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Forget The "Alibaba Top" - This Is The Chart Everyone Is Watching
While it is easy, even sentimental, to pin what may (or may not) be a bubble, or as some call it - market - top on the recent liquidity and euphoria-soaking IPO of China's megaretailer Alibaba and its sliding chart since it broke for trading, a la what the Blackstone IPO did to the previous bubble, it is also wrong. The reality is that the attention of what few carbon-based investors and traders are left, is glued to very different chart: the one below from Deutsche Bank, showing the between the S&P and the total assets owned by the Fed.
Read on for the reason why:
Less central bank liquidity
In Figure 8 we show what has probably been one of our most used charts of the last year or so. It looks at the relationship between the size of the Fed balance sheet and the S&P 500 (as a proxy for risk generally). As you can see, since the Fed balance sheet was used as an aggressive policy tool post-GFC, the graph suggests that the S&P 500 is well correlated with its size with the former leading the latter by 3 months. For the past 5 years or so the times where we have seen strong performance from risk assets have broadly coincided with periods where the Fed was aggressively expanding its balance sheet. In the periods where the balance sheet wasn’t increasing we generally saw a more challenging environment. So as we have highlighted recently the wobbles seen during the summer months may in part have been due to the imminent end to asset purchases next month (given the 3-month lag in the relationship) and arguably demonstrate the potential challenges facing investors in a world where liquidity is less freely available.
However...
Here we’ve focused only on the actions of the Fed. Since the GFC it’s not just the Fed that has increased the size of its balance sheet. In Figure 9 we track the YoY growth rate (in dollar terms) of the four main central banks globally (Fed, ECB, BoJ, PBoC). We can see that pre-crisis overall balance sheet growth was fairly strong due to the expansion in China. We then get the post-GFC boost from the Fed and to a lesser extent the ECB. We can see that central bank balance sheet expansion seems to have come in waves since then following the various different forms of policy accommodation and QE. Having reached a peak of around 13% in Q1 this year with the growth rate declining since. With the Fed balance sheet likely to be static as of next month much might depend on the BoJ and the ECB from a global liquidity standpoint. China’s actions are less predictable and it could be they react to slower growth by expanding the money base.
However, as of today, they appear far more predictable. Recall: "Get To Work Mr. Chinese Chairman": China Set To Fire Its Central Bank Head, Unleash The Liquidity Floodgates
So, Deutsche Bank's conclusion: "Overall we would argue that markets might experience a few more bumps in the road as the global liquidity picture is not as supportive as it has been."
Also known as Euphemism 101.
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2nd Chart is the BIG BIRD to the Fedsters everywhere
2nd chart. Central Bank BS..
Yep.
FOX is in the business of protecting the FED - https://www.youtube.com/watch?v=qLpXv6ICre8
Early Alibaba investor Hans Tung: Alibaba is focused, will use money in emerging areas..
http://hedgeaccording.ly/2014/09/early-alibaba-investor-hans-tung-alibab...
"They" (the four principal central banks aka Fed, ECB, PBoC, BoJ) will NEVER stop printing for fear of a risk asset meltdown. If they do stop it is because they 'want' risk assets lower....much lower.
Now that "They" are buying equities as well as debt it is becoming clear that they will never 'want' risk assets lower and interest rates higher. I anxiously await the day when the markets can no longer be controlled.
Yep, and it's gonna be in a jiffy, like a hockey stick chart.
My intuition is that the banksters will do exactly that. They will not only crash stocks, but they will crash bonds too. They will royally fuck investors, except those of course that are forewarned by them. Why? Because that's what banksters do.
When it is this obvious, the Crack Up Boom can't be too far away.
Ali may mop the floor up with Amazon which is partially down … again. Ebay has also been having too much unintentional down time. Hard to sell and buy stuff when the web site is broke. Ali Baba has some top notch web people who may run circles around AMZN and the Bay.
1) Funny how Amazon and Ebay are both under attack just when Ali BooBoo goes public.
2) Ali BooBoo is a great place to find non-brand-name Chinese merchandise. Stock up on some toothpaste and baby formula while you're there, and remember to order early since Christmas is only three months away and it's a looong way from China to anyplace that has money to spend.
3) Sure, I want to send my financial data to China, where all foreign assets are scrupulously protected by the government.
4) Speaking as someone who shops for a plethora of diverse manufactured items every day, and not just some consumer electronic crap, I can tell you that Chinese merchandise is largely persona non grata with people who expect things to work as intended. "Made in China" means that you'd better buy two or three of them, so that you have at least a 50% chance of finding one that will work at least for a little while. Once it breaks, you will have learned, or re-learned, your lesson and will stop throwing your money away on non-functional crap. This level of intimate personal experience is why I KNOW that Chinese trade and financial figures are all imaginary. I've seen countless market segments where Chinese stuff drove virtually everything else out. Two years later, however, it is the cheap Chinese crap that is utterly gone and the products of other nations are ascendant. Who's up? Mexico. Vietnam. USA. Taiwan (granted that some Taiwanese products are simply repackaged Chinese stuff but it is a telling indicator that the Chinese need to hide the country of origin through such subterfuges.
