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"Something Has To Give": Wall Street Finally Noticed The Epic Divergence Between Stocks And Commodities
We have shown the following chart, showcasing the unprecedented divergence between commodities and stocks countless times:
And now the sellside is finally starting to notice, and instead of merely falling back on its traditional "but if you ignore energy..." platitudes aimed squarely at the 5-year-old trader market, is taking it seriously. Here is Credit Agricole's Valentin Marinov with a note released yesterday, which it seems took the market about 24 hours to read and digest.
Stocks still up even as commodities are down – something has to give
The persistent selloff in global commodities (and commodity currencies) of late is attributed to mounting growth concerns (centred on China) as well as USDappreciation in the run up to Fed lift-off. Lower commodity prices have already sent gauges of inflation expectations lower and weighed on global bond yields.
Yet, it seems that these developments are in stark contrasts with the apparent resilience of the developed stock market indices. For example, the VIX index is still trading close to its lowest level this year. The question is then, should we view the apparent resilience of the developed stock markets as a sign that investors are overdoing it selling commodity and risk-correlated currencies. Market shorts seem substantial indeed. It took only some adjustments in RBA’s language to send AUD more than 1.5% higher at one point yesterday.
We are far less sanguine and think that the developed stock markets may be lagging behind other asset classes as investors position ahead of Fed tightening while global economic data continues to fuel market worries. We still see risks on the downside for risk-correlated and commodity currencies going into lift-off, which we expect in September. As highlighted in our recent publication, falling central bank reserves should ultimately bring global asset prices (stocks and bonds) more inline with falling commodity prices and slowing global growth (and global trade). In particular, the FX reserves should fall more on the back of weak (commodity and manufacturing) export revenues. In turn, fears about weakening global demand for stocks and bonds should mount, making current valuations difficult to sustain. Risk appetite should remain subdued and continue to undermine risk-correlated, commodity currencies while propping up safe havens like JPY and EUR. USD should do well as well, but mainly against G10 smalls.
Expect the remainder of the sellside penguin crew to finally "notice" and this gaping divergence in the coming days.
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They ain't noticed shit
The economy is doing great! The divergence between stock prices and commodities/energy usage/shipping rates is a result of .... Oh FUCK!
Bullard managed to stop the crash last year by mentioning QE 4, when (not if) they have to halt a crash this fall (or late summer) what will it do to the feds so called credibility when they not only can’t “lift off” but must start jaw boning QE again. Of course they haven’t had credibility with the ZH crowd for a while, but the CNBC crowd may start to question their omnipotence. Should be fun to watch.
Print before it's too late!
But Laslo Birinyi is calling for 3200 S&P!!! And on CNBC no less... Bwahahahahahaha...
https://www.youtube.com/watch?v=d1aAqdczkOw
So when does the market break?
Oh...On August 15, 1971. That is when.
Logged on to upvote that, Tall Tom. (Something about a Credit Boom brought about by the ending of sound money to pay for a War that was never needed except to create demand.. Fuck U Tricky)
When you are on a remote vacation and still long?
Perhaps, but the real question is how many "retail" or independent players are actually left in the "official market"?
If only two people are playing fucking monopoly out of 7+ billion, who gives a flying fuck? The laws o Nature and physics are not negoticiable and demographics are what they are.
but those last 2 players are setting the level of 'wealth' for the rest of the planet. If the S&P is 2200 every one is rich. If it is 666 every one is looking for a window ledge on a tall building.
Pretty sure Janet knows this too.
"but those last 2 players are setting the level of 'wealth' for the rest of the planet." -- perhaps, but only as long as people accept their PAPER.
In theory, the Fed could manipulate interest rates higher, and the equity markets still levitate . . . if they light off another QE-trilly.
Double secret "QE-trilly" is and has been ongoing...
The Fed-tyranny only stops when all fiat-greenback confidence is lost.
With only two sectors pushing the S&P 500, Healthcare and Retail (tech) there should be no surprise in this chart.
Neither are heavy commodity users, in fact benefit from lower prices of materials and shipping with out lowering the ultimate cost to consumers.
Or something like that.
Interesting considering that many tech companies still use a shitload of precious metals and rare earths...
remind me, how are those miners doing again?
