Equities Spike To Record Highs As US Macro Hits 2-Month Lows

Tyler Durden's picture


Treasury yields are up 1-2bps; the USD is flat; gold and silver are up modestly; but stocks are screaming higher to all-time highs in the Trannies and S&P. All of this is occurring as PMI and ISM missed expectations this morning and the US Macro Surprise index in the US (worst of all nations year to date) is at 2-month lows. What's behind it? FOMO, POMO, YOLO? All we can say is the S&P has never been this far above the Fed balance sheet (over 50 points rich) since QE began.

Equities are notably rich to Fed balance sheet and US macro is not supportive


As the disconnect grows...


Charts: Bloomberg

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Tue, 07/01/2014 - 11:14 | 4913814 Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

I give up...

Tue, 07/01/2014 - 11:15 | 4913821 TabakLover
TabakLover's picture

Same here.

Tue, 07/01/2014 - 11:28 | 4913865 hedgeless_horseman
hedgeless_horseman's picture



Where have we seen this before?

US Stocks are priced in USD.

If the value of the USD decreases 50%, the value of the stock increases 100%.

Nominal versus real returns.


The U.S. Dollar Index® is computed using a trade-weighted geometric average of six currencies.
The six currencies and their trade weights are:

57.6 %


13.6 %


11.9 %


9.1 %


4.2 %


3.6 %


Synchronized diving, anyone?

Tue, 07/01/2014 - 11:31 | 4913892 coulous
coulous's picture

Tue, 07/01/2014 - 11:40 | 4913929 A82EBA
A82EBA's picture


Tue, 07/01/2014 - 11:42 | 4913937 PartysOver
PartysOver's picture

Until it goes boom, just Buy.  Attempting to rationalize delusional stupidity is a fruitless cause.

Tue, 07/01/2014 - 11:52 | 4913990 Headbanger
Headbanger's picture

Two words:

Vinegar Strokes

Tue, 07/01/2014 - 11:54 | 4913999 wallstreetapost...
wallstreetaposteriori's picture

The market is not going to peak until retail is holding the bag.... big upside meltup coming as retail jumps head first into all this BS.

Tue, 07/01/2014 - 12:00 | 4914038 Headbanger
Tue, 07/01/2014 - 12:01 | 4914039 hedgeless_horseman
hedgeless_horseman's picture



Retail cannot afford the bag.  Thank God for the Norwegian sovereign wealth fund, and the idiots at CALPERS, etc.

Tue, 07/01/2014 - 12:23 | 4914108 shitco.in
shitco.in's picture

The Norwegian's aren't stupid.  They WILL hold 5%, but won't be buying at these prices.

Tue, 07/01/2014 - 13:36 | 4914408 Cruel Aid
Cruel Aid's picture

calpers etc is the reason the Fed is doing this or a big reason. Pump or bailout /default.

Or they just hate Meredith Whitney and her City/Muni call

oops no shit statement?

Tue, 07/01/2014 - 12:02 | 4914047 spastic_colon
spastic_colon's picture

and just think they were able to get the VIX back to 12 in order to smash ES higher before EOW

Tue, 07/01/2014 - 12:10 | 4914067 Headbanger
Headbanger's picture

VIX chart showing fives waves up followed by a completed pennant or flag pattern:


So this is it for the VIX smash and thus the equities orgasm this morning.

As I said, vinegar strokes. 

Tue, 07/01/2014 - 11:48 | 4913961 Cthonic
Cthonic's picture

Held a lighter up to my monitor but I'm still not seeing the message.

Tue, 07/01/2014 - 11:52 | 4913984 max2205
max2205's picture

What no NFLX bonus chart?!

Tue, 07/01/2014 - 11:34 | 4913905 Yen Cross
Yen Cross's picture

  First of all a 50% devaluation in usd would destroy the global economy as oil is priced in usd.

Tue, 07/01/2014 - 11:40 | 4913931 markar
markar's picture

It's only going to be the new domestic USD that will be devalued 50% ROW will recycle them at current value when as no longer need them.

Tue, 07/01/2014 - 11:47 | 4913951 hedgeless_horseman
hedgeless_horseman's picture



US Stocks are priced in USD.


