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The Cost Of Recoupling: 235 S&P Points
Since late November and more so mid-December, the US equity market (and broad risk drivers) have decoupled from Europe's woes. The fundamental unreality (as we discussed here, here, and here) of this lagging performance and over-enthusiastic economist extrapolations has pushed the S&P to over 235 points over a 'fair-value' of 1050 (based on EURUSD's price). Even on a conservative basis - from the last real-decoupling point on 12/21, the S&P still stands almost 150 points 'rich' to a global-slowing European recession-dragging USD-based-earnings crushing 1.27 EURUSD.
Medium-term dislocation...
and short-term dislocation...
Charts: Bloomberg
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Purge at Goldman heads are rolling baby.......
Why only 91 day analysis?? What about 6 and 12 months, 1 and 2 year?? Maybe there has been a lot of noise over the past couple of months.
Whoever junked you has obviously lost the ability to think for himself...
I'm not saying that ZH is wrong on this because over the last year we have seen many instances of decoupling between the ES and the more general 'risk-on Context' and there have been many really good trades to be had on the narrowing of the spread.
But simply asking for an even longer-term picture makes sense, even if only to confirm the scenario.
Euro showing a bit oversold and at major support of 1.25 (support in '09 and '10) - what will happen to markets if the Euro bounces back into the low 1.30's?
S&P up another 5% - 10%???
It's called the Obama re election Hail Mary fake pump print to infinity at all costs fuck reality BLS number fudging Obamanomics plan!
Higher they rise, harder they fall.
But...but...but this time it's different.
Really!
It has been. The floor under US equtie is much easier to control when vol is low. The PWG is having a field day with this. This is the Fiat Ponzi at its best: USTs selling to PDs and flipped to Direct. Check. Money fleeing the euro into the dollar. Check. Nation-States destroyed across Africa-ME-Asia. Check. Just another day in the life as a Central Bankster.
Mission Accomplished. The CIA/NSA/Central Banking troika is plenty pleased with themselves for engineering another global financial Coup d’état.
http://en.wikipedia.org/wiki/Coup_d'%C3%A9tat
This is why I was horrible depressed yesterday. They did it. They won. They implemented the laws, they have their Fiat Ponzi rollin', and they are destroying all of the brown people across the globe. They will have their New World Order!!!! Muahahahahaha!
And in the dark of night after they have drank their wine, we creep up and....
BUY SILVER
Jim Willie
"In my opinion, the Zero Hedge web journal is by far the most valuable and broad single source of relevant information in the global financial crisis, bar none... the intrepid indefatigable Tyler Durden (bloodied but resilient) of the Zero Hedge crew."
The USDollar Paper Tiger
http://news.goldseek.com/GoldenJackass/1326306021.php
Jim should join our club
This is why I monitor ZH. I will pledge 3% of this compression trade right back at you tyler.
What better way to get things realigned than a break out on shitty volume and then FAIL with a bearish put/call ratio tailwind.. don't hear a peep about this possibility anywhere yet...
http://fiatflaws.blogspot.com/
When will someone title a blog FiatPonzi@wordpress.com already?
Wow, either this time is different or there is going to be one hell of a correction.
pods
My money's on it's not different and a BIG correction.
Reminder, Italy auction of short term bonds tomorrow (overnight for us yanks), and long term auction Friday!!
Keep on extending the indexes.Fund managers are already planning the huge bonuses with Bernanke in the background pulling the strings.
Beige Book: National Economic Activity Expanded At Modest To Moderate Pace
Archer Daniels Midland Co., world's largest grain processor, to cut about 1,000 jobs, or 3% of workforce, to reduce costs - @BloombergNewsADM is telling their employees it is just a modest to moderate layoff.
Yes, all is well. We are all going to be millionaires.
1,000 jobs lost is 1,000 families without a paycheck.
That's like, half of Nebraska.
When the USD falls, the S&P will make new highs...crushing the shorts again. In the land of make believe only your lack of imagination can hold you back
That is scary true.
It will be the greatest day in Bernanke's life. Issue QE X, the DXY falls, stocks rise, USTs stick. He has his hand in his pocket just thinking about it.
