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When Gold And Stocks De-Correlate

Submitted by Tyler Durden on 04/18/2013 13:40 -0400

The structural collapse in paper gold prices has been met a seeming 'money-on-the-sidelines' flourish of investors looking to buy the physical asset. However, when asset relationships break-down so significantly, as gold and stocks have in the past 90 days, one has to take a step back and think "what changed?" As the chart below shows, the last time the correlation between stocks and gold was this negative, things did not end so well for the high-valuation equity momentum chasers...

And just for fun, from Barclays' Jordan Kotick, the last time the commodity/USD relationship broke down to such an extent was just ahead of the 2008 equity market decline.

It appears things have 'changed'...

Charts: Bloomberg and Barclays

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Thu, 04/18/2013 - 13:43 | 3467185 SolidSnake961

it is just a transitory issue

Thu, 04/18/2013 - 13:47 | 3467215 ParkAveFlasher

It's only a flesh wound.

Thu, 04/18/2013 - 14:26 | 3467355 LetThemEatRand

What are you going to do [market], bleed on me?

Thu, 04/18/2013 - 15:33 | 3467672 Thomas

I've spent years building a portfolio supposedly uncorrelated with the S&P. I've finally achieved it and discovered that it is painful.

Thu, 04/18/2013 - 15:36 | 3467683 Thomas

I have begun wondering what a dislocation between paper and physical gold would (will) look like. Physical shortage strikes me as the most likely. Drop in paper gold was one I pondered. I've begun wondering if we are seeing it finally. Too early to say for sure but some of these symptoms are suspiciously similar to my best guesses. Any other symptoms come to mind?

Thu, 04/18/2013 - 15:50 | 3467746 Missiondweller

I've wondered the same thing and came to the same conclusions. Its already happening to gold & silver on the retail level. I had assumed it would show first on the wholesale level first. I've been looking for some signs of that but its not like you hear about China bitching about paying $100+ ounce premium to have the physical delivered since they are accumulating quietly. Maybe we will hear about wholesale premiums in silver from electronic or solar makers.

I definitely think you're on the right track.

Thu, 04/18/2013 - 15:06 | 3467555 SpiceMustFlow

It's a shrubbery!

Thu, 04/18/2013 - 15:18 | 3467606 Ying-Yang

shrubbery.... you mean bush? Sure blame bush (sarc)

Thu, 04/18/2013 - 15:09 | 3467569 Motorhead

Come on, you pansy!

Thu, 04/18/2013 - 15:21 | 3467613 Ignatius

All paper will burn.

Thu, 04/18/2013 - 15:32 | 3467664 midtowng

global economy going into recession and commodity prices crash and treasury yields approach zero.

Why shouldn't the stock market keep going up under these conditions?

Thu, 04/18/2013 - 13:53 | 3467245 samcontrol

so i'm transitory fucked?!

Thu, 04/18/2013 - 14:09 | 3467312 kliguy38

only if you're playing paper

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/18_Rule_-_More_Evidence_Of_A_Massive_Run_On_Physical_Gold.html

Thu, 04/18/2013 - 14:39 | 3467330 derek_vineyard

gotta call you on this one tyler----according to this chart stocks were undervalued for several years; the crossover occuring near start of 2013. thus you are hypocrites.....you should have been pushing equity under-valuation pre 2013.

hey pussies---refute my comment, don't sheeple to tylers with arrow down

Thu, 04/18/2013 - 14:48 | 3467428 EclecticParrot

It appears our friend Derek may be drinking up the 'vineyard''s profits, rather than focusing on picking the grapes, which is likely his role if he doesn't understand that correlation doesn't equal causation, and that the graph is more a statement of the respective positions of gold vs. stocks as "safe haven" investments vs. "risk on" vehicles, and one lagging the other during positively correlated periods doesn't indicate undervaluation. Instead, it seems Mr. Durden may be suggeting gold often leads stocks in evidencing the relative "risk off" trade. Now then, don't throw out those skins, our we'll all be stuck with insipid, sweet white elixir.

