• Monetary Metals
    05/02/2016 - 01:28
    The price of gold shot up this week, and silver moved proportionally. Headlines are screaming for gold to hit $10,000 or $50,000. Does this alleged new bull market have legs?

How Much More Upside Is There?

Tyler Durden's picture




 

For 5 years the correlation between the expansion of the Federal Reserve's balance sheet and the growth of the S&P 500 has risen dramatically. Since QE3 was unveiled, the correlation is converging on 1 which of course is just happy coincidence and nothing to do with the free and easy flow of liquidity that month after month of Fed largesse has created. The problem is we now know that the hurdles to a Fed un-Taper are very high and so we can extrapolate the end-point for the Fed's balance sheet and where stocks would trade at that point. The S&P 500's recent exuberance has priced in the total expansion of the Fed's balance sheet to the end of the taper, so how much more upside is there?

 

Coincidence...?

 

Perhaps not...

 

And close-up... we have priced in the rest of the Fed's balance sheet expansion to the end of the Taper... The S&P is actually around 20-25 points rich to the current levels of the Fed's balance sheet

 

Dont forget, tapering is not tightening... though it looks a lot like it will be...

As Jeff Gundlach recently opined...

What troubles me the most psychologically in the markets right now is this logic that as long as there is Quantitative Easing, stocks will go up.

 

And if the Federal Reserve drops Quantitative Easing, stocks will go up, too, because it means the economy is strong.

 

It makes me wonder.

But then again, Fed's Williams confirmed last night...

The Fed must blow bubbles because otherwise irrational investors get "carried away" and inevitably crash the markets...

 

Ultimately it seems clearer and clearer that, as Williams himself opines "financial stability is just as important as pursuing price stability and growth."

So prepare for QExxx

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Fri, 06/06/2014 - 10:26 | 4829907 dontgoforit
dontgoforit's picture

nOT pREpAreD for this....a fools game.

Fri, 06/06/2014 - 10:29 | 4829921 localsavage
localsavage's picture

This is getting old...

Fri, 06/06/2014 - 10:34 | 4829938 Mark Carney
Mark Carney's picture

Your New Normal:  Spanish 10Yr yield is only 7bpts higher then USA 10 yr.

 

All fixed!

Fri, 06/06/2014 - 10:39 | 4829952 Manthong
Fri, 06/06/2014 - 10:45 | 4829971 max2205
max2205's picture

Mark my words.....it will stop when billionaires become trillionares when millionaires become billionaires and when thousandaires become millionaires

 

....................../´¯/) 

....................,/¯../ 

.................../..../ 

............./´¯/'...'/´¯¯`·¸ 

........../'/.../..../......./¨¯\ 

........('(...´...´.... ¯~/'...') 

.........\.................'...../ 

..........''...\.......... _.·´ 

............\..............( 

..............\.............\...

 

 

Fri, 06/06/2014 - 11:01 | 4830029 THX 1178
THX 1178's picture

And when bread costs 250 a loaf.

Fri, 06/06/2014 - 11:33 | 4830135 SamAdams
SamAdams's picture

I suspect Greece and Ukraine are planning to buy $1T in treasury notes in the coming year.  You know, because Belgium is all tapped out...

Fri, 06/06/2014 - 11:37 | 4830179 thamnosma
thamnosma's picture

Pirates run Somalia.  Seems like a good place to set up some operations.

Fri, 06/06/2014 - 14:18 | 4830710 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I am telling you this now. Team Obummer is going to play the sound bite, "the US economy is strong because of my leadership" to death using the fake stock market and phony employment stats as evidence. Another thing is they will taper slightly to confirm this great lie. The taper is going to damage the fake recovery more than they realize. Debt driven expansions require more and more each round to be effective. Watch out below!!

Fri, 06/06/2014 - 15:13 | 4830925 TBT or not TBT
TBT or not TBT's picture

With NIRP, the correlation can exceed 1. BTFATH!

Fri, 06/06/2014 - 11:46 | 4830201 Four chan
Four chan's picture

kudos tylers this is an outstanding thread in many outstanding threads.

Fri, 06/06/2014 - 12:17 | 4830299 disabledvet
disabledvet's picture

Or when you pinch a loaf and that costs 250 bucks.

 

At McDonalds.

 

Where is the chart showing the Great Commodity collapse?

 

Where is that non correlated asset phuckers?

Fri, 06/06/2014 - 15:38 | 4831020 zaphod
zaphod's picture

No, that happened in Germany and they still had several exponential runs to go.

It will stop when people walk away from the dollar and fiat currencies in general. Only that will take power back from the banks/government. Until then this will continue.

