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Stocks Pump (On 'Bad' Data) And Dump (On 'Good' Oil Price Cuts)
As we noted earlier, something is seriously broken in these 'markets' and when the head of Blackrock appears on CNBC and uses the "cash on the sidelines" meme to justify stocks going higher (which is unbridled idiocy remember), we suspect even the big boys are getting nervous about the decouplings, illiquidity, and BoJ-driven exuberance. The early pre-open ramp in stocks was quickly eviscerated as data missed (PMI & Construction Spending) and stocks retraced back to bond reality... but 'they' needed all-time highs to run some more stops as USDJPY burst to 114. Once those highs in US equyities were tagged and traders realized what the Saudi actions regarding oil prices meant, WTI plunged and dragged stocks with it. Bonds, oil, HY credit, and VIX all decoupled from stocks.
The other decoupling
Disappointing day - but we are sure a victory for the bulls...
Quite a day for homebuilders (dump-and-pump on piss-poor housing data) and Enertgy pump-and-dump on Saudi news)
Post-Saudi price cuts, stocks pumped (yay lower prices) then dumped (wait the Saudis are screwing us?!)
As stocks played catch down to bonds 3 times...
Driven by oil prices - today higher oil was a good thing, lower a bad thing again...
VIX decoupled notably from stocks today...
Treasuries close the day mixed (30Y -1bps, 2Y +2bps) as traders sold bonds in Europe and boiught them in the US session
The USDollar closes the day up 0.4%
And commodities were generally mixed (gold down,silver unch, coppe rup) but crude was monkey-hammered
Oil pumped (yay they raised prices on Asia, Europe), then dumped (waity they cut US prices!)
Of course, Japanese stocks didn't give a shit - all they want is a JPY that is crushed Venezuela-style...
Charts: Bloomberg
Bonus Chart: Commodity vol remains very elevated and FX vol is picking up again...
Bonus Bonus Chart: Asness on the unbrdidled idiocy of 'cash on the sidelines'
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Margin Call!
http://www.advisorperspectives.com/dshort/charts/markets/nyse-margin-deb...
That chart is truly spectacular.
I already gave up on my WTI longs. ouit @minus $1360. It wasn't a double bottom; so I don't have any further business there.
The amount of significant things changing behind the scenes but not really affecting stocks is borderline amazing at this point.
With no QE commodities will be first to deflate. Stocks are next.
imo QE only works (at boosting asset prices) when growth is at least staggering forward ... we're close to ending current growth cycle ... (lack of) demand will squash commodities no matter QE
at the end of the day ... SOMEONE has to take delivery of commodities ... good luck getting someone to do that (at high price) in face of recession
I think the Bakken shale oil bubble has already developed a leak.
http://www.dailyfx.com/crude-oil
Not sure commodities can deflate so much, unless they have heaps of unsecured debt holding them up. I suppose this is possible in China.
Commodities will move first though, you're right, mainly because they are reflective of the real economy, as opposed to the financial ponzi economy.
When stocks do deflate as liquidity (credit) dries up it is going to be rather spectacular. I have my popcorn ready.
Its interesting to me that, last time [1980ish], when oil became plentiful, [North Slope & North Sea came online '76ish], they [Voelker] jacked the price of money. Now - Liquidity crisis jacks rates, but plentiful oil cushins the blow ... temporarily. A kind of late stage kick the can maneuver??
today remined me of a scene in lampoons vegas vacation where clark griswald finally pushes on blackjack after losing thousands....kind of how i feel
Like Friday, another day of total BS horizontal action for hours, with a constant bid that went completely against technicals, then a brief 1:00 ramp attempt that was swatted down by the oil news, but late VWAP magic ensured no index closed below Friday’s lows, which if you recall were stratospherically high.
The “waiting on the election and Jobs Report” meme doesn’t wash for me. Instead, this is eerily similar to last week, when the Japan news was obviously, yet with subtlety, front-run, so it’s likely the same is in the works for a Europe announcement, more likely to disappoint (one would think).
OT: We had snow here in S.Carolina this weekend. WTH? AlGore said (years ago) we will burst into flames any minute now. Lurch Kerry is saying the same thing, along with various other buffoons. I was looking forward to glo-bull-warming, now it looks like we will get winter after all. Damn-it man!
Jesus. Not this childish shit again. And you people wonder why nobody in the *real* world takes ZH seriously.