FYI, taking about "prices" in the absence of price discovery is fucking moronic.
There's a limit to how much sucking any vacuum can do. Perhaps they're sucked out.
"In theory, the Fed could manipulate interest rates higher, and the equity markets still levitate . . . if they light off another QE-trilly. "
Fucking idiot.
I've thought you were an asswipe for months. Your post is indicative of your worth to the world.
QE did not end.
According to Jim Willie the amount being injected into the Banking System currently in the USA is roughly $4 Trillion per year.
It is called "diminishing returns".
What happens when it increases to $16Trillion per year? What happens when our entire GDP is based upon QE?
Is there a real economy at that point? Is there a real econmy now?
more and more of the world's GDP is simply pushing paper/digits.
This activity adds nothing of real value...
Fuck em.
So long as there are people competing for a higher standard of living, there will be an "economy".
The differnce between our economy and the economy of a lion is that the lion thinks his standard of living is just fine, hence, he will just eat your ass and then go take a nap.
Book'em Danno!
Tighten publically to control inflation and loosen privately to keep asset prices and the 'wealth effect' levitated? I've had a similar theory, but once again can't see how it doesn't end in complete ruin.
The real issue is the debt and bad paper. My theory, supported by history, is based on the fact that their debt/paper (central banks) is very different from everyone else's (including the government's). When the time comes and the "crisis" warrants the "emergency action" they (central banks) will erase all of their debts/paper/CDS etc.
As always, their debt/theft/bad bets will fucking dissappear, yours will not.
And yes, there will be a run on all paper/banks.
This time, however, it will be a global event.
Trying to figure out your point. The Central Banks liabilities are currencies (the dollar), the debt they hold on their books are their assets. If those debts are erased then it is simply debt monetization. Not to mention that those debts are govt bonds and MBS so would in fact be erasing government and mortgage debts (everyone else's debt). Please elaborate.
Bullshit. For conventional loans, maybe, but these loans are fine because there is something real behind the loan, a car, a house, a business.
The CDS bullshit and other financial "products" is a much larger portion of their actual "profitable business" now. That's where all their compensation comes from these days anyway. That is the paper that will go "bye-bye".
Fuckers are going to have to actually work for a living again, they won't like it and will not let it happen without a fight...
Again, same as it ever was.
Banks have not been "conventional banks" for quite some time (thanks to bailouts and the "elimination of all risk" - for them anyway), despite your optimism, which is still appreciated.
I think you are missing Captain D's point. CBs are NOT like other banks. They make money and that is their liability. All the 'debt' on their books' is in the asset column. Sure it can tank but they don't have the kind of 'need to be paid' debt others have.
CB=Primary Dealers (at least in America) and I know several high up that food chain. Trust me, they most certainly "need to be paid".
again, fuck em. If they didn't the REPO and reverse REPO "markets" wouldn't be doing what they are doing.
The greatest illusion that many, including the Captain, are falling for is the fact that these people are hiding in plain sight. Fuck em, fuck em straight to hell.
LoP
I do agree that in monetary shifts that banks usually get bailed out/special treatment and usually more power, but I think you are confusing central banks with the central bank shareholders ie regular large banking institutions. CB do not equal primary dealers, these are the primary dealers.
Bank of Nova Scotia, New York Agency, BNP Paribas Securities Corp, Barclays Capital In,Citigroup Global Markets Inc, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc, Goldman, Sachs & Co, HSBC Securities (USA) Inc, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated ect ect
Sure since the big banks are the shareholders of the CB you could think of them as one entity, but I think your understanding is a bit off. Sorry not trying to be confrontational but I wanted to straighten that out.
If the CDS market is legit, then they will all go down together.
I think we agree. My point/theory is that this is contrary to thousand of years of human nature. no way these people will kill themselves. The CDS market is bogus they knowit, you know it, I know it...
this paper, now more that some 900 trillion must simply "dissappear", otherwise world war III it shall be.
same as it ever was...
Ah - but they now have 'cover' with Eurozone and China interventions...
Apparently the Fairy dust and Unicorn pee commodity sectors are looking bad......
Gamblers never give a shit about statistics or relevant facts, they only care what those they face across the table think.
