Are Bernanke's Fingerprints All Over Equity Indices?

Tyler Durden's picture

The link between nominal interest rates, inflation breakevens, and stocks has changed; especially with regard the last few years' seemingly increased dependence on the Central Bank to keep an anti-deflationary floor on breakevens (or conversely the Bernanke Put under stocks). UBS' macro team, while humbly professing not to be experts in corporate earnings (which have been dismal) or balance sheet ratios (which are positive but have deteriorated in recent months) believe in a big picture macro perspective that we have been vociferously commenting on for a year or two now.

SPX (green) vs 10Y Treasury rates (red) and 10Y TIPS Breakevens (blue-dots)


As official policy rates are frozen near zero and the Fed is likely to keep them there for at least two more years, one would need to look for different indicators quantifying market expectation of a future success or failure of the Fed’s stimulative effort. Breakeven inflation is a good candidate. The logic is pretty straightforward: we have been living in the low inflation environment for the past several years, and the Fed is quite intent on preventing deflation, so “successful” monetary policy should boost future inflation. The TIPS market reflects changing inflation expectations by repricing breakevens. Breakevens have reacted to the introduction of traditional and non-traditional policy measures, from new bond purchase announcements to extending the language regarding super low policy rates.


Specifically, they have noticed a potentially curious link between the way the market interpreted monetary policy signals and the large cap stocks in the US: the breakeven inflation rate on 10yr TIPS has tracked the S&P 500 very closely this year.

When the Fed is perceived to be successful in stimulating the economy, stocks benefit and breakevens also rise.


When the Fed’s potency is called into question, stocks fade and breakevens decline.


We have checked historical data to see if a similar pattern existed for the relationship between SPX and the nominal 10y Treasury yield in 2012. We found that relationship to be very statistically weak. We can point out to a pair of dates in 2012 when the 10y benchmark yield was essentially the same (1.83% vs.1.88%) while the S&P500 was 158 points higher on one date than the other.

Nominal Treasury rates have lost their 'signal' as UBS agrees with the point we have been making for a long time: central bankers and politicians, not economic fundamentals and inflation expectations, currently drive the nominal rate and equity markets.


Source: UBS

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Aziz's picture

Bernanke hasn't been fingering.

Bernanke has been fisting.

LetThemEatRand's picture

So probably a good thing for Ben's sake that they don't take knuckle prints.

Precious's picture

Bernanke?  Maybe Netanyahu.

Hedgetard55's picture

Not his fingerprints, his sperm.

Muppet of the Universe's picture

I bet bernanke nuts in between two hundreds and tips valets with it.

Short Memories's picture

Its a "War against Deflation" I guess :-\

GetZeeGold's picture



Long lubricant me on this one.


The Big Ching-aso's picture



Be gentle Ben, be gentle.

Michael's picture

Let me see if I get this strait;

The Federal Reserve is handing its corporate member banks on a silver platter hundreds of billions of dollars in free money by collecting interest on Fed deposits in their banks. That's what the 28 trillion dollars is for?

Pure Evil's picture

Makes you wish you were one of the corporate member banks doesn't it?

Ah, I love the smell of freshly printed money early in the morning. Its the best part of waking up, Ben Franklin in your cup.

mick_richfield's picture

No -- if I got an extra trillion all of a sudden, it would just get me into trouble.

francis_sawyer's picture

These cards are MARKED...

They're a mess!

A chocolate mess!

Easy boys, the dirty dealer meant no harm...

Michael's picture

Remember Remember the 5th of November.

When you see what we have planned for the 5th of November, all your questions will be answered. We mean on that date a complete and total destruction of the Republican party as we know it today. Here's a hint what will happen; R for Revenge. Revenge is a dish best served cold.

Michael's picture

Full disclosure;
I have not seen the movie V for Vendetta till this evening. I'm about 3/4 of the way through it.
So far it isn't anything I haven't already thought of.

I believe the ending will be to my satisfaction.

Michael's picture

My analysis of the movie;
This is what real HOPE is all about.

GetZeeGold's picture



You do realize you're talking to yourself......right?


d edwards's picture

Long story short: we're all screwed!

Stoploss's picture

All the way to the elbow...

CunnyFunt's picture

BSB, bubble-builder extraordinaire.

CunnyFunt's picture

"Through 2014", what percentage of 10-year bonds will be self-purchased in order to maintain ZIRP? If the answer is below 75%, I will name my firstborn Ben Shalom.

DavosSherman's picture

Ben S. Bernanke is a fucking moron.

ekm's picture

I have found a name for this stock market: TERRORIST MARKET

You see, a terrorist doesn't need to be succesfull each time. He wants to be succesful once only. We never know how many times a terrorist tried and failed, but we all know when the act is succesful.