I have walked away from the dollar in every manner I can (considering all my expenses and paycheck are nominated in dollars), have you?

Fri, 06/06/2014 - 11:18 | 4830107 icanhasbailout
icanhasbailout's picture

It depends. Adjusted for real inflation or not?

Fri, 06/06/2014 - 11:03 | 4829956 Headbanger
Headbanger's picture

Or in other words..  We've already reached full retard!

Also "financial stability is just as important as pursuing price stability and growth."  is an oxymoron!

Cause they're simply can't be endless growth as these fucking idiots want to believe.

 

And holy shit Batman!!  VIX IS DOWN TO A NEW 52 WEEK LOW!!

http://www.marketwatch.com/investing/index/VIX/charts?symb=VIX&countryco...

 

AND PROBABLY A DECADE LOW TOO!

http://www.marketwatch.com/investing/index/VIX/charts?symb=VIX&countryco...

 

FULL RETARD REACHED!

Fri, 06/06/2014 - 13:38 | 4830593 Professorlocknload
Professorlocknload's picture

Question is, will there still be enough liquidity left when VIX skyrockets, to pay out?

Gonna be interesting watching the entire stadium try to exit through a 12 inch porthole at once.

Fri, 06/06/2014 - 15:00 | 4830874 Bryan
Bryan's picture

The best job on the planet at that point will be scalping tickets through that 12 inch porthole.

Fri, 06/06/2014 - 11:16 | 4830101 EllaDara
EllaDara's picture

06/06/2014 will be remembered in history as Tday. When SP topped at 1949.5 and never returned again. (T as in TOP)

Fri, 06/06/2014 - 11:24 | 4830130 whatsinaname
whatsinaname's picture

Hello Sherlock.

Fri, 06/06/2014 - 19:33 | 4831560 bigfoot_st
bigfoot_st's picture

why not? 20-14=6, so you have a whacky 666 day!

Fri, 06/06/2014 - 11:16 | 4830102 EllaDara
EllaDara's picture

06/06/2014 will be remembered in history as Tday. When SP topped at 1949.5 and never returned again. (T as in TOP)

Fri, 06/06/2014 - 11:46 | 4830204 machineh
machineh's picture

T as in Toast ... for short sellers.

Fri, 06/06/2014 - 12:24 | 4830346 disabledvet
disabledvet's picture

Hope you assholes have a good muni bond guy.  Once that junk bond market gets nuked say hello to the Big Ugly Fat Phucker.

that's a trillion in issuance a year...at one percent interest rates on the thirty year.  "Forever."

Fri, 06/06/2014 - 12:02 | 4830239 aardwolf
aardwolf's picture

CALLING ALL ZEROHEDGE READERS:

DO YOU WANT TO END THE FED? DO YOU WANT TO TAKE BACK THE POWER TO CREATE MONEY FROM PRIVATE BANKERS??

 

SWITZERLAND WILL HAVE A REFERENDUM THIS YEAR TO DO JUST THIS!! THEY WILL START ISSUING SWISS FRANCS DEBT FREE LIKE YOUR OLD GREENBACK!!! THEY WILL REMOVE THE PRIVATE BANKS POWER TO CREATE ELECTRONIC DEPOSITS AS DEBT AND RESTORE IT TO THE SWISS NATIONAL BANK, WHICH WILL DO IT DEBT FREE!!

 

PLEASE DONATE HERE THIS SUMMER: http://www.vollgeld-initiative.ch/english/ THEY NEARLY HAVE ALL THE FUNDING FOR THE 100,000 SIGNATURES REQUIRED.

 

DO YOU REALLY WANT THE MADNESS TO END? PUT YOUR MONEY WHERE YOUR MOUTH IS! I HAVE DONATED 10 CHF MYSELF BUT YOU GUYS ARE RICH. PLEASE HELP THE WORLD TODAY! IF THE SWISS SUCCEED WE'LL BE ONE STEP CLOSER TO ENDING THE FED. ACT NOW!!

Fri, 06/06/2014 - 10:27 | 4829908 PlusTic
PlusTic's picture

It's NEVER going down...

Fri, 06/06/2014 - 10:35 | 4829941 machineh
machineh's picture

For stocks, there hasn't been a down year ending in 5 for the past eleven decades. If we can make it through this summer, it's off to the freaking races.

So I'm projecting a Bubble III peak of S&P 2,720 in 2016.

Though it's a long shot, this is not entirely a joke. Central banksters are bat-shit crazy, so prudence will get you nowhere.

Fri, 06/06/2014 - 10:43 | 4829965 PlusTic
PlusTic's picture

there are no "natural" sellers, only shorts...so we will just keep going from squeeze to 3-day selloff to squeez...until there are "natural" sellers again, we can't go down for more than a few days to a few weeks...