If the value of the USD decreases 50%, the value of the stock increases 100%.


Nominal versus real returns.

This is intended as a simple illustration (not a prediction) that it would not take much of a USD devaluation to pump the sp500 from 1935 to 1964, as illustrated on Tyler's chart, with zero or negative fundamental improvement in the underlying macro economy.

Tue, 07/01/2014 - 11:54 | 4914005 DavidC
DavidC's picture

Dollar index has hardly moved today HH.


Tue, 07/01/2014 - 11:59 | 4914026 hedgeless_horseman
hedgeless_horseman's picture



See this comment from below....

When you can control both sides of the ratio you can make it look like whatever you want, no?

The USD can go down, and the dollar index can stay pretty much the same.

Tue, 07/01/2014 - 12:30 | 4914134 shitco.in
shitco.in's picture

We should probably keep an eye on CHFUSD to see there is a reaction like 2008 or 2011.  This could move significantly and not change the index (as you posted before CHF makes up about 3%).  This could be a good indicator of a much larger event in the near future. 

Tue, 07/01/2014 - 11:57 | 4914022 NoDebt
NoDebt's picture

And just to add to that.... How come Germany's 10 year has a lower yield than a 10 year UST?  How about JGBs WAY below same duration USTs.

Is it because the world thinks Germany and Japan are "safer" than the US?  Doubtful.  That's your currency devaluation premium talking there.

Tue, 07/01/2014 - 12:14 | 4914082 Yen Cross
Yen Cross's picture

  The BoJ owns a much larger percentage of the JGB market then the Fed. does of the Treasury market. The JGB market is completely manipulated by the BoJ or yields would be parabolic. That's why Tyler laughs about the days when there's no bids on JGBs.

Tue, 07/01/2014 - 12:10 | 4914069 Yen Cross
Yen Cross's picture

  I realize what you're saying. It's just so far over the top to think the usd would somehow devalue 50% over a short period of time. Look at Japan and their economy is 1/6th the size of the us economy.

 Commodities/energy and bonds would destroy the global equity and financial markets. The ROW wouldn't continue to settle in usd. The bond market would blow up and yields would explode as traders ran for the door on the devaluation.

 Countries are already moving away from usd and setting up outside settlement channels, and a devaluation like that would just hasten the transition. Look at how the yen has devalued across the board vs currencies. The same would happen with the dollar. (F/X is $4 trillion a day market)

Tue, 07/01/2014 - 12:14 | 4914085 hedgeless_horseman
hedgeless_horseman's picture



Of course you understand, but I was trying to keep the math easy for the non-currency traders.  You might be amazed at how many people do not understand that a devaluation in a currency causes a greater percentage increase in the price of everything valued in that currency, including stocks and stock indices.

Tue, 07/01/2014 - 12:24 | 4914113 Yen Cross
Yen Cross's picture

  Yes, the "nominal pricing" scam is pretty pathetic.

Tue, 07/01/2014 - 12:48 | 4914217 Frank N. Beans
Frank N. Beans's picture

but obviously not gold

Tue, 07/01/2014 - 13:04 | 4914275 fonzannoon
fonzannoon's picture

you cant have a devaluation on a reserve currency, because things can only be "devalued" when they are pegged to something else. 

Tue, 07/01/2014 - 14:58 | 4914687 Yen Cross
Yen Cross's picture

  You most certainly can have devaluation from loss of purchasing power through central bank policies, resulting in lower terms of trade. (printing money & artificially low interest rates)

  That is why multinational corps like the dollar weaker so they have larger profits when they repatriate them back into usd.

Tue, 07/01/2014 - 11:45 | 4913953 ParkAveFlasher
ParkAveFlasher's picture

Yes, but it would be a slow destruction, sort of like a dismantling.  I think that tptb will succeed in the incremental dissolution of the currency and reinstatement of a new monetary regime of some sort.

Tue, 07/01/2014 - 11:49 | 4913976 markar
markar's picture

It's only going to be the new domestic USD that will be devalued 50% ROW will recycle them at current value when as no longer need them.

Tue, 07/01/2014 - 11:35 | 4913911 LawsofPhysics
LawsofPhysics's picture

And yet the pound and euro continue to go up against the dollar.  What is this more common core math?