Same this with this market: The market tries to hit and the Gov + Fed hit back. The market tries a bigger bomb, Gov + Fed dodge it. And so, on and on and on and on. The market keep throwing more sophisticated and more powerful weaponry finaly strikes.

The market had a good strike in 2008 and it seems that it's getting pretty easily used to cocainated easing 1 and 2, twists, stock and bond buying by Gov+Fed by use of Primary Dealers with the only goal to provide money to Primary Dealers to meet their margin calls, thus removing stocks and bonds from the market until............nothing would be left to trade.


Remember, the market needs to strike only once in a blue moon. The market is BY NATURE a TERRORIST MARKET. Next time: It will a be a great Market Crash since the market seems to have learned all the tricks by now.


Atomizer's picture



Very shortly, someone will be hollering.. Give me that Thought Crime Act on my desk to sign. Increase the penalty to one million dollars with served time up to life. We will no longer bargain with these Muppets. Our ideology of this new world will happen. Stiff penalties for dissenters will send the strong signal that we mean business.  

We have many work houses for criminals to work off STATE fees. You will be reprogrammed during your stay.. 

Christianity is stupid, communism is good 

ekm's picture

I lived thru that. I never really suffered  personally but I know a lot of people who did.

We were taught not to think independently. We didn't even knw what 'independent thinking was'.

I'm afraid the western world is going towards willingly.

Atomizer's picture

I think once they push the envelope too far off the table, they’ll regret how they overlooked the human bonding element bit.

malikai's picture

If they regret that, they're really going to regret that there will be nowhere for them to hide.

The whole world is in on it now.

Atomizer's picture

Yes. Think as if you flipped on the light switch, you know where they are hiding, extermination has now been contained.

LMAOLORI's picture


"ekm Remember, the market needs to strike only once in a blue moon. The market is BY NATURE a TERRORIST MARKET. Next time: It will a be a great Market Crash since the market seems to have learned all the tricks by now."


Your Money Market Fund May Not Survive The Next Wall Street Panic


On June 21, 2012, Securities And Exchange Commission Chair Mary Schapiro testified about “Perspectives on Money Market Mutual Fund Reforms” before the Committee on Banking, Housing, and Urban Affairs of the United States Senate. In somewhat chilling remarks about today’s roughly $2.5 trillion money market funds, Schapiro dragged out the bloody corpse of the Reserve Primary Fund, which in September 2008 “broke the buck” and set off a cascade of panic that swept through other money market funds and flooded the short-term credit markets.




Breaking a Buck, Maybe, but Not Taxpayers’ Backs


MARK Aug. 29 on your calendar. It’s the day all of us could end up on the hook for a big future bailout.


The Securities and Exchange Commission is expected to vote that day on a proposal that would limit taxpayers’ exposure to the $2.6 trillion world of money market mutual funds. The plan would reduce the odds of having to rescue teetering funds when the next financial crisis comes — and it will.

Money market funds are a huge cog in the nation’s financial machinery. Many people think that these funds are as safe as federally insured bank deposits. In most cases, they aren’t. But then, in the dark days of 2008, a run on one fund, Reserve Primary, reverberated in the industry.

Investors fled, and the Treasury stepped in. It earmarked $50 billion to protect money market funds and to prevent them from “breaking the buck,” or having their shares fall below the sacrosanct $1 net asset value. Of course, if the government rides to the rescue once, the thinking goes, it will surely do so again.


Money Funds Step Up Fight --- Fidelity and Others Have Dedicated More Lobbyists to Beating Back SEC Rules


Mr. Aguilar, a former general counsel for Invesco Inc., the 13th largest money-fund company by assets, has said he doesn't believe there is sufficient evidence that additional reforms are needed. A spokeswoman for Mr. Menendez declined to comment. Mr. Aguilar declined to comment.






Per the Q4 2011 FDIC Chief Financial Officer's report to the Board, published on March 30, 2012, the FDIC's Deposit Insurance Fund had a balance of $11.8 billion dollars.


Bank deposits in the United States at the same time are estimated to be between $8 TRILLION and $10 TRILLION. Let's be conservative and say the number is $8TTT.

11,800,000,000 divided by 8,000,000,000,000 equals 0.001475, which I will round UP to 0.0015.

That is read as "fifteen hundredths of one percent". It isn't one percent, it is fifteen hundredths of one percent. That is how much the FDIC is carrying to back all of those little signs on the teller windows that say "Each Depositor insured to at least $250,000. Backed by the full faith and credit of the United States government."


ekm's picture

Wow. Fantastic work.

(Out of all links, the Ann Barnhart one did NOT go direct to the specific article about FDIC statistics.)

LMAOLORI's picture


It's a PDF file 96.7KB likely that's why it didn't work for you it has to be downloaded

Tombstone's picture

Benny, buy gold now.  Sell at $15,000, after you enact QE27.  Use proceeds to pay off debts.  Then take your commie brothers and leave for good.