Thu, 04/18/2013 - 15:03 | 3467487 derek_vineyard

chart porn....tyler's uses it all the time, but only picks the portion of the chart that supports his conclusion. and the conclusion is that the sky is falling (of which i dont necessarily disagree) but tylers shouldn't twist every chart/news item/world event to support their pre determined non negotiable conclusion. sf giants lost 4-3 yesterday and look at my chart...when that happens the probability of a world collapse has been made greater.

Thu, 04/18/2013 - 15:21 | 3467614 Ying-Yang

chart twisting is understood in the fight club

Thu, 04/18/2013 - 15:34 | 3467662 Smiddywesson

Derek's got a point there. This can be a scary bear site, and when you are a scary bear, you'll find a scary argument in every chart. Whether that's exploited intentionally or not is up for debate, but not by me, because I'm a scary bear. LOL

Thu, 04/18/2013 - 15:38 | 3467690 Jack Napier

It doesn't take a rocket scientist to know that 400 times leverage = eventual run for the underlying assets with broken counter party risk chains. The fix for collapsing bubbles was a bigger bubble, how ingenious.

Consider that the only reason ZH has its membership is because they are highlighting what is going on. If the sky wasn't falling nobody would know about this site.

Thu, 04/18/2013 - 14:56 | 3467483 Gazooks

dereek isn't harvesting or drinking, just now pissing and lurking the men's room

Thu, 04/18/2013 - 15:01 | 3467515 derek_vineyard

the tylers want a world collapse because their ego is so large that they'd rather be right than alive. everything that happens is all a precursor of doomsday. and they offer no real solutions....except to root for a crisis. watch out what you wish for so the cliche goes. tyler's have been wrong on almost all market calls for 5 years .....the ego is all that matters now.

Thu, 04/18/2013 - 15:09 | 3467553 RSBriggs

The Tylers are authors on an entertainment blog owned by a major media outlet. Doom and gloom and Bitcoin trashing sells clicks. Unicorn farts and skittles don't. If it's Unicorn farts you want, you can get that from any lamestream TV outlet, CBS, MSNBS, ABC, FOX, CNN, etc., or the ultimate daily source, the New York Times.

Thu, 04/18/2013 - 15:17 | 3467599 derek_vineyard

i agree....doom and gloom sells

so why the hero worship on this website by the sheeple?

Thu, 04/18/2013 - 18:28 | 3468616 Bizaro World

Derek: So do unicorn farts. I don't subscribe to the "hero worship" idea but do think there are serious problems in our financial system and know the main stream media presents rose colored canned responses/explanations that consistently favor banks and/or politicians. Tylers present the flip side. But there are so few news outlets that present the flip side, and even fewer that can give you a chuckle while presenting it.

Present a better alternative for real financial news with some humor or quit bitching about the Tylers.

Thu, 04/18/2013 - 15:17 | 3467596 Doña K

derek, the point here is that basically we are all wishing for a better government by exposing the fraud and trying to be funny and sarcastic at the same time. ZHedgers are not necessarily traders or even high roller investors. They are mostly switched on individuals who can thinkfor themselves and they mostly have like minded opinions. Your opinion can be heard here but don't be accusatory. Just make some comentary backed by some of your own facts and then pehaps you may see fewer down arrows.

Some of us have been here for 3 years or more and we have seen people coming in and finding the light about evil.gov

over to you.

Thu, 04/18/2013 - 15:21 | 3467611 derek_vineyard

dona

ive been a contrarian for decades........but this blind hero worship of everything written on this site has become absurd

Thu, 04/18/2013 - 15:23 | 3467630 Doña K

Your opinion is respected. But don't forget you can turn ZH off just like most of us turn off CNBC. But at least here you can read very funny stuff very often, no matter what you believe. Vis a vis Bonzai 7

Thu, 04/18/2013 - 15:53 | 3467762 SpiceMustFlow

I'm not high net worth and struggle with some of the charts occasionally, but I enjoy ZH mostly (maybe 60-40) the funny comments. After finding ZH I can't read the comment section anywhere else, so regardless of whether the vast majority here are like minded and therefore susceptible to the tylers' chart porn, it's nice to have a forum where you aren't dealing with the mental dregs of society.