OMG! Captain Debtcrash posted a comment that wasn't made of 80% hyperlinked text to his bullshit blog that nobody reads.
+1 One of the great lines from Spaceballs.
New norm-hell.
Surely you are not implying that the Chinese, Russians, Brazilians and Greeks will be buying far fewer pricey iPhones?
No definitely not. Porsche is overhere strill scratching his head as to why no one in Greece, Spain or Italy are buying his cars anymore.
Why can't commodities go up? Trying to be optimistic and hoping that there is a pair trade in there somewhere...
...nevermind, I forgot, there is no price discovery...
1. Chiner
2. Slack demand...worldwhy'd
3. BC GS said so
4. We all shun commodities down here, Georgie!
So long as the human population is growing, there is in fact plenty of demand for energy and all the resources that support a higher standard of living. Actually, the population does NOT have to grow as the amount of resources and energy that are required to simply maintain the status quo is fucking huge. I know we burn a shitload of diesel. I don't see that changing anytime soon.
So, while the "official markets" can do whatever, get long the black markets and sharecropping, because that's where the real action will be.
hard to reach a higher standard of living when most of the world live on $20 a day or less. The USA & EU consumers are not only tapped out and in debt up to their eyeballs the population is aging rapidly. Retired people don't buy much shit. Oh but I saw this in my local paper yesterday you can now finance a POS KIA for 84 moinths lmfas
Whether or not people actually "reach it" is fucking irrelevant. They will still compete for those resources regardless. Hence, there millions lining up for that POS KIA...
To be fair, on a seven year payment plan they're practically free.
Malthusian arguments have failed to catch the productive/extractive innovations that have kept grain yields growing faster than population, and now with advent of shale, hydrocarbon production.
When was the last time you had to knife someone for a bag of flour, or a gallon of gas (or diesel)?
Funny you should ask...
yes, take away the SNAP program and all government subsidies and let's see the real price for food and energy.
This guy is a classic useful idiot.
LOL!!!!!! How many calories have to be invested to actually deliver those calories from shale?
Just because you cannot comprehend the MATH behind it all, doesn't mean any of it is sustainable.
Let me guess, you probably think all that debt will actually get paid back too?
How many people are dependent on SNAP again? That's the only reason why you DON'T have to "knife someone for food" you stupid fuck.
What a fucking idiot.
We need money to lubricate the economy. When there are problems with the money itself there will be problems with the economy. No amount of barter can keep a population of 7 billion souls alive. We must resolve our monetary problems. The current problems are baked in the cake. There is no solution to our current problems in the present system. This is the 'reset' that people speak of. It will be far different and bigger than LaGrand and other discuss. It will require burning down the house and rebuilding.
We can only hope that in spite of the platitudes we hear from officialdom that some where a group is planning for these eventualities....at least thinking about them.
If we wake one morning to a destroyed system and there is no Plan B ready to go many will be lost.
We may have pleanty but distributing it requires a functioning currency system. Tradable wealth assets like gold are great but we must also have currency that can span the golobe in milliseconds to feed the whole of humanity.
Yes, continuing to reward bad behavior only takes us further in the wrong direction. People do eventually catch on to the fucking SCAM and that which cannot be sustained, won't be, period.
Moral hazard is a real motherfucker like that.
That assumes globalization is a given. I'm not a tree hugger, but I can see where localized, self sustaining, micro markets could be
a desirable outcome. Feeding the whole of humanity just so we can continue to increase in number seems self defeating.
When I workout (not as often as I should) I don't put the treadmill on full blast because I don't want to bust my ass. Well, IMHO
mankind is on a treadmill that continues to speed up, and at some point we will go down hard if we are unable or unwilling to
dial it back. I'm not pro famine, but rather for prophylactic measures to slowly rein it in. Exponential, perpetual, or parabolic
population increase is not sustainable.
I think the unspoken goal is, in fact, to thin out the 7 billion, no? I just can't see the Money-Power shedding any tears over the "many" who "will be lost." That's not who they are.
I have yet to see a psychopath-in-power, anywhere, at any time, who cared one whit for his subjects.
*addendum: I upvoted you.
Short reality index and long new normal index. It only works on paper if HAL 9000 is trading.
"HAL 9000." That's a good name for it.