Bernanke openly praised Roosevelt's 40% dollar devaluation as one of the main reasons the depression ended in his speech here: http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm
that is the next card he will play when the banks start to crumble
Absolutely
my thoughts exactly. you will only see the crash in spx if you price it in gold. and it will be a legendary crash.
"The trend is your friend" is correct: the DXY/USD has been pushed up to nosebleed one-year highs. While this says something about the level of TRUE belief in QE3, it also acts as a secret weapon against shorts...
I'm no expert but support looks like 76 on dx/y, which would mean a 6.5% pop on the s&p at around 1370. This would probably scare the shorts out again and push the index to 1400 before we start the sell cycle all over again. Who knows? I'm using logic and their lies my dilemma
Nice record low levels of shorts in the markets too right now. How they pull off their next 'short squeeze' with no shorts around I'll like to see.
Everyone is short the euro not the market. They somehow (they always seem to) get the euro to rally and the dollar to sell off and bingo...the S&P runs and runs. A lot of people still short financials too. They will really get banged around. Then Greece tanks. The euro tanks and people rush back into treasuries and large US multinationals.....rinse...repeat.
Yea everyone knows all the new normals, and how this time its different and where the S&P will definitely be in 3 months. Until the big false flag event that sets everything on its ear one morning.
Yeah agreed. I used to think this would be a long tug of war that just slowly bled everyone out. Now I think we just keep speeding up until we hit the wall at full speed.
Depends on whats falling with the dollar....hope it isnt nuclear warheads.
...you said it, the USD decoupling is a myth, ES is only decoupling on the downside courtesy of the PPT, setting everything up for "blowout", "upside surprise" headline driven JPM earnings to start the show
winning!
Still BTFD, we are just getting started. Anybody want a toke of this hopium?
Hey Tyler, I came across this last night on my trawls, looks like you are stirring some hot debate elsewhere.
Sorry if someone else has already posted this link.
http://screwtapefiles.blogspot.com/2012/01/is-someone-paying-zero-hedge-...
That's an interesting article, with equally interesting comments. If I traded silver (don't) then I might wonder what was up.
i just come to this blog for the sarcasm...
I) Nobody pays us to post. II) we wish the best of luck to anyone who wishes to buy 10MM or more in physical silver without incurring 20%+ premiums on the order when all costs are factored III) the Sprott PSLV NAV spread has continued to leak wider, and nobody paid us to do that either.
Ag1761/Tyler,
I posted this to the original ZH article yesterday regarding another naysayer (no, I don't get paid for posting).
The replies are stuck at an eerie 666 so someone go say something before another conspiracy is hatched.
I see no conspiracies in the ZH article, only observations.
"Regarding the Daily Capitalist article criticizing this piece:
The Daily Capitalist (DoctoRx) seems to miss the point.
Key sentence from Tyler in this article: "In other words, someone is willing to pay up to 30% over spot for the right to be closer to the physical metal than merely have a paper claim on a paper claim (pre hyper rehypothecation and what not)."
The Sprott PSLV is not holding physical, but it gives a measure of what people are willing to pay to be closer to actually owning physical than MF Global "possession" of silver.
If people are willing to pay a 30% premium using the PSLV versus a certificate owned by Cede & Co. (DTCC), it gives a measure of the price strength (demand) for physical.
Do you trust Sprott to hold enough physical silver to back the ETF versus owning a certificate owned by DTCC? That is what makes a market.
Daily Capitalist article: http://dailycapitalist.com/2012/01/08/pslv-bulls-moving-into-deep-space-...
ZH Article on Backwardation (this one): http://www.zerohedge.com/news/physical-silver-surges-record-30-premium-o...
ZH Article on DTCC: http://zerohedge.blogspot.com/2009/06/biggest-financial-company-you-have..."
Perth Mint does not incur any premium when it pulls physical out of London. Whoever is feeding you that is making a fool out of you. If you really are independent and after the truth, more than happy to chat with you anytime - you have access to my email in my profile.
