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Correlation Breaks Lead To Market Chaos
This is what happens when the world's central bankers - incapable of seeing the bubbles forming in front of their own eyes - are let loose on global markets... Where ever you look, markets are in turmoil this morning with even the precious equity indices trading like penny stocks... The bottom line is that significant Treasury weakness, gold weakness, and stocks actually in the red suggest an increasing feeling that the QE juice has run its course.
Things are getting out of hand...
Treasury yields played catch up to stock prices - then diverged dramatically intraday at the moment...
Gold and stocks were highly correlated - but not today...
as gold tracks the rise in Treasury yields now...
and WTI Crude is collapsing... biggest drop in six months
Cross-asset-class correlations have plunged...
Charts: Bloomberg
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"Americans just need to go back to living their lives"
- Ben Bernanke, 2011
It's fine, ZH. I dunno what you are worried about.
They control the machiens that control the numbers. #nothingtoseehere
Collapsing commodities are a HUGE red flag
Equity put/call tanking too. Hmm...
Turd #4 tapering off, turd #5 queued up and gurgling ...
benny, kruggie, and the SOK will save us
there has to be a safe haven somwhere, right?
The bathtub, assuming it's cast iron.
,
is there a notch 11 on the printing presses?
Yee haaaaa! Ride 'em, cowboy! Slim Pickins on the bomb....might as well enjoy the ride.
Light QE today, no QE Monday. Turbo Tuesday, light Wednesday/Thursday, Turbo Friday.
@Stackers
Ditto.
Possibly front-running equities...? Did Ben leave the Building?
Did Ben leave the Building?
No, but he should consider jumping off it...
No, he's jumping from his personal helicopterwith a large
backpack of cash. No chute but lotsa cash.
Interesting.
All of those finance guys touting the instability of currency when backed by something real had it exactly right.
Look how incredibly stable our markets have become as a result.
Nice work fellas.
Rotation into R2K, for today anyway...
I'll go back to living my life when he gets out of it
Fuck You Bernanke
i'm sorry but it is us who are fucked
My gold coins are still worth 10,000 each.
10,000 what? And are you talking about the foil-wrapped milk-chocolates?
And they kept saying you can't eat gold!?
Ugly chaos guerilla trading out there...especially yesterday...but also continuing today. We must be close to that time when everything ends well.
...and they lived happily ever after.
I don't have access to Goldman's codes (I swear) but I think it likely that the bots will react to a breakdown in their cherished correlations by pulling into defensive positions and reducing liquidity. Ugly things can happen quickly in that environment. But of course nothing significant ever happens after markets close on a Friday so no one shouldn't be worried right?
The S&P is flat and the Nasdaq is up. The sheep are grazing. All is well.
Profit taking to buy BitCoin Last price:$120.99999
the QE induced bond bubble is popping & the QE induced stock market bubble is popping - nice way to start the weekend IMHO
Flat is the new popping?
1.8% on the ten year is the new popping?
in the magical land of NIRPZIRPEDERP it is
The /ES is down almost 1.5 points!!! OMFG call the PPT FAST!!!!!!!
This is about Japan, people. The rule of the game was that the dollar would lead the descent. Japan has broken that rule and a LOT of problems are resulting -- not least of which is the reality that a given number of yen budgeted to buy US Ts now buy fewer.
"not least of which is the reality that a given number of yen budgeted to buy US Ts now buy fewer." - if they are printing more yen, why wouldn't there be more treasury buying (so that american sheep can buy more flat screens etc.), seem like you have that part exactly backwards, especially since treasury yields are rising now.
On the contrary, buying fewer US Ts with the FISCALLY budgeted amount of yen puts pressure on US T prices, thereby forcing the yield higher.
Printing more yen does not change the budgeted amount of yen for US T buying. The Japanese govt can do that, not its CB.
The printed yen flows into many other hands, dollars and treasuries will get bid, when the price is right.