Get yourself in debt under a basket of currencies. We'll compact your debt under the annual percentage rate based on new bond purchased volume.
Laughing at the stupid handlers manipulation. When is Obama going to send Stimulus checks to everyone? We saw that IRS con-job under Jeb Bush brother.
It was a interest loan to tax based slave income revenue. Do you remember Jeb?
Trump 2016.
The truth is that at this point everyone is on the government tit!!!
fuck em...
fuck em all...
Some just happen to suckle bigger, more liquid teats than others; some don't even have a true teat, they are waiting on trickle-up or trickle down
to slake their thirst. The middle class is the runt of the litter nuzzling about trying to latch a teat, between an obese sibling and a gaunt one,
both of whom are mean as hell and seemingly indifferent to the runts survival.
"Be advised you have a malfunction in your HAL niner tripple zero unit"
Nothing says lack of demand and global depression like crashing commodities.
Copper and aluminum ingots are falling out of dimons and blankfeins ass as they walk now, they needs a war bad to get commods moving again.
Lol does this mean Wall Street will be rational soon? Hell no apparently all the ''great experts on CNBC, FOX Biz'' are concluding that there's no bubble . Geez its like reality is to be make believe and kick the can
Free money to Central Banking to loan out under FICO scores has backfired. Who would of thought? Cannot wait for NIRP. This is when the fraud will be understood.
/sarc
propping up safe havens like JPY and EUR. USD should do well as well, but mainly against G10 smalls
safe havens????
Stocks go up because Fed, not because commodities. Investing easy. Wait for bad data. Press "buy." Buy Ferrari. Repeat.
You just said Ferrari because Lamborghini is hard to spell.
"You just said Ferrari because Lamborghini is hard to spell."
Nice one lasvegas
Something's Gotta Give:
https://www.youtube.com/watch?v=6Xwl4oVnbhU
Or put another way, stocks go up for the same reason commodities to down: ZIRP.
Escape velocity.
Additional data-reading caveats:
"...but if you omit..."
"...but if you exclude..."
"...but if you look at..."
"...but if you consider..."
Humpty Dumpty (The stock market) sat on a wall (a wall made of fiat currency).
Humpty Dumpty had a great fall (Crash!).
All the King's (Janet Yellen) horses (The Fed.) and all the Kings's men (Wall Street/bankers).
Couldn't put Humpty together again.
End of story.
Least we kid ourselves these fuckers are buying commodity stocks with both hands open.
Which, if you think about it, is more horrifying than I'd they're just ignoring the delta.
. That would mean that so many people are selling but not talking about it that even with the fed and citadel buying like it's going out of style commodities are still declining in price. If this was the case and word got out...
The Chinese stock market meltdown proves that once confidence fades, there is almost nothing a central bank can do stop the equity markets from crashing.
The U.S. is next.
It is just a matter of time. Not if, when.
Jeb, your brother offered a payout to the Social Security fund (a way to take our money to re-invest).
Your a day late, dollar short. Social security trust fund is going to be insolvent in 2017. Where did the money go? A question to ask this evening.
Jesus mother of god!! Check out HLF. WTF! I always know when the PPT is in action because HLF will be ramped, but 20%! They must be going in full force. wow. Just wow.
EDIT: If I still had a trading account, this would be a short worth taking.
Shares Outstanding: 92.41M
Float: 82.27M
Short % of Float (as of Jul 15, 2015): 48.10%
Its called a short squeeze. When everyone and their mom is already short, the short term pressure is on the upside because this is where suckers can get margin pressured. See, the short it and forget it mentality doesn't work because as the stock rises (from short sale "buy to cover" orders), the price rise drives up the maintenance capital required by your brokerage house on your existing short position. If you short 100k HLF yesterday, with 50K equity, today you would need to post an additional ~25-30k as collateral or be forced to buy in at a 20k loss on the first day. Alternatively, lets argue that you shorted 100k, but used no leverage. if the stock rises 50%, your short position would be for -150k, which means your equity has fallen to 50k, any more losses beyond this point and you need to post capital to the account or your brokerage forces you to cover at a loss. Think this can't happen? Check out other "short squeeze" candidates like NFLX or GMCR.
Yellen plunge protection team.
Nobody wants pet rocks anymore...