Thu, 04/18/2013 - 15:56 | 3467780 Quinvarius

The economy actually is as bad as this site portrays. Being a contrarian for the sake of being a contrarian is not a winning game. The financial graves are full of contrarians. You become contrarian when the crowd is doing something facts don't support.

If you want to be a contrarian, watch this series: http://www.youtube.com/watch?v=Q8e-e9xtFWA You will know what to do.

Thu, 04/18/2013 - 17:19 | 3468206 A. Magnus

Blind hero worship? Where the fuck are you finding THAT besides the mainstream media in regards to everything Obama? I've been carousing these forums for a couple of years now and I have YET to see a single person offer to let the Tylers teabag them because of their sterling market acumen.

If you're gonna make accusations you might want to offer something substantial...like say EVIDENCE...post an example or kindly SHUT THE FUCK UP.

Thank you...

Thu, 04/18/2013 - 15:05 | 3467543 Hmm...

I agree with Derek.

on the one hand, stocks evidently correlate VERY closely with Gold

thus, when gold breaks down like this one would expect Stocks to also fall.

however: another way to look at this data set is that the same inflationary pressures that have shot stocks to the moon...

also shot gold to the moon.

I personally own a lot (for me) of gold (about 50 oz) and no stocks. (my IRA is filled with CEF and my 401k with short term Government Bonds). I have no debt (everything paid and clear including house).

thus I prefer for gold to do well and for stocks I could care less...

but one must understand that we are clearly in an era where the Fed has forced asset prices up up up. that includes equities, house prices, gold, silver, paintings, and everything else under the sun.

Oil is a somewhat special case given that there is a downturn (crash?) in worldwide first world demand right now.

Thu, 04/18/2013 - 15:12 | 3467576 Bay of Pigs

FED forcing gold and silver up?

That is absurd.

Thu, 04/18/2013 - 16:37 | 3467950 Hmm...

"FED forcing gold and silver up?

That is absurd."

have you not been paying attention? you don't think any of the liquidity pumped into the market by the various Central Banks found its way into commodities including Gold?

4 words for you: Paulson's billion dollar loss.

you think he's the only hedgie in the gold space right now (paper and physical)?

there is rampant price appreciation in almost ALL assets, INCLUDING Gold and Silver. Much of this is Fed Induced. Sure, the Fed doesn't WANT the money going into gold... but go there it will.
(Why do you think I have bought 50 oz of PHYSICAL gold since 2009?)

Thu, 04/18/2013 - 20:38 | 3469128 Bay of Pigs

The gold bull market started way before trillion dollar deficits and QE. GLD and SLV are paper shams and frauds and are being used to suppress the price.

Thu, 04/18/2013 - 15:16 | 3467584 James_Cole

Derek is right and you are correct:

but one must understand that we are clearly in an era where the Fed has forced asset prices up up up. that includes equities, house prices, gold, silver, paintings, and everything else under the sun.

It's called leverage, nothing is immune. Seemingly 99% of the commentators on here cannot understand this simple concept.

Thu, 04/18/2013 - 15:28 | 3467618 Bay of Pigs

ZH has covered the gold story quite well for years. Maybe you should read some of those posts and get up to speed?

Thu, 04/18/2013 - 15:29 | 3467647 derek_vineyard

james-----everything appears overpriced to me. i see no safe harbor. i would say if i could store a variety of commodities i would at least break even with inflation or deflation.......but that really isn't physically possible. all other investments are pure gambles today and i see no high probability long term strategy. ive advised my son to spend all his money and enjoy....dont invest in anything currently.

Thu, 04/18/2013 - 23:52 | 3468655 Gazooks

no 'safety' for anyone, but your son still deserves better advice if he intends any future.

Thu, 04/18/2013 - 13:58 | 3467274 cspg

supply shock risk. hoarding in 2008/liquidating today

Thu, 04/18/2013 - 18:20 | 3468582 GoldForCash

Want to make money this Time around? Place your bets in the opposite direction that money was made in 2008....

Thu, 04/18/2013 - 18:24 | 3468596 GoldForCash

Want to make money this Time around? Place your bets in the opposite direction that money was made in 2008....

Thu, 04/18/2013 - 13:43 | 3467188 Dr. Richard Head

All printers on deck......All printers on deck!