I can't get into it, but Tyler, if you have any input on PDRC (Power Reverse dual currency notes) I think it would explain this move to everyone.
maybe, but then you might want to know who bought other currencies ahead of Abe's move. Pretty much everyone saw this one coming (including ZH).
My 'ancestor' Franz Pick Sr.saw disruptions like this in the 1930s and declared "The danse macabre of the currencies has begun", and I think today's action is the beginning of a repeat of the trouble he saw then.
Same old same old, higher interest rates, say above 2.0 % on the ten year treasury, spell trouble for the political puppets. Look for the Fed to step in and buy as rates head towards 2.0 % and above. In a debt-based financial system, the system dies if new debt is not created, besides < sarc on > if ZIRP is good, then NIRP will be awesome < sarc off >.
Kriminey....debt-based system. In the past that hasn't worked out so well for me when the bills came due. I wonder.....
"In a debt-based financial system, the system dies if new debt is not created"
...and if it is
it's parasitic and major organs are starting to fail
WELL color me a joker and we'll call it a purple NIRP-le. Never rub another man's rhubarb!
Goldman must be test-running some new algorithms.
Kidding aside, this is pretty significant stuff here. Trader's nightmare.
oh please, gold is not weak. gold -- as the usual -- is being attacked as the great Chairman spoke.....and so it will be until trading hours end as....
gold is never, ever to rise when the great OZ, the mighty and powerful, speaks.
Here is something about gold "that can't be eaten" but can be applied to intestines:
Gold solder used to laser-weld ruptured intestines"In order to make the seals stronger, a group of scientists led by Arizona State University’s Prof. Kaushal Rege has created a material known as a plasmonic polypeptide nanocomposite. Applied to the edges of a wound like a solder, it consists of microscopic gold nanorods cross-linked with elastin-like polypeptides (chains of amino acids). When exposed to near-infrared laser light, the mixture sets, seals with the tissue, and takes on an elastic quality."
http://www.gizmag.com/plasmonic-polypeptide-nanocomposite-laser-tissue-w...
And Argentina...I don't even know what to say about how misguided they are:
Deadbeat Special Unveiled in Jail-Free 4% Bond: Argentina Credit"President Cristina Fernandez de Kirchner wants tax evaders hiding about $160 billion in dollars to help finance Argentina’s oil-producing ambitions. Her offer: Buy a 4 percent bond or face the prospect of jail time.
The tax authority announced the plan May 7, highlighting its information-sharing agreements with 40 nations and warning Argentines who don’t use the three-month amnesty window that they risk fines or arrest. Evaders have two options for their cash and the only one paying interest will be a dollar bond due in 2016 to finance YPF SA, the state oil company. The 4 percent rate is a third the average 13.85 yield on Argentine debt and less than the 4.6 percent in emerging markets."
http://www.bloomberg.com/news/2013-05-10/deadbeat-special-unveiled-in-ja...
So they'll back shit with gold before paper....hmmm.
It's algo'ing to hell.
In the pending new game of rock, paper, scissors - rock covers paper, and the scissors are for Dimon's wrists.
Smuckers:
you need to copyright that!
Hell with that RhoneGSM...lets implement it.
Latest on Obama's Benghazi Cover Up...
http://youtu.be/xdlfugzcdno
hmmm - weird - my gold didn't decline - just checked it - still all there - in fact it might even rise - might go buy some more today
What goes up must come down. When the Zirp Spring pops from having interest rates compressed for too long...it's going to be a rather quick default.
This is freaking hillarious!
http://consumerist.com/2013/05/09/trading-that-old-quarter-for-an-ice-cream-cone-may-not-be-such-a-good-idea/
Just buy NFLX hedged with VIX calls and you will make a fortune.
If gold closes positive, everything else will make sense. GLD was gifted 6 tons yesterday to dump on the London fix today. Lets chew through that and see what happens.
But But Buffet said to buy stocks!!!!!