Doesn't look like they are diving together at all.

Tue, 07/01/2014 - 11:42 | 4913936 hedgeless_horseman
hedgeless_horseman's picture



All the QE and the USD continues to hover right around 80? Why?  The forex markets are just as rigged as every other market.

Tue, 07/01/2014 - 11:46 | 4913960 _disengage_
_disengage_'s picture

When you can control both sides of the ratio you can make it look like whatever you want, no?

Tue, 07/01/2014 - 11:54 | 4913997 hedgeless_horseman
hedgeless_horseman's picture




Tue, 07/01/2014 - 11:42 | 4913935 Oracle 911
Oracle 911's picture

Calling USA Zimbabwe is derogating for Zimbabwe.

Seriously, does Zimbabwe ever  stormed a foreign country for its resources while bloating about democracy and freedom, or supported terrorists and other diversion groups (NGO's are that kind of groups) or erected embargo on ideological  basis?



Now you get it.

Tue, 07/01/2014 - 14:27 | 4914570 Clowns on Acid
Clowns on Acid's picture

Wake up d_bag, of course Zimbabwe would "storm foreign contry" for resources. They killed off most of the white farmers didn't they?

Smarten the fuck up.

Tue, 07/01/2014 - 11:43 | 4913941 _disengage_
_disengage_'s picture

Wouldn't it be great if there was some kind of objective metric by which all currencies could be measured?

*cough* freegold *cough*

Tue, 07/01/2014 - 11:26 | 4913872 NotApplicable
NotApplicable's picture

I was going to blame YOLO, but then I remembered how that does not seem to affect voters in Chicago, or any other area with a finely honed political machine.

Tue, 07/01/2014 - 11:28 | 4913886 Ignatius
Ignatius's picture

Use confetti to buy up ownership stakes in real companies/assets regardless of dollar valuation -- and be in that ownership position when it all falls apart -- is the best I can make of this.


Tue, 07/01/2014 - 11:16 | 4913825 SHEEPFUKKER

Damn, I should have bought the fukkin all time highs last year. Oh wait, I get a new opportunity to do so nearly every single day. I win!!

Tue, 07/01/2014 - 11:16 | 4913826 Ness.
Ness.'s picture

That's exactly what they want.

Tue, 07/01/2014 - 11:18 | 4913839 fonzannoon
fonzannoon's picture

"Equities are notably rich to Fed balance sheet and US macro is not supportive"

I don't know why but I laughed so hard when I read that I knocked over my coffee. Breaking news.....



Tue, 07/01/2014 - 11:29 | 4913883 JenkinsLane
JenkinsLane's picture

"You mess with the bull, you get the horn."

Tue, 07/01/2014 - 12:25 | 4914115 DavidC
DavidC's picture

I'm getting close to it as well. Over 5 years of this shit and no real improvement in the economy, the central banks destroying the citizenry with inflationary measures that they mistakenly (or deliberately) think will actually help them.

I'm tired and frustrated with it.


Tue, 07/01/2014 - 12:31 | 4914137 DebtSlaveZombie
DebtSlaveZombie's picture

Ive been ultra bullish for about 2 years now and we are getting short term frothy (or Shothy).  Even though I think we are going to S&P 2500 and DOW 20000 by late next year/early 2016, short term we are due for a 8-10% pull back.  US Macro data...GDP growth...and other economic data are not agreeing at all and after mid year portfolio re-arrangements (this week) we are gonna have to take a breather.  This market is running red hot and due for a pullback.  I pulled 50% of my positions in the past week and will look to go all cash if we continue to rally.  I may miss out on 2-3% of the upside, but the risk doesn't pay here.  I will wait for this froth to come back in.  We will have another February soon.

Tue, 07/01/2014 - 12:38 | 4914165 DebtSlaveZombie
DebtSlaveZombie's picture


Keep 30-40% in though, but take something off...geesh.  DONT GET GREEDY!!!

Tue, 07/01/2014 - 11:17 | 4913833 SanfordandSon
SanfordandSon's picture

Personally, I think we see a top when 0 H turns bullish, no offense... 

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