Thu, 04/18/2013 - 13:46 | 3467209 TeamDepends

Where's Jerry Lewis? We could have a Labor Day Printathon! Oh, wait....

Thu, 04/18/2013 - 13:47 | 3467214 xtop23

QE4 incoming. $85 billion a/mo ain't cutting it.

Thu, 04/18/2013 - 14:00 | 3467278 css1971

Japan is doubling that all on it's own, no?

Thu, 04/18/2013 - 14:05 | 3467298 McMolotov

We should start naming QEs the way we name storms, and we can choose the names of those people who've done the most damage.

i.e. QE Alan, QE Ben, QE Cuntface (that's for Obama), and so forth.

Thu, 04/18/2013 - 14:28 | 3467364 I am more equal...

Remember to categorize:

Cat 5

Cat 4 - I think Katrina was a Cat 4 at landfall.

Cat 3, etc.

Thu, 04/18/2013 - 16:05 | 3467828 Wile-E-Coyote

Lol....... I nearly spat my beer out at "Cuntface".

Thu, 04/18/2013 - 13:56 | 3467242 reload

Wether the Gold decline was intentional (and incidentaly I am not in the conspiracy camp - but the, what hidden liquidity crunch just happened? one) or not - the money on the sidelines ready to pounce on cheaper physical will not have gone un noticed.

It will prompt two emotions in our financial overlords - fury that jo blogs has any disposable to spend on barbarous relics, and fury that he has not been successfuly hearded into the Equity shearing pen.

Thu, 04/18/2013 - 13:44 | 3467196 bnbdnb

Reserves, reserves, reserves. Crash won't happen. Slow melt to a new correlation, maybe.

Thu, 04/18/2013 - 13:45 | 3467204 Jonas Parker

Long on linen paper and green ink...

Thu, 04/18/2013 - 13:48 | 3467213 HD

Stocks go down?!! Simply unpossible. Obvious propaganda by the tinfoil hat brigade.

DOW 36,000 Moar stronger recovery on the way! BTFD!

Thu, 04/18/2013 - 13:49 | 3467216 SheepDog-One

Quick Bernank press Alt-P harder! You're our only hope fearless Maniacal Monetizer!

Thu, 04/18/2013 - 14:13 | 3467318 eclectic syncretist

Ben Bernanke is printing like Mohammed Atta in the cockpit of a fully fueled jumbo airliner closing in on his target.

Thu, 04/18/2013 - 13:49 | 3467225 laomei

As much as I like gold, this is a worthless post. There is plenty of de-correlation to the point where the only thing that matters is that gold is continuing to go up in value over time, while stocks are far more volatile.

The reason I buy gold is because at the end of the day, it'll never be worth $0. It might be worth $1, but it'll never be worth $0. Stocks on the other hand... yes, I do play with them here and again, but only on receipt of insider intel. Profits get banked in gold and hard assets that maintain value.

Thu, 04/18/2013 - 15:45 | 3467713 Smiddywesson

Thu, 04/18/2013 - 13:50 | 3467227 Pareto

Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver. Buy gold & silver.

But what if price falls?

What about deflation?

Its that easy.

Thu, 04/18/2013 - 13:54 | 3467241 Kiss My Iceland...

Sorry, I can't resist ....

http://www.youtube.com/watch?v=rY-XDQN6ipE

Thu, 04/18/2013 - 14:18 | 3467335 Pareto

Ohhh for surrrrrreeeee. lol. The birdies in the trees "woo hoo", and Ives yakking while the song plays on. fucking hilarious.

Thu, 04/18/2013 - 15:01 | 3467519 Boston

Orders FILLED buddy. Orders filled.

I've never bought more ounces (of both) at once than I have in the last 3 days.

Thu, 04/18/2013 - 16:07 | 3467834 Wile-E-Coyote

I stacked more Silver today........................... Fuck YOU Blythe.

Thu, 04/18/2013 - 13:52 | 3467235 Pimp Juice

Off topic but check this out:

Foreclosure Checks Bounce

http://abcnews.go.com/Business/foreclosure-settlement-checks-bounce/t/st...