Gold has a unique abilty to track whatever is going down. Dow down, gold down. Dollar down, gold down. Oil down, gold down. Bonds down, gold down. Good economic news, gold down. Bad economic news, gold down. War, gold down. Terrorist attack, gold down. Bernanke speaks, gold down.
I'm down wit'da' gold, MF'er!
Down......down............down......................until it explodes.
"If you shut up truth and bury it under the ground, it will but grow, and gather to itself such explosive power that the day it bursts through it will knock down everything that stands in its way."
– Émile Zola
Have you considered challenging your own view by extending your view for more than a 1 day period. How about say 5 years, or 10, or 20, or 100 years...
As for Druckenmiller he is totally right on hard commodities, China and Australia. But he made a big big blunder by saying.
"The last 11 years was an aberration, a deviation from the long-term trend of declining commodities prices as technology reduced the cost of extraction.”
Works only when resource quality is constant, i.e. if Saudi oil can serve the entire demand, he is right. If the Saudi oil starts to tail off and while total demand increases you have to go fracking or tar sands, technology is better, but because the resource is so much more lower quality, you are not seeing the oil go back to 1998 price.
His statement is equivalent as saying that as long as Buffalo bill gets a more and more powerful winchester rifle, there will be more and more glut of buffalo and the price of buffalo will constantly drop. Grantham debunks this silly view masterfully.
I think pushing his reasoning to the limit it is like saying that the entire world food supply can be provided by a flower pot because of constantly increasing technology or that at some point we have limitless quantity of resources and the cost of resources will converge to 0.
Malthus made the difference between an exponential function of population and an arithmetic at best increase in return on use of resource, in truth it is probably asymptotic.
Somethings gotta break. Either inflation is going to come roaring in with WTI rising to $140/bbl or SPY has to crash. Cannot have it both ways.
http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=logarithmic&chdeh=1&chfdeh=0&chdet=1368216000000&chddm=35190&chls=IntervalBasedLine&cmpto=NYSEARCA:SPY&cmptdms=0&q=NYSEARCA:USO&&fct=big&ei=Iw2NUaD0N4at0AGfBw
When performing an exorcism, never challenge the devil to try and hurt you.
Why? There is an 85 billion-per-month bid under everything to keep banks and the "market" right where it is? Nothing is getting to main street, why not make it 120 billion per month, or 300 billion?
As far as I can tell, nothing will change unless the world goes to war in earnest or heads fucking start rolling at the Fed.
Because there is only so many bonds to buy. After that it's (gasp) direct printing.
Right, because with all the unfunded liabilities on the treasury's balance sheet, they won't simply issue more, thereby allowing interest rates to rise and America to hard default. Just the same, I think I will take the other side of that trade. It's real simple, at the end of the day either the debt goes away, you find a way to "fund" the new debt or the unfunded liabilities go away. You might get some mixture of all three, but no options are "painless".
or the world rejects a currency
sure, just about as chaotic would be the world eliminates all debt in a jubilee. Both would have extreme outcomes.
we have extremely criminal leaders, extremely limited raw resources, and extremely stretched debt. I have a feeling the result will have the same adjective/adverb
This is what the intentional prelude/set up to a "Flash Crash" looks like...
This to me looks like a market made up of virtually no long term investors and instead all "fast money". The least little shake and it's an across all asset class "go to cash" mentality so we can BTFD on Monday. Sometime in the next 6 months I think we'll see a limit down situation on no real news, just nerves.
Even 3 months ago, I honestly would've agreed completely with you. But I don't think there are any 'nerves' left, this thing is numb to the world.
Market is only correlated to positive moves. With the move in the dollar and commods, ES should be selling. Yet again the market completely ignores anything that might show weakness. It cannot even sell 0.5% down - its basically unch all day.
What fucking "market" are you motherfuckers talking about? 85 billion-dollar-per-month bid under everything. the bid could easily become 120 billion, or 300 billlion, or moar.