Yep...it doesn't matter a wit that no one is left involved in the markets...according to all the failed pitch men on Wall Street. In fact, you might say that the failure in capital formation IS the reason the market has been able to drift up. Why not? After all, in the non market market, selling causes equities to rise, and buying causes declines.
It will take generations for any stitch of credibility to be restored to US markets. And so the Greater American will just roll on and on specifically because of this perversion of markets and the missallocation of capital.
Way to go...criminal syndicate known as Wall Street!
+1
The banksters think they are firmly in control now. So now is the time to go balls to the wall. How about everyone that is able retires, buys lovally, buys silver, and sits in on their capital building once a week? Yeah? What say you "hippies" of ol'? Remember, the times they are a' changin'.
They just keep bashing precious medals...while pitching that burritos have unlimited pricing power, or that the death of the Euro union is "priced in."
And despite the megaphone of their fraud networks....crickets from Average Joe.
It's a reality show! Starring " Timmah, Ben , & Jimmah Cramer" ... Dancing with the traders of "Wall Street".
RSVP, PLATFORM SHOES, for cramers table...
Check Bobl vs Dax. Nice "decoupling" there too.
I was just running that correlation, or lack thereof.
We've gained back 1 point since the posting. The Fed cannot print after that Beige Book, oil above 100, and the S&P approaching 1300. Caveat emptor.
i wonder how that joke show's ratings are doing CNBC......
Simple Answer.
SPY is rallying in virtually every foreign currency, making new 3-year highs in Euros and Pounds.
http://stockcharts.com/h-sc/ui?s=SPY:FXE&p=D&b=5&g=0&id=p97176935329
Thanks to crashing energy prices, with natural gas trading at generational lows today, the consumer is ebullient after finding out that "Peak Energy" was one of the greatest investment theme frauds ever perpetrated by Wall Street.
Check out UNG.....
LOL....
Yup. Good thing we can power cars and planes on NG. We're saved!
Huge number of commercial vehicles (UPS delivery trucks), virtually all public transportation buses, and all government pool cars have all been converted to CNG or LNG in Los Angeles.
These vehicles today have fuel costs which are the lowest in 15 years.
The low end consumer is saving huge, because bus fares have not gone up recently.
So....then your mom DID give you a new bus pass for Christmas?
Sorry - but $WTI carries a little more weight in the global economoy than UNG - :-)
Robo you are on to it here imo, nat gas is only common sense in the commercial fleet sector.
http://www.pickensplan.com/
Cars and planes, no. But millions of very large trucks and hundreds of even larger turbines...soon.
Totally disagree with you here Tyler. Europe only accounts for 8% of Sp 500 eps and the est for this year is 106....the Mkt is still cheap!
If the S&P were to trade at a PE of 10, which could happen with lowered estimates and bad news in Europe... You would be looking at a 20% drop from these levels...
NOT... SO.... CHEAP...
Normal historical pe is 15.8 and normally you pay a higher mulitple for eps as interest rates go down no we are not in a normal enviroment but a 10 multiple I think you would be hard pressed to get
Fair assumption. I however, have difficulty being convinced with either scenario actually...
I could see the bond markets taking a hit from these historic highs and some money moving to stocks to push the market to new highs...
Agree with you on bonds....I am short 50k of 30 yr Treasuries for the mother of all bubbles to unwind!!
go back a few years (or decades) and look at index PE's, several instances where single digits were the norm over multiple years, precedent has been set
Decades ago on single digit pe's....we also had multiples in the upper 20's in the late 90's...you make NO POINT!
Hetman68:
Money is sloshing into the U.S. markets because of the pain and suffering in Europe.
$ Coming into our bonds and markets out of fear and because of low volume HFT fluffing.
Add to that the high possibility of QE3 (4, 5, 6) in one form or two or three and the decoupling makes sense.
It also means that overseas money is floating our markets for the time being.
Subtract the safe harbor money and the cotton candy high of the next QE and the markets are overvalued.
Remember that 2011 was flat. Lots of volatility and movement but flat for the year.
Timing is everything.