Thu, 04/18/2013 - 14:17 | 3467332 deus x machina

heck, they are bouncing unemployment checks...they are calling it a computer error.

Thu, 04/18/2013 - 20:50 | 3469184 moonstears

So the checks come from Rust Consulting, so most "winners" of settlement will toss it in the trashcan as junk mail, their "$300 settlement". Brilliant fags, those bankers.

Thu, 04/18/2013 - 13:53 | 3467239 StarTedStackin'

Yawn

Thu, 04/18/2013 - 13:58 | 3467266 francis_sawyer

How about some charts to let us know how well 'chartists' perform at flipping burgers?...

Thu, 04/18/2013 - 14:09 | 3467303 fonzannoon

Wow. Just wow.

http://www.bravotv.com/princesses-long-island/season-1/videos/these-princesses-know-what-they-want

Thu, 04/18/2013 - 15:33 | 3467665 SmallerGovNow2

shows like that and real life like that show you why we are completely fucked...

Thu, 04/18/2013 - 14:00 | 3467267 BanjoDoug

There is sure a lot of speculation that the current DIP in prices has caused the buying frenzy. I think this is short sighted.... sure the prices are down for G & S, but is it more likely the buying surge to due to economic uncertaintly and hyper-inflationary fears. After all fiat DOLLARS are really only worth just what they are printed on, nothing more. So even though prices are down, I would speculate that buying would be happening anyway. The slam-down on prices however does benefit certain short prositions and does encourage Ma & Pa Sixpack to sell their stash and head back to fiat.

As another thought, you could transfer those fiats today in to something with productive capability like machine tools, etc - anything that can be used to make things on the other side of this edomite-created-bankster-disaster looming around the corner.

Thu, 04/18/2013 - 14:08 | 3467308 reload

I think you are wrong abaout `ma and pa sixpack` selling.

Do you know anybody panic selling coins and bars?

As for making productive investments, machine tools etc - nice idea, but very hard in a world of overcapacity. But if you are connected enough to have crony government contracts and slave labour, carry on and good luck.

Thu, 04/18/2013 - 14:18 | 3467337 fonzannoon

I have seen people selling over the last week. Physical. Just nowhere near enough to compete with the buying.

Thu, 04/18/2013 - 14:22 | 3467341 eclectic syncretist

JP morgans registered gold with COMEX continues to decline swiftly. Should be at less than a million ounces by the end of the month if the current rate of depletion holds. If they are in any way behind the 14 million ounce shorting that just trashed the PM markets they obviously do not have the goods to cover.

Likewise, premiums for physical online are very high. It's all breaking apart for the banksters.

Thu, 04/18/2013 - 14:25 | 3467352 fonzannoon

the place i go to is tiny, and they said they are getting calls from all over the country and outside the country

Thu, 04/18/2013 - 14:00 | 3467277 kds_xsl

We need real gold

Thu, 04/18/2013 - 14:05 | 3467284 havin' thangs

Can anyone explain why UNG is not following the herd?

http://i.imgur.com/hJcDott.jpg

Thu, 04/18/2013 - 14:17 | 3467329 the grateful un...

i have an article from Barrons, April 13 Time to Dance the Contango, but with NatGas you were buying twice as many BTU per dollar as you were with say gasoline. you would expect that spread to narrow.

Thu, 04/18/2013 - 14:03 | 3467289 kevinearick

Endgame

The global capital cabal is committed. It cannot turn back and it has no exit. The container ship complex and the artificial oil demand it created is collapsing, along with the WalMart business model of importing free product and paying on sale, as is the US Navy monopoly of trade. Because it is based upon dc electronics, and anyone with kernel space can intercede, WWIII will be asymmetric. The point of bombing is to lock populations into starvation and disease. The result is always a food war and because of perennial planting, soil deprivation, biological weaponry, and martial law prototyping, the result is going to look like Haiti. You might want to be where independent farmers with viable seed and land want you to eat. Gold is not a bad bridge to the end of local economic viability, but you can't eat it, and once this starts, all the bridges will be taken out.

