to do with......Father, please forgive me

Wed, 02/13/2013 - 14:18 | 3240653 Freddie
Freddie's picture

F TV and Hollywood.  Pull the plug on them or keep supporting The Matrix like a drones/Dorner.  People who watch TV are retartds.

People are sheep-S.  S added for effect.

Wed, 02/13/2013 - 20:41 | 3241603 MachineMan
MachineMan's picture

Stop buying Wheat Thins.

Wed, 02/13/2013 - 13:06 | 3240500 spekulatn
spekulatn's picture

On a much smaller scale, shares of EZCH are getting a$$-chewed after reporting better than expected numbers. Talk about divergence. Make a profit get whacked 20%. 

Wed, 02/13/2013 - 13:15 | 3240512 ZippyBananaPants
ZippyBananaPants's picture

This article would mean so much more if I knew what a Break-Even was?

Wed, 02/13/2013 - 13:37 | 3240556 Seasmoke
Seasmoke's picture

81-81 ..... hoping the Royals get there this year

Wed, 02/13/2013 - 14:27 | 3240675 inevitablecollapse
inevitablecollapse's picture

As a kansas citian, i applaud this, even if the context was misplaced!

Wed, 02/13/2013 - 14:04 | 3240619 LongSoupLine
LongSoupLine's picture

...if I knew what a Break-Even was?



Here try this.  Hell, I'll even put it in a fucking sentence:


"That lead pipe wouldn't fucking break, even as I hit Bernanke in the fucking head with it at full fucking retard velocity."


Hope that helps...

Wed, 02/13/2013 - 14:36 | 3240709 gmrpeabody
gmrpeabody's picture

Thanks Soup..., it really helps when used in a sentence.

Wed, 02/13/2013 - 13:31 | 3240543 slightlyskeptical
slightlyskeptical's picture

The truth is that the major averages do not include dividends reinvested. On that basis the S&P 500 total return broke through it's 2007 highs in August of this year. Of course the people on the street don't like tot alk about that because if you include dividends in their performance they are lagging by another 2+%.

For the record if you have a broker or advisor that compares your returns with the base S&P 500 price return, i would fire them. They are being dishonest.

Wed, 02/13/2013 - 15:28 | 3240850 A. Magnus
A. Magnus's picture

"The truth is that the major averages do not include dividends reinvested."

They don't include brokerage fees either, because those usually outpace the pittance given to mere shareholders as dividends...

Wed, 02/13/2013 - 13:52 | 3240586 SmoothCoolSmoke
SmoothCoolSmoke's picture

I've concluded Bernankie is just not going to let the markets correct.  He can't, because he built his whole reputation on studying the Great Depression.  When the Dow hit bottom after Black Friday (around mid 1932), it climbed steadily for about 5 years.  It rose from about 42 to about 194, recouping about 50% of the pre-Black Friday peak.  In mid 1937, it turned down again, and lost 50% in about a year.

The current markets are only about 4 years post bottom, but they've recaptured almost all of the pre-crash level.  Point is, a 50% fall from here would prove that Bernankie learned nothing from all his study of the GD.  I doubt he will let that happen.

Wed, 02/13/2013 - 14:02 | 3240613 El Viejo
El Viejo's picture

The Fiscal Cliff of 1937 by Steve Keen as a warning to congress:



Wed, 02/13/2013 - 14:15 | 3240646 eddiebe
eddiebe's picture

"One of the key 'supports' for these hope-driven nominal levels has been forward inflation expectations"

The keyword here is 'Nominal'.

Wed, 02/13/2013 - 14:39 | 3240716 WhiteNight123129
WhiteNight123129's picture

You need dumb money to come back in stock and spend in good and services. After a while the spending in goods and services push inflationary pressure because we have a lot of base money in the system (thanks Ben). At that point Fed has to withdraw the dough, while long bond curve keep steepening. So the dumb money is going to shoot it its foot by getting out of cash. Classic.

Also in the meantime we will have hourrah inflation is not very high and we are back to ~normal~ i.e. releveraging. In fact we will have a different expansion based on the spending of redundant base money (Go OBAMA with raising the minimum wages, the corporate margins are going to look funny. But first euphoria.


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