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Tyler Durden's picture


Same Shit, Different Day; yet again the S&P 500 is trading tick-for-tick with the all-important EURJPY cross rate. As the following chart shows, its all about fun-durr-mentals...



(h/t @Not_Jim_Cramer)


Same Shit Different Day...


and longer-term...


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Tue, 12/10/2013 - 13:17 | 4232905 rubearish10
rubearish10's picture

Tired of the same shit.

Tue, 12/10/2013 - 13:18 | 4232917 Bluntly Put
Bluntly Put's picture

I think we need an enema.


Tue, 12/10/2013 - 14:21 | 4233060 Headbanger
Headbanger's picture

Nahhh... I think the drinking light just went on here so.... I think I need some ice...

And if SilverRhino shows up,   Here's a video on the sand bag issue yesterday:

Tue, 12/10/2013 - 13:19 | 4232916 Colonel Klink
Colonel Klink's picture


Tue, 12/10/2013 - 13:18 | 4232919 RafterManFMJ
RafterManFMJ's picture

Damn, I clicked on this article 'cause I thought it said, "Fun Derp Metals;" And I love metals, so...

Tue, 12/10/2013 - 13:20 | 4232926 Shizzmoney
Shizzmoney's picture

They can't just get away with it, can they?

Oh wait, that's why there's governments.

Tue, 12/10/2013 - 13:26 | 4232948 666
666's picture

So, my brothers and sisters, why are we sitting on our fat asses and not profiting by this information?

Tue, 12/10/2013 - 14:20 | 4233107 NotApplicable
NotApplicable's picture

For what does it profit a man to gain the whole world and forfeit his soul?

Tue, 12/10/2013 - 13:25 | 4232952 Kreditanstalt
Kreditanstalt's picture

Why is this correlation happening?


Tue, 12/10/2013 - 13:54 | 4233014 Ghordius
Ghordius's picture

my two cents: belief, mostly. fueled by carry trade, humungous leverage, and an ocean of cash that is willing to swish wherever there is an infinitesimal profit to be made, mostly with other people's money

never in the history of mankind have so many bright minds devoted themselves (and lots of computers) in the search of correlation

correlation is not causation, but hey, it makes nice bonuses

yes, this FX pair is interesting, mostly because it's between two extremes of (major players) CB policy in an extreme monetary and financial environment

breakdown of correlation will probably happen when the other Asian countries - which are mostly USD pegged - will react. and then the Yen to EUR to USD relation breaks

less likely: the BOJ or the FED start to brake from this mad monetization dash

again, my humble two cents

Tue, 12/10/2013 - 14:49 | 4233074 Ham-bone
Ham-bone's picture

???  I have no idea but is it something like this???  If not, explain...

BOJ attempting to hyper-monetize their currency and severly weaken Yen against trading partners to boost export based econ...willing to print seemingly any amount, buy anything, indebted beyond belief...

ECB trying to stabilize Euro while unwilling to fully monetize...will buy sovereign bonds to avoid consequences of bad governance but will not go further.  Must maintain strange bedfellows of Spain, Germany, Greece, etc.  Bulk of exports are within euro zone so depreciating currency not of great value?

from investopedia...

Here's an example of a "yen carry trade": a trader borrows 1,000 Japanese yen from a Japanese bank, converts the funds into Euro's or dollars and buys a bond (Spanish or Greek debt, Russell 2000) for the equivalent amount. Let's assume that the bond pays 4.5% and the Japanese interest rate is set at 0%. Stands to make a profit of 4.5% as long as the exchange rate between the countries does not change. Gains can become very large when leverage is taken into consideration.  Common leverage factor of 10:1, can stand to make a profit of 45%.   Gains become even larger on the re-exchange to original currency if Yen continues to devalue during the trade.

The big risk in a carry trade is the uncertainty of exchange rates. Using the example above, if the Euro were to weaken relative to the Japanese yen, then the trader would run the risk of losing money. Also, these transactions are generally done with a lot of leverage, so a small movement in exchange rates can result in huge losses unless the position is hedged appropriately.  So, if BOJ ever curtails Abenomics (haha) or more likely ECB gets on QE path or US cuts QE?...that would be the ignition of the great unwind? and then "momentum" of unwinding rips this apart???


Tue, 12/10/2013 - 13:46 | 4233017 somecallmetimmah
somecallmetimmah's picture

Kuz u rasis ('r sumpin).

Tue, 12/10/2013 - 13:35 | 4232963 HRamos_3
HRamos_3's picture

My head hurts, so i'm just gonna ask to someone that knows better:

Who's piggybacking on who?


Also, if someone is willing to explain why in the new normal things go south after 1PM that would be swell... At least last week, that was the case pretty much everyday including one day that the trade actually broke...

Tue, 12/10/2013 - 13:31 | 4232967 RSloane
RSloane's picture

In the spirit of trying to be hopeful, or in this case grasping at gossamer while looking for gold, at least something somewhere is being associated to something else! Its not often that we can see actual correlations, so take this as a positive sign!