The pathway to the future always goes through commodity currencies, as it did during the Revolution, but you go ahead and prove me wrong. The cartel is implicitly offering individuals extortion of full participation or total economic collapse, and more and more economically viable individuals are telling it go F- itself. The first tenet of war is to destroy the food supply. As communities split off, revolution becomes possible, and once that happens...The American China prototype of communist capitalism is collapsing into greater socialism, proving once again that importing a failed culture to fix a failed culture can only lead to greater collapse. Never, ever, never depend on a banker. Always build your own bank.

What do you see happening? If you price the stock market in commodity units...

Thu, 04/18/2013 - 14:22 | 3467345 bsdetector

Kevin what do you mean by build your own bank? In other comments you have mentioned a family bank. What are your thoughts here?

Thu, 04/18/2013 - 15:41 | 3467566 kevinearick

if you take care of the land, the land will take care of you, for generations to come. If you have 7 kids that love you and you take reasonable care of yourself, you will not need anything from government. The empire, however, must have your children to perpetuate itself, because the majority always accepts the false assumptions that rest as its foundation, that it can reasonably rely on its ability to take your estate away and divide it among itself, relying upon your children instead of its own. Train your children accordingly.

Technology makes and breaks humanity. The point of the Internet is to avoid all the bloodshed to the extent possible, and allow the majority to simply devolve into non-existence over time. Government is not determined to grant homosexuals access to your marriage, children, and health benefits by accident. Nothing against homosexuals personally, but they are not viable. Empires come and go like seasons, distilling DNA.

you don't want to be in San Francisco (empire margin root) or Ames, Iowa (biological warfare). Fiat can only produce derivatives. Commodities can produce both derivatives and integrals.

Thu, 04/18/2013 - 14:04 | 3467297 Fortunes Favor

Precious Metals Outlook: US Dollar Breaks Down From “Key Turning Point” Top

http://blog.rosenthalcapital.com/2013/04/precious-metals-outlook-us-dollar-breaks-down-from-key-turning-point-top/

Thu, 04/18/2013 - 14:09 | 3467306 WTF_247

They are still not really selling most names. Stuff like CAT - yes. But most stocks are only a single day push higher from making yet another new high. Most also have little to no resistance retracing any selling - futures move down 10, stock sells 50c. Futures move back up 10 stock moves up 60c. There are a lot of names that are just ignoring the sell this week. They are slightly down but nothing out of the ordinary. Funds are still net buyers of many names.

Trying to hold support in futures near 1540. I am shocked that no momentum based shorts would come in and just wail on it and crack it down big to the point where they get it to feed on itself. The volume drops off near the lows but that always ends up in a push higher, not lower.

Thu, 04/18/2013 - 14:09 | 3467307 The Dancer

Doug, I think the markets are saying that we're going to see deflation 1st...take a look at sugar...below cost of production...for example...look at the short term trends of crude, copper,PMs, etc...cotton...these markets are not inflating....I'm betting on deflation 1st, then maybe hyperflation...shorting stocks looks like a great bet right here and now...jmho

Thu, 04/18/2013 - 14:16 | 3467323 polo007

According to Deutsche Bank:

http://www.scribd.com/doc/136739584/Gold%E2%80%99s-New-Reality-Deutsche-Bank

Executive Summary

This week has witnessed a once in a generation move in the gold price. On Monday, daily losses in the gold price were on a par with the declines that occurred once in January 1980 and once in February 1983.?

2013 will therefore most likely mark the first year gold has posted negative annual returns since the year 2000. In our view, what had beena reliable source of positive returns for the past 12 years has ended.?

While we may see cyclical strength, for example if the US succumbs to a mid-year slowdown which reignites QE expectations, we believe we are witnessing a structural change in the gold market such that many of the forces that had powered gold higher over the past decade are fading and in some instances moving into reverse.?

In our view, the next step will be to assess the equilibrium price for gold. We explore various techniques to establish fair value. This includes estimating the level of the gold price which would eliminate the premium of gold to other commodities that has appeared since the onset of the financial crisis.

Thu, 04/18/2013 - 14:15 | 3467327 fonzannoon

So Germany does not want it's gold back?

Thu, 04/18/2013 - 15:26 | 3467638 Bay of Pigs

Quoting Deutsche Bank?

LOL...