VIX action will be the tip-off to the next 1,000 points. We need VIX UP, Stocks UP for a few more days so the NY "boys" can get comfortably short S&P and long VIX. Up until a few days ago, it was Stocks UP, VIX DOWN = MORE STOCKS UP. Of course, that is assuming the rules haven't been changed...
Market is in a quantum state. By your observing and noting the rules, by nature of your observation the rules have changed ....
The Algos are OBVIOUSLY programmed to go to positive correlation to Euro/Gold rise and DISCONNECT to any reverse of same. A One-Way Algo Reality. Tough to trade it, huh..??
"Flash Crash" just went from Likely, to highly likely to virtually CERTAIN....i m H o...."The Collaborators" are gonna crash this puppy...!!
Yeah, OBVIOUSLY... i m H o, you can just STFU. Tough to trade? - LOL. No, fool, this is the easiest trade EVER! Sell paper before it burns to cinder, and buy phyz while you still can. Period.
http://www.youtube.com/watch?feature=player_embedded&v=iu5dVxjO1f8#!
The stock market is being manipulated so stay out of it!
Gold is being manipulated, so buy it!
Wait....
Are you talking about paper or physical, big fucking difference.
G7 finance ministers to announce over the weekend all QE-ing will stop Monday.
(just testing to see if the algo bots pick that up)
Spoke too soon, market up as expected. Gold was a safe haven for 5000 yeras till the US decided that in 2013 they would repeal the laws of history and now it is stocks and the paper dollar which is multiplying at 85 Billion per months! Laughable!
But this time things are different!!
http://www.safehaven.com/article/29772/the-us-indices-the-reality
Since the financial crash of 2008 the western economies (US, Euro zone and Japan) have been using quantitative easing (QE). QE is not new. It was also used extensively in the 1930's. Japan has been using forms of QE for over a decade. But when one looks at the velocity of money and the money multiplier the money is not getting into the broader economy. But it is getting into the stock markets largely through the large money center banks that are the major beneficiaries of QE. Rising stock market valuations help the money center banks balance sheets. It is believed for the US at least that QE is primarily to help prop up the banking systems in the US, the Euro zone and Japan. The banking system remains saddled with huge amounts of debt that is either toxic or uncollectable.
"Market chaos" is a bit of an exaggeration, mate. The S&P and INDU are only marginally down; the Nasdaq is up.
Well on Treasuries down, it makes sense, on metal commodities (the excess of infrastructure) it makes sense. Treasuries in bear market means first twilight for stocks and next game over for stocks once the TSY 10 years go over 3.5%
But CRB Food index is not budging.
As for China what will avoid a collapse is Information Technology, or transfer of technology at a huge pace. Why do you think Chinese are hacking like nuts? They know their infrastrcuture, manufacturing driven model is dead but they want huge transfer of technology to buffer the fall out.
For food, every year the planet is spawning the Equivalent of France in new population. Malthus is going to bite hard, very very hard.
In my cynicism, my first thought is that all other securities always end up recoupling UP to the S&P.
Also, can we rename WTI Crude to WTF Crude?
I actually think this Benghazi nightmare has put some of our leaders to self-soiling ... affecting the market.
While in motion if an engine car becomes disconnected from the load it's hauling the cars below the break slow down and eventually stop. While the engine no longer having to pull all that weight begins to haul ass along the tracks. If the engineer is asleep at the wheel the engine car will eventually jump the tracks. That's what's happening now. The real economy is slowing to a stop, the market on the other hand is going to accelerate until it ends up in the ditch.
Good analogy.
Via email, Princeton economist Paul Krugman:
I don't really know, although at some level I'm not surprised: finance types just hate, hate easy money policies, although you would think that these policies are often good for their bottom lines. I do wonder in this case whether there's extra hatred of Bernanke because he keeps proving them wrong: they keep predicting terrible things from QE, runaway inflation, and all that,and instead the bearded academic stuff keeps turning out right.
....that would be "right" for the top 1% of the country, but perhaps "wrong" for everyone else...
Witnessing the violent end of monetarism...