Tue, 12/10/2013 - 13:38 | 4232995 Ragmar
Ragmar's picture

Can someone explain why Euryen has been closely correlated to the S&P.  If its a hedge, why does it work for the hedge funds?

Tue, 12/10/2013 - 13:38 | 4232996 Ragmar
Ragmar's picture

Can someone explain why Euryen has been closely correlated to the S&P.  If its a hedge, why does it work for the hedge funds?

Tue, 12/10/2013 - 13:52 | 4233027 TrustWho
TrustWho's picture

Here is what amazes me.... The Euro represents an economic zone that may be the weakest economy in the world; yet is the strongest currency in the Developed World.

And we know why....the Jon Corzine trade (except for Jon Corzine) due to the Draghi promise.

Tue, 12/10/2013 - 13:59 | 4233052 Ghordius
Ghordius's picture

weakest? in growth, yes. though every toddler is stronger in growth than an adult. have a look at trade and trade balances and let's have this chat again

Tue, 12/10/2013 - 15:14 | 4233260 TrustWho
TrustWho's picture

Employment/unemployment is the best gauge of healthy economy. The real time-bomb of Euro is the great North-South divide that your trade balance metric exposes. The North is running with positive trade balance and the South is so weak it can NOT buy imports, so trade balance are actually turning positive.

I think Japan is just a mess and really think it is dead and the scavengers are already feeding. I have no understanding of Japan and their dangerous economic policy, so I pick the straw that will break the camel's back erupts from southern Europe and I include France. When interest rates start spiking, the straw will emerge.

I totally agree with toddler concept, but they cry quickly with a little pain.

Tue, 12/10/2013 - 16:41 | 4233478 Ghordius
Ghordius's picture

I disagree on unemployment as best gauge

one farm has two horses, one farmer, five unemployed sons, makes 600 bushels, the other has two fully employed brothers, makes 200 bushels. which one is better? well, at the end it's about the other side, too: expenses

further, in one country youth stays unemployed in their parents' unexpensive household, in the other it's getting heavily in student loans and lives in a separate, expensive household. which is more sustainable?

european statistics scare often the shit out of unaware American analysts. yet this goes back to 1907. lots of basic differences and "uncomparables"

Tue, 12/10/2013 - 16:48 | 4233656 TrustWho
TrustWho's picture

Neither country is stable, but one is more productive than the other. If an economy can not provide emploument opportunities, especially for its youth, the standard of living is falling. almost everthing in economics happens at the margin.

Tue, 12/10/2013 - 16:28 | 4233550 Ghordius
Ghordius's picture

the great North-South divide that the trade balance metric exposes is a good argument, yet this very metric has been violated in the West by... Uncle Sam. Since the 60's

so it's not necessarily a show stopper, and a question of political goodwill

the Germans, for example, remember very well that not long ago they were dubbed "the economic sick man of Europe"

we had a crisis. we still have a banking crisis. yet less monetary intervention is supposed to result in a sharper, harsher downturn, isn't it? That's what all economic schoolls agree on

yet in monetary matters, trade balances are still the fundamentals. the article exposes only that they are temporarily... irrelevant

Tue, 12/10/2013 - 16:45 | 4233636 TrustWho
TrustWho's picture

You forget the Draghi PUT at the press conference where he played the Nuke option and told the market that he would do whatever was required to save the Euro (basically save the southern countries) and the Germans have played along without putting any German money at risk but Spanish, Portugal, Irish, Italian and Greece bond rates crashed. (For Jon Corzine fans, Draghi did this after MF Global went belly up)

Since the PIIGS yield is still high relative to Japan, USA and Germany, the hot money chasing yield floods into Europe; therefore, without putting Euro Central Money at risk, Draghi has utilized hot global money to hold Europe together. I believe the market will call draghi's bluff, once called, the financial house will fall.

Wed, 12/11/2013 - 04:01 | 4235287 Ghordius
Ghordius's picture

TrustWho, in theory I'd agree with you. yet there is also this phenomenon of repatriation at play. most of those peripheral sovereign bonds are coming home. this tells me that it's less "hot money" fuelled than in other cases. we'll see

Wed, 12/11/2013 - 13:02 | 4236450 TrustWho
TrustWho's picture

Repatriation is also a valid point. I would think we could agree the politicians/central bank partnership has perverted the market. The natural state of long term Efficiency has been replaced by arrogant men trying to save the system. Natural Law always rules and the short term (could be decades with Nature time) chaos creates a Known Unknown.

Tue, 12/10/2013 - 13:53 | 4233032 ebworthen
ebworthen's picture

So since July 12th of 2012 the Eur/Jpy has gone from 96 to 141.

So...shadow banks are using free money from the FED to lever FX trades to buy stocks on the perpetual ramp?

Tue, 12/10/2013 - 17:35 | 4233834 orangegeek
orangegeek's picture

Like watching paint dry.



Tue, 12/10/2013 - 17:49 | 4233885 starman
starman's picture

Bingo tora tora !

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