Thu, 04/18/2013 - 14:28 | 3467356 Pareto

Yeah whatever. WTF is the "equilibrium price of gold". Structural changes moving gold in reverse? What would that be, SOUND MONETARY POLICY? If government lets yields (rates) rise, well, then I'm with you. If not, your full of shit.....again.......still. Price falls notably, and fuck everybody's got their crystal ball out, when the reality is, they don't have a fucking clue. they leave out the most important element in their analysis......SANITY! Hey Deutsche Bank, whats the price of AAPL this time next year - do you see some structural changes there too? What about GS? Assclowns

Thu, 04/18/2013 - 14:26 | 3467351 Yen Cross

O/T I can't believe VIX is only 17.27. What a joke. http://www.bloomberg.com/quote/VIX:IND

Thu, 04/18/2013 - 14:29 | 3467360 the grateful un...

crudes off too, and this is the aha moment. first thing is stocks knee jerk higher, because cheaper gasoline, good for the economy, right? wrong, cheaper gasoline means fewer profits at Chevron, less drilling for oil, less exploration. it means that assets as a group are falling. that must be good right? 25 cent gasoline, 10 cent loaf of bread, and 1/4 million for a house? well that's too much, in a 1950s economy. and looks who's holding all that inflated mortgage paper. the Federal Reserve. so what's next for Ben impoverished balance sheet? better buy gold, and crude oil and keep those asset prices high, or hand the mortgage industry hot potato back to the UST. as President how would you like a trillion worth of mortgage paper worth less than half that, in a 1950's economy, tax base, etc. so they print money and they buy gold, but first they need an attractive entry point, wink wink, nod nod.

Thu, 04/18/2013 - 14:30 | 3467366 The Dancer

I do fear that the FED will double down because they have little other choice at this point...unless this is/has been the plan from the beginning...to get all players stuck to the tar baby/invested...then distribute, go short, and collapse. This will put them in total control of the planet...I'm not exaggerating! Well, that's the way I'm betting this game going forward...FORWARD!

Thu, 04/18/2013 - 14:33 | 3467376 lasvegaspersona

In mid December fofoa noted a change. It was confirmed on the ECB balance sheet report Jan 4,2013. Since then several other items that signaled a change in attitude by the ECB have confirmed. There is a withdrawal of support of the paper gold market which could presage lower gold prices and a split in paper/ physical prices.

Thu, 04/18/2013 - 14:37 | 3467384 Agent 440

So gold is crap. Now buy my GM bonds you bitchez.

Thu, 04/18/2013 - 14:43 | 3467404 The Dancer

I'm not buying anything that I don't need or will need...I'm a seller at this time!

Thu, 04/18/2013 - 14:46 | 3467417 czarangelus

I'm not convinced the stock market will ever drop. It's going to 20,000 - and gasoline is going to $12/gal

Thu, 04/18/2013 - 14:48 | 3467439 polo007

According to Bank of America Merrill Lynch:

http://www.scribd.com/doc/136285938/The-S-P-500-Rally-From-Mar-2009-is-the-6th-Best-Rally-Since-1929-Bank-of-America-Merrill-Lynch

The rally from March 2009 is the 6th best rally since 1929

The S&P 500 has rallied 127.85% from the 09 Mar 2009 low to the 06 March 2013 high. This is the sixth best rally or “bull market” for the S&P 500 since 1929. The rally from March 2009 is four years old and is the eight longest bull market. We are defining a bull market as a rally of at least 20% without a 20% correction using daily closing basis data. There are 25 of these bull markets going back to 1929 with an average return of 103.5% and a median return of 73.5%.

Thu, 04/18/2013 - 14:49 | 3467452 DebtSlaveZombie

Sell the SLW Apr 22 calls from yesterday. Bought in at 0.60 for 20 calls. Sell at 1.20. Nice 1200.00 profit.

Thu, 04/18/2013 - 14:53 | 3467474 Keynesian Mess

Good thing that it's different this time.

It is different right?

Right?

Uh oh.