Don't listen to the experts. Accept the evidence of your own lying eyes when you shop. Do YOU want to buy Chinese? No, and neither does anybody else. Ali BooBoo touts their access to 1.2 billion people, but it needs to be remembered that about 800 million are subsistence farmers and the other 400 million are finding themselves out of jobs as the "workshop of the world" discovers the painful truth that nobody is buying their simulated products any more. Big trouble brewing in little China. War is probably inevitable, which is yet another good reason not to patronize Ali BooBoo. Do what you can to starve the beast before you have to wrestle with it.
Takes me back 50 years when they were saying the same thing about Japan. The unions really really hated Japan 50 years ago.
50 years ago?
More like 25-30 years ago. Remember "Domo Arigato, Mr. Roboto" (STYX-1982)?
How about those High school team fundraisers.
Hit the Corolla with a sledge hammer $3.00 - 3 hits for $5.00!
All the dire warnings that Japan was buying up real estate the equivalent size of Iowa?
Japanese tourists, flush with cash taking over all resorts, worldwide. Club Med, Disney World, etc.
It was VERY unpatriotic to buy a Japanese -brand car in the 80's.
So what did the Japanese do?
Built a bunch of non-union factories in the USA: Tennessee, Ohio, California, Texas, & Kentucky.
That, plus a huge bubble pop calmed things way down.
China will pop soon enough, too.
Remember, too, about China: 1 Billion pissed off, poor, rural commie slaves + 200 million prosperous, happy middle & upper class posers.
The rural slaves now have TV & see that lifestyle. And they want it, too.
25 to 30 years ago the infection had already progressed for 25 or 20 years. Initially Japanese quality was pretty poor and a joke. But they embraced W.Edwards Deming, whose quality ideas USA manufacturers shunned. USA was deeply into designed obsolescence. American cars began to fall apart. American TVs and radios began to disappear. And Japanese products became superb. You couldn't tell the difference between a Komatsu and a Caterpillar unless you were up close. I watched the whole thing. Germany made the same encroachment, but not nearly as successfully as the Japanese.
The Fed may not be expanding its balance sheet (at least for now), but there are plenty of other central banks who will pick up the slack.
http://www.youtube.com/watch?list=PLzHgJaQ86rtUzmtzST1bgHOjQJPJnRneh&v=h...
Is that graph giving me the finger?
Bend over and prepare to sing soprano.
The tin-foil hat guy in me almost wonders if this is an "on pupose" to drive everyone to a central currency or currencies; ie: the Amero, etc.
It's also a relatively painless way for all the .govs to print away their entitlement obligations.
We have a front-row seat for the experiment of what happens with money printing on a global scale.
There has been a central currency for all but around 40 years for the last 5000 years. It's been called gold/silver. Soon to return after the great reset.
BEND OVER YOU KNOW YOU WANT TO!
i'm yellen "look out below"
post-GFC, HA! Guess we're going to post-FUBAR.
These men and women of substance would rather drive their countries over the cliff than lose face, well all 3 faces.
"Overall we would argue that markets might experience a few more bumps in the roadas the global liquidity picture is not as supportive as it has been."
translation: Yellen will be different than Bernanke in that she will, "try" to throw at least a few "blips" on the lower left to upper right charts(giving cronies like us advanced notice of course) instead of Bernanke's just straight up chart.
When the going gets tough BOMB IRAQ ( it's worked for the last 4 Prezzies hasn't it? )
The first chart shows what's really driving the stawk market to record highs!
good solid reason for current topping behaviour in the equities market.
I love the acronym; "Central Bank BS"; whoever is responsible for that deserves a prize.
Experience a few bumps you say. Sounds like some golden opportunities to BTFD bitchez.
Just for kicks, I wonder what the S&P 500 P/E ratio would be if the stock buybacks of the last five years were undone. I think I have the data to do that for the Dow 30. I'll work on that one tomorrow.
I bet the the ratio is undestated by 15-20%. buyback adjusted.
There are dozens of indicators with screaming sell signals. People are still trying to use technical analyst to trade stocks. Stupidity gets painted on pretty thick. Indicators only work in a free market setting. The market will drop when organized support cannot move it higher despite total effort.
http://quillian.net/blog/
I'm sure the question has been asked before. Why would a company in China, which is reputedly one of the largest online interests in the world given the size of the Chinese economy, require an IPO in the U.S.? It's a very, very basic question to be sure.
They love Americans and they just couldn't stand it if you didn't have a chance to participate in this wonderful new opportunity.
at any given moment the "market" is exactly where the fed wants it to be. there is no market, there is only old yeller.
Get ready for trillionaires.....as your income goes down. I hope to live on some aristocrats estate and subsistence farm in the Hamptons.
All that money will bring a tsunami of competition to Amazon and the likes. We will order whatever we want, underwear to auto parts directly from the manufacturer in china and they will make it and ship it to our homes. That's what amazon is doing now, half that crap isn't even made untiil you order it. BABA will just eliminate one step in the process and we'll order it directly from the Chinese. Good luck Amazon, just like Wally world before you the model is changing and it's not going to be pretty for you. Ahh capitalism, you gotta love it. /s
Had the FED randomly gave a million dollars to 85 thousand people a month, instead of to the banksters, I bet our economy would be growing at 10% by now... According to Sir Keynes.
It would be.
But instead, we gave it to already rich plutocrats who just pocketed it.
And LOL at anyone who thinks the Fed will ever lower rates. ZIRP is right around the corner, folks. Japan *is* the Fed's model; the Bernank basically was the one who taught those guys everything!