I'm waiting until 6pm - Cramer will have all the answers
Seinfeld reruns?
Christ – gold is surging!
(+$3.00)
Ho Li Fuk !!!
Stick your head in that gator's mouth, I dare you!
CL is getting obliterated...
Katrina price 44.25
WTI looks like it wants to move into the $43.00 handle.
Is your CL something other that Colgate-Palmolive, down 23 cents today? jus' askin'
Inspector Clouseau gets a special delivery
And the artificialy supported DJIA is about to make its next bear market lower low around 17,250, or lower, as Mr. Market clears his voice for a long-delayed declaration of much lower valuations to come:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=DJIA&insttype=&freq=1&show=&time=8
Even with Commodity Carnage gold is at 1090 ... I think this is a very good sign
zh, this is a very weak post. You are clearly running out of ideas. You are nervous because your narrative, since the past several years, is under threat. Your effort to sensesationalize your narrative may hurt you more so becuase you chose to be annonymous. Why are you hiding if you have done nothing wrong? Why do you suggest people to hide as well?
No matter how the convergence occurs general people will lose big time. There are no good options anymore. The later it happens the fewer options will be left on the table. How long will you keep writing same thing over and over again? Are you not convinced yet? If not then what doubts do you have?
fucking shaaaaddddupppppp!
Pareto, it appears you are scolding a child. Do you do this to your own children too. If you do not have of your own then are you giving me a hint that you are a child predator? Is this what zh turned you into?
Are you suggesting that this is simply true price discovery?
LMFAO!!!
Okay fine, then raise rates already motherfucker!!!
The only "narrative under threat" I see is the one coming out of D.C., The Fed, and from the bankers/financiers mouths.
And yes, all those useless paper-pushers should be scared.
I would have answered to your legitimate question, but there is no point talking to anyone who can't respect mothers.
One more thing LawsofPhysics : going by your narrative I have worries that your neighbor's and probably your own mom may be in danger from you. Control yourself. what this place has turned you into?
Don't come to fight club then asshat.
Evolve or die...
same as it ever was...
I reckon you should lead by example, so reply to this with your name and e-mail address, and phone number so you can lead the charge
of revelation.
my profile will lead you to what you want to know; i was never hiding.
Fahque Imuhnutjahb, now that you know who am I, did you just realize that you are threatening me too. Anyone who wants to know me can do so. So, the only people I should feel threatened are right here. Zh employs people like you to threaten those who do not agree with them. So, now it is on you to explain how different is ZH from those that they claim to report about.
For what it's worth, I don't know who you are because I didn't click on your profile, because that's how damn interested I am.
In terms of threatening you, I'm not sure how. I am not employed by ZH, and I'll disagree with who ever I want to---this isn't
called fight club for no reason. I've had my ass handed to me on here a few times, but I didn't take it as some kind of threat.
I get about as many down arrows as I do up arrows, and that's the way I like it. Finally, I don't have to explain shit about ZH
because I don't know shit about ZH---they could be corporate shills for all I know.
Have I ever commented on you just because I may not agree with you? Have I ever insulted anyone on this blog? Then what are you doing in this mob. This is what a mob mentality does to people. It bring the animal out of them. Add annonimity to it and then you truly know what they are in their real life. This is how people like zero hedge maintain their presence. They bully the very same people who they claim to protect. I see no difference between zh and the people in their atricles who zh villifies.
ZH is a double edged sword. For every poster who says outrageous nutjahb bullshit, there will be another who makes an insightful comment.
Anonymity is paramount to candid discussion. There may be guys on here who could bring the nail gun wielding reaper upon themselves if
they were up front about who they are. I hold ZH, for better or worse, in much higher regard than GS, JPM,BofA, etc..
ZH has become more pedestrian than it was when I first started reading it, which ironically, was before they allowed me to, (or before I figured
out how to) start a profile. Now, I really miss some of those commenters. I'll go to the archives and marvel at how many are gone. But I
digress, if you're looking for civility, then you are on the wrong site. Sincerely, fah que, because imuhnutjahb.
so your telling me my purchases of gold and silver are subsidized lowerr for the next few years?
Splendifirous!
I got 24 years til I retire.
Thank you Yellen you beautiful lady!