Thu, 04/18/2013 - 14:54 | 3467477 polo007

Effective Federal Funds Rate from 1954 to 2013:

http://www.scribd.com/doc/136581486/Effective-Federal-Funds-Rate-1954-to-2013-Federal-Reserve

Thu, 04/18/2013 - 15:44 | 3467715 Henry Chinaski

buy the fucking decorrelation

Gold. Bitchez!

Thu, 04/18/2013 - 16:38 | 3467966 Hmm...

somewhat serious question:

is there any data point that would not mean to buy gold?

Gold goes up? Buy

Gold crashes? Buy the Dip

Gold correlates very closely with stocks? Buy

Gold correlation breaks down? Buy

Do I think there are reasons to buy gold? Yes. but it is risky. Don't think so? the last week proves otherwise. And yes, I know that I had 50 oz of gold last week and 50 oz this week, but it's worth a lot less with regards to other assets than it was last week.

just like a house in Vegas. Sure a house in vegas from 2007 is still a house in vegas in 2013. but it's worth a hell of a lot less.

Thu, 04/18/2013 - 16:46 | 3467990 StarTedStackin'

I'm not buying these charts, unless you can show what happened last time stocks and gold decorrelated after massive QEs........

uh huh

Thu, 04/18/2013 - 16:46 | 3467996 ZIRPThis

So, are we looking at another October not-so-much-a surprise 5 years after the last one, or do we even have that long? These de-correlation numbers are hard to ignore. However it happens though, this will be the most predicted economic collapse in history.

Thu, 04/18/2013 - 17:01 | 3468069 Kirk2NCC1701

Unlike the rest, I have to call "Bollox!"

In the first graph you show the end of one strong decoupling and the beginning of another. What's missing is the timeline to the left, showing the start of that decoupling -- which allows us to compare that start to the start of the recent decoupling. We need a start/start comparison.

Even so, I see a long period of decoupling going on in that first graph. Meaning: The Fed/Markets can play games with gold longer than we can stay solvent.

Thu, 04/18/2013 - 17:21 | 3468217 jimmyjames

What's missing is the timeline to the left, showing the start of that decoupling

************

Not up to date but this shows the left side start of the decoupling-

http://www.acting-man.com/blog/media/2010/05/Gold-vs.-SPX.gif

Thu, 04/18/2013 - 17:37 | 3468338 ReactionToClose...

tradition .... US Mint told me to bugger off ..... they won't come off their premium for gold coin sales .... they are likely the only profitable arm of the federal gov't.

How can that be when every financial commentator is mocking those who think gold holds some function in this world of instant, press a button liquidity ...

... my my, how lonely to be an outcast .... I never could keep up with the Jones anyways .... can't help my limitation of being naturally contrary. Oh wait, isn't that what all the genius investors tout ... being naturally contrary to the 'herd'? Never mind, I'll put my tin foil hat back on ... and keep looking for the angry white American that Salon magazine hopes did the Boston tragic bombing ...

Thu, 04/18/2013 - 19:43 | 3468906 polo007

According to Macquarie Research:

http://www.scribd.com/doc/136799469/Corporate-Bond-Rate-CPI-Inflation-Implies-S-P-500-at-1742-Macquarie-Research

Corporate Bond Rate + CPI Inflation Implies S&P 500 at 1742

Our research theme for several months has surrounded the ongoing Risk-off Rally in the equity markets, highlighting sector preference for defensives and yield plays, but the common question we have received is regarding fair value for the equity market. While bottoms-up consensus EPS augers for a fair value range of 1550 – 1600, the unnatural impact of monetary policy on bond rates suggests a cross-asset arbitrage model may provide a better perspective. Using our CPI Inflation model we find that the fair value of the S&P 500 could be ~1742, or around ~12% above its current price of 1552.

Given that our cross-asset arbitrage model uses the S&P 500 Dividend Yield as valuation, presumably yield stocks would significantly outperform during a rally to 1742.

While this analysis is more for thought than basing investment decisions, it does provide perspective that the ongoing global quantitative easing undertaken by central banks should continue to push investors out on the risk curve and support higher equity markets. The question then becomes, as the Monetary valuation regime, is increasingly detached from a Fundamental/ Economic valuation regime, what happens when central banks ultimately reverse course?

When Gold And Stocks De-Correlate

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