GetZeeGold's picture're totally giving away our best stuff!


yogibear's picture

There is no Bernanke exit strategy. Bernanke's puppeteer is Wall Street. Bernanke and the fed doves will print until the rest of the world chokes on the mountains of printed US dollars. Then reality hits the fed and market. Only when they loose control.

Atomizer's picture

Ben will… Nip It In The Bud


Bawhahahaha. Ooooooo KNOCK ME OUT!

proLiberty's picture

The Fed is distorting the market through Low Frequency Trading (LFT).

pauhana's picture

"Are Bernanke's Fingerprints All Over Equity Indices?" (Yes, duh!)

What other purpose would there be for this insanity?  Need equities to be up until Nov. 7.  After that it won't matter.

Waterfallsparkles's picture

I am begining to believe that Bernanke wants the Market to stay high is due to all of the Pension Funds and Insurance Companys.

It is hard to believe what would actually happen if Pension Funds lost all of their Money and Insuance Annuity funds could not pay out the benifits they have promised.

sabra1's picture


All customer funds in the United States are now the legal property of JP Morgan, Goldman Sachs, BNYM, or whichever megabank is the counterparty on the loans the FCM or depository institution takes out in order to fund its mega-levered proprietary in-house trading desks.

For the love of God, I don't know what more there could possibly be to say to snap you people out of your normalcy bias trance. You have GOT to get ALL MONIES out of the financial system NOW. This ruling sets precedence for every depository institution, not just futures brokerages. It is now legal in the United States for any financial institution to steal customer funds, borrow money against those funds for the uber-levered proprietary trading use of the financial institution, and the customers have ZERO CLAIM TO THEIR OWN FUNDS once they are in the custody of the financial institution.

The court has ruled that once your money passes out of your PHYSICAL POSSESSION, and I mean PHYSICAL possession, it is no longer yours, and you have no legal claim or legal recourse to it when it is stolen. This includes BANK ACCOUNTS. Money in a bank is in the possession of the BANK, not you. Do you comprehend this? The entire system is utterly devoid of any integrity or genuine security and is breaking down catastophically before our very eyes. You HAVE to comprehend that your money sitting in an account is no longer legally yours. You have to force your brain to process and comprehend this, no matter how incomprehensible it may seem. IT IS OVER. This is Marxist hell. We have arrived.

This ruling and precedent will be used by every brokerage, every bank, every insurance company and every pension fund to deny you your money when the financial system finally collapses, be it on Monday, or be it two years from now.


You have GOT to GET OUT.

DOT's picture

You don't own that account, somebody else owns that account for you. 

HappyCamper's picture

Sage warning, but let’s take this one step further. Soon you may not own it even if it’s in your physical possession. (Precious metals) Our Marxist overlords will outlaw it, confiscate it, and exchange it for near worthless fiat in its place. Plan accordingly as best you can.  Accumulate food, necessities, and live in a community were you don’t fear your neighbors. The storm is coming so hunker down.

yogibear's picture

I am begining to believe that Bernanke wants the Market to stay high is due to all of the Pension Funds and Insurance Companys.

That's a big reason to pump the markets. He knows if the pension funds with their 8%/yr gain fails the whole house of cards comes tumbling down. Like Bernie Madoff, Benny Bernanke has to keep the game going. Bernie Madoff didn't have an infinite printing press, Bernanke does.

ekm's picture

Not necessarily.

The only way to "protect" the price of an asset is to BUY the asset, hence it is to OWN  the asset. There's no other way.

Fed is providing ZIRP to Primary Dealers with the order to OWN the assets, slowly ending up OWNING the whole market, hence no volume since asset are being removed from the market.

Theoretically and practially it ends until the whole market is owned by the Primary Dealers. We may not be that far off that point. I think the market was at that point right before the crash in 2008.

ekm's picture

Hence, for all those who BELIEVE that Liqudity increases the Volumes and Trade, you are wrong.

Liquidity way and above normal, decreases volumes and trade since excessive liquidity REMOVES the objects to be traded, hence lower volumes and less trade.

holdbuysell's picture

Greenspan in 2005:

"We can guarantee cash benefits as far out and in any size you like...we can't guarantee their purchasing power."
ekm's picture


That video is gold. I thak you from the bottom of my heart. I rarely say this and I always am quite serious when I say.

Thx again.

Nehweh Gahnin's picture

Here's your $500k pension bitch.  Now go buy your loaf of bread.

buzzsaw99's picture

Interesting theory. Let's see, the bernank's plan to help the pension funds and insurance companies is to force them to pay outrageously high prices for stocks and bonds. The super low coupon and dividends along with the fraudulent trading activities will naturally help them all make a great deal of money. [/sarc]