Killing commodities was simply an effort to further prop up Apple's (and others) share prices; especially since it was the number one stock in soooo many funds.
Cops love steroids!
yellen's gonna raise the ffr with wti < $45? don't think so.
More printing is coming no doubt.
But this time it will not be able to overcome the massive tidal wave of deflationary debt that is approaching.
Jobs being cut were high end jobs, i.e. oil companies? These people have enough savings they don't need to file right away?
Still teh fantasy of Fed raising rates. How long this BS is going to go?
Unfortunately my A-Hole gave out some time ago on realising the strength of the FREE Financial Opposition Terrorist Forces.
Instead of sell-side penguins, you probably mean sell-side minions. Glad I could help with crack-up boom economics.
We interupt this program to bring you a commercial from the RNC:
http://www.cnn.com/2015/08/06/politics/priebus-trump-gop-nominee/index.html
The tradtional paradigms don't hold anymore. Used to be that lower commodiities meant a cheaper cost of goods to the manufacturers and stocks did better. But we don't have a manufacturing based economy anymore. We have a Facebook economy that is Faceless. It is all a charade.
How does the old adage in real-estate go, they aren't creating any more land? Perhaps same goes for shares ... they aren't printing any more shares. In fact, through stock buy backs, they're effectively reducing the shares in circulation.
Of course, the argument can be made that the currency in circulation is getting smaller too. So perhaps it's a race between which commodity is getting smaller faster: currency through debt destruction? or stocks through stock buy-backs?
Ah the games that get played.
FIFY
you could see the FED manipulation in the stock market today as a constant bid was kept at the 2070 level basis the Sept S&P.
now that the market has reversed, the shorts are again about to get crushed ahead of the payroll number tomorrow.
the equities formerly known as markets are completely gamed and nothing but another scam to sucker the retail bag holders back into the stock market.
it will work until it doesn't.
Wouldn't life be simple if we could predict the future by looking at historical data? I'd be rich!
The Bride of Franken Market ...Goldilox emplyment will be here tommarrow to save the day.
It's possible the we're looking at QE to 'infinity and beyond'.
Two anti-gold stories on Bloomberg's front page today! The bottom's probably in for gold but not the DOW.
imagine if someone or someones could print money legally and buy all the stocks and bonds?
imagine you loaned the fed your gold (the real shiny stuff) and then one day you said i want it back, they said, heres some fiat dollars to buy the gold on the open market, thats what we do? and then you say (being somewhat stupid in the first place to loan the fed real gold) then why did you want my real gold in the first place? and the fed says, we didnt want your gold, but you wanted to be able to trade with america and so you offered it as collateral, (we dont print money we print collateral) and now you are stupid times two and you say so give me back my collateral.
There is just so little energy to push two buttons. See? Watch.
Ctrl-P
but but if producers pay less for their raw materials their profit margin will increase! isnt that what happened to exxon, they pay less for crude, but they charge the same rates for gasoline, they hit a home run on earnings, right?
QE4 commodities recover 50% of their lossess and stock hold steady.
nothing has to 'give'.
The "ignore energy" isn't about the stock market, it's about whether there's strength in the U.S. economy.
Stocks still up, even as commodities are down -- Something has to give
You have accidentally shown us too much of the chart. Look at the period from middle of '97 to the beginning of '99. Pretty much matches middle '11 to now. Then look at beginning '99 to middle '00. Stocks continue to rise but commodities just about make it back to where they were.
It that what you think is going to "give". Stocks will continue to rise and commodities will reverse and rise too?
Buy the spread.
Is this the time to buy commodities on "the dip"?
What has that to do with it? Commodities are bottoming. BTFD S&P
Thursday down swing is a fake. Just look at the stocks that are falling.
The only thing that going to give is the ink cartridge in the big magic money making machine in the fed..
moar stoxx...moar Kool Aid and just keep on pumpin bitchezzz
www.teamramgold.com
Deleted. Text editor not working worth a shit.
The Fed won't react until the biggest banks' loan books are on the verge of default...because they know it will be nothing more than a decision to have an inflationary collapse rather than deflationary.
Decision for the banks is inflationary... All other roads strip their wealth.
But they don't want to rush the fatal step.