Fri, 06/06/2014 - 10:58 | 4830016 EHM
EHM's picture

Yes. It's the stupid fucking shorts that make it easy. When the stupid shorts realize they can't win then you might see something.

Fri, 06/06/2014 - 11:12 | 4830077 dontgoforit
dontgoforit's picture

We've given up on winning.  We're on the side lines selling popsicles to toothless grandmas.

Fri, 06/06/2014 - 11:39 | 4830182 thamnosma
thamnosma's picture

I like cherry, you got cherry?

Fri, 06/06/2014 - 12:30 | 4830370 dontgoforit
dontgoforit's picture

Of course; that's my favorite, too.  $250, please (inflation, you know).

Fri, 06/06/2014 - 10:47 | 4829976 SheepDog-One
SheepDog-One's picture

They're not crazy at all, they're just rounding up all the sheeple into the pen for the EZ slaughter.

Fri, 06/06/2014 - 10:50 | 4829983 Platinum_Investor
Platinum_Investor's picture

I really think that's a coincidence no down years that end in 5.  

Fri, 06/06/2014 - 10:57 | 4830010 dracos_ghost
dracos_ghost's picture

Except with QE/NIRP/ABE, there are no down years that end in a number.

Fri, 06/06/2014 - 10:28 | 4829910 LawsofPhysics
LawsofPhysics's picture

Before I answer that question, I'll like to know whether or not the author believes that debt actually has to be re-paid or not?

"Full faith and credit"

tick tock motherfuckers...

 

Fri, 06/06/2014 - 10:31 | 4829930 alien-IQ
alien-IQ's picture

Faith; A belief in something for which there is no evidence.

Fri, 06/06/2014 - 10:40 | 4829955 LawsofPhysics
LawsofPhysics's picture

Life is not black and white.  I have "faith" that the lights will come on in the barn when I flip the switch.  Oddly enough, you would be surprised how often that doesn't happen.

Fri, 06/06/2014 - 11:13 | 4830087 dontgoforit
dontgoforit's picture

Time for a re-wire?  I suspect we're going to get the shock of all shocks one fine morning.

Fri, 06/06/2014 - 11:28 | 4830143 Spastica Rex
Spastica Rex's picture

I suspect we're in for a very lengthy re-defintion of what it means to be an "Average American."

Fri, 06/06/2014 - 11:36 | 4830173 Haus-Targaryen
Haus-Targaryen's picture

I'm telling you guys -- get out. 

Fri, 06/06/2014 - 11:06 | 4830046 cosmictrainwreck
cosmictrainwreck's picture

Of course debt will not (cannot) be re-paid...simply repudiate/re-set currencies, etc. Was at town hall with congress critter waaaay long ago (1980's?). Da " budget" etc. interest as % blah blah. Asked "OK...what about principal? Anybody ever even so much as talk about that?" Reply: "nah"

Fri, 06/06/2014 - 10:28 | 4829912 alien-IQ
alien-IQ's picture

who gives a fuck.

Fri, 06/06/2014 - 12:29 | 4830362 disabledvet
disabledvet's picture

"Just pass the gray poupon bitch."  I like it.

"Free airfare to friggin Tel Aviv included."

Fri, 06/06/2014 - 10:29 | 4829918 Tabarnaque
Tabarnaque's picture

To infinity and beyond...

Fri, 06/06/2014 - 10:30 | 4829923 irongator
irongator's picture

So clearly it cannot be QE to infinity... There is obviously going to be some force that stops the QE (if our government cannot have self control). What is that force or threat that stops the madness, and then what happens?

Fri, 06/06/2014 - 10:30 | 4829924 Dr. Engali
Dr. Engali's picture

How much more upside is there? Just ask Zimbabwe.

Fri, 06/06/2014 - 11:48 | 4830209 machineh
machineh's picture

As billionaires, they are too busy counting $100,000 bills to pay for a cup of coffee.

Fri, 06/06/2014 - 12:57 | 4830490 NoDecaf
NoDecaf's picture

The only downside is that we won't be able to do the wallpaper thing.

Fri, 06/06/2014 - 10:31 | 4829925 tawdzilla
tawdzilla's picture

Can anyone answer me a serious question?  Where would the 10 year rate be right now if no QE had been done?

 

To ask in another way...specifically, how much affect does QE have on rates?  1/2%, 2%, more?  Thanks.

Fri, 06/06/2014 - 10:45 | 4829973 i_call_you_my_base
i_call_you_my_base's picture

It's probably much more than anyone would estimate. The idea that the Fed can and will control rates probably has more impact than the control itself.

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