Look in the mirror to find out why.
Noting the favorable correlation with the counter indicator.
wmbz,
And yet, somehow, the world is different from SC.
http://cci-reanalyzer.org/DailySummary/ (it was similar over the weekend)
Problem still remains one of final demand. That is the "g" in GDP.
I do not see a deflation but I sure see defaults everywhere.
"White Elephants" and stranded capital galore where I live.
I was waiting for CBOE or NYSE to break this afternoon.
sept construction a big miss
expected ... +0.6%
actual ... -0.4%
july and august revised down
downward revision to Q3 GDP
+1 for the Bonus Non-Chart ... ' cash on the sidelines '
"The USDollar closes the day up 0.4%"
been on a rampage since Lance called for it to go lower
La petite mort.
According to Sprott Global Resource Investments Limited:
http://sprottglobal.com/thoughts/articles/what-greenspan-latest-talk-means-for-gold/
Friday, October 31, 2014
I traveled last week to the New Orleans Investment Conference, previously known as the ‘Gold Show.’ Jim Blanchard, a man known for promoting the right to own gold during the Nixon era, started the conference in 1974.
Early on, the conference was a gathering place for investors in precious metals. Speakers such as Rick Rule broke out into the investment scene through conferences like this one.
I’ll report later on the many speakers who attended the conference - and try to boil down some of the salient points from the highly valuable conference (attendees took nearly a week away from their regular lives to attend).
For now, I’ll confine myself to the headline speaker of the show – former Fed Chairman Alan Greenspan – and what his comments could mean for gold investors.
We did, though, learn a few important things about the Fed.
First off, Greenspan claims he has always remained true to Austrian economics and the principle of sound money. He fell into his role as Fed Chairman purely by accident, he claimed, and what he did there, he did it because he had to.
He explained that the capital needs of the Federal government were so massive that the only way to prevent disaster for the rest of the economy was to keep feeding the beast with cheap money. If the Fed hadn’t created and circulated new money, the Treasury’s insatiable demand for capital would certainly have ‘crowded out’ the rest of the economy, wrecking the entire private credit system.
Political realities, he explained, in the form of entitlement spending and off-balance sheet obligations of the US government, trump the need for sound money every time. It wasn’t his fault – that’s just how the system works. It’s set up to redistribute income from savers, who lose income because of low interest rates, to spenders.
In other words, Greenspan was a man who was forced by circumstance to go against his beliefs. Coming to the show, I had expected to disagree with Greenspan, but what I found was that the Fed Chairman was saying exactly what we have believed all along. Sound, stable currency is incompatible with the welfare state. Greenspan may have slipped away from the path, but he’s a great spokesperson for our message.
The Fed is unlike any other business in the world. It’s the only one that we know of that literally creates ‘something from nothing.’
The Fed wills new currency into existence, which it can then ‘sell’ by charging interest. Every dollar comes into existence as a debt due to the Fed; the more dollars are out there, the more money the Fed makes. The interest it receives is ‘pure profit.’ So it’s no surprise that as the government’s demand for capital has increased, the Fed has ‘accommodated’ that demand. Even if the Fed has to lend the government the money to pay its interest, that new money costs nothing to create, and it adds to the bottom line.
We did get one striking admission out of Greenspan. The Fed is not independent of the government, he said, calling suggestions to the contrary ‘naïve.’
Greenspan didn’t speak much to role of the Fed. He didn’t talk about inflation targets, or comment on how the Fed could help grow the economy, as he would have if it had been a New York Times interview I’m sure.
Hidden in his answers, however, was a big prediction for how the Fed will likely act in the future.
It’s not about juicing the economy or keeping the currency stable, although those are certainly justifications that are used.
The truth is, the Fed is merely adjusting supply to meet demand. That’s what he meant when he said that the Fed had to increase the supply of debt to avoid the private sector being ‘crowded out’ of the market.
Its mission isn’t to keep the currency stable, it’s to help fund the spending of the US government, and to defend the banking system.
This suggests that as long the US government resort to high levels of debt, the Fed isn’t likely to decrease the supply of money.
Greenspan might have an inkling of something he’s not telling.
Here’s what the former Fed Chairman had to say about the direction of gold and interest rates:
“Gold – measurably higher. Interest rates – measurably higher.”
With oil measurably lower, cushioning the blow to deliver the Banksters a little more time in the saddle.