I agree with your points...but a the end of the day europe is 8% of profits for the sp 500 on that $106 number...so europe shouldn't be as relevant as it has been....people just fear Lehman 2!
S&P decoupled from reality, 150 or 200 points rich by any measure, so then....S&P 1350 next? LOL whatever.
Meanwhile RoboTarder is all over it, he's hitting the buy button on his Etch'a'Sketch trading platform....nevermind he's still 300 DOW points too rich from his last euphoric all-in call months ago at DOW 12,700.
the aud is ( absolutely) correlated to the "spx". You're damned if you do, and damned if you don't! It's the CHF of 2012.
Importers, all 3 of them /sarc, will love it! Exporters will watch profits erode, and input costs rise on the labor side!
China,& EM balance sheets will say it all! Personally I think the " aussie is due for a rather dramatic dip in the " short-Medium" term from a technical perspective.
I'm sorry, but why on earth should the S&P 500 be coupled to the USD/Euro exchange rate?
The two moved together briefly while Wall Street rubbernecked past the eurodebacle. Then we got bored...
DE - Coupled?
The 'Eruodebaucle' has passed? I dont believe that at all.
Passed? No, we're at intermission waiting for Act III. By then I'll be happy to sell you some stocks I bought in August.
because the value of the dollar relative to the other most widely used currency on earth matters.
When consumers start buying I-pads with goats...then perhaps the dollar wont matter...until then..it does.
'Santa decoupling event', now already deemed the 'new normal', LOL!
Nasdaq Comp seems to be up for 7th consecutive day...hmm, a very rare incident. No resets, no recoils allowed - PPT, whatever, but it sure doesn't look like a healthy market. How many days they can manage, 10, 20?
And for what reason? Theyre not making anything off of it thats for sure. Maybe now theyre just waiting until the 'all bulls' indicator flashes and pull it for the next leg down.
Everyone seems to forget theyre raping the bulls just as much as the bears. But nevermind that, everyones already got S&P 1,400 locked in the bag.
Yeah, for what reason, I don't know.
But, actually this is not 7th up day, only 5th, since there was one day when Comp declined by 0.3 points, not percentage points, but points. Anyway, seems like it's on autopilot, and feels exactly like 2007 - July 2008. All news was good news and no news was good news. I remember how frustrated I was back then. Then it was "contained", not it is "decoupling".
But anyway, whatever they do, there's too much money hiding on large cap techs, the money is there because it seems to be the only play (with dividends) in town. So much money hiding there, that no big rally is possible before the weak hands are dropped out.
what's the fair market value of Hopium with a dash of Bullshit? Because I think that's what's driving the decoupling.
It really reeks of the bottom of the desperation barrel being scraped now.
just wait til tomorrow's "better than expected" unemployment numbers hit. No doubt we'll see /ES over 1300 before the day is done.
Lot's of Yuan news tonight! http://www.forexfactory.com/calendar.php ( click on calendar) Some one stick a " Ball Park Frank" up Bob Pisanis' ass!
The 2 year correlation on ES1 and EURUSD is .55. R squared is .309. Although these charts seem to show a high correlation in the short term, it is not unexpected to see such a dislocation. I am not ready to short SPX and buy EUR thats for damn sure. Maybe you have the balls to prove me wrong?
Can't you just make it easy, and call it 6:1 and some change?
But wait...Maria Bartiromo and Jamie Dimon said this is already "baked in" to the market levels and bank stock prices?
(/sarc off)
Jamie Dimon could be a " pitch man ' , with " jeff Immelt" at a 3-D ( I-max) presentation of U.S. debt in [ SHITS ville} >
another big rally today for tacky plastic shoes, 3rd rate travel sites and terrible mexican food.... 1350 here we come! lol...
LOL, everyone's looking at the same charts.....which only encompass the last 5 months. gimme a break. this relationship you're looking at changes from time to time for various reasons. why don't you post a chart going back 5 years instead and see what it looks like. At least go back to before the fed became intimately involved in artificially propping up stocks. You will see what you're describing as decoupling is not as uncommon as you make it out to be, and surely does not have to ever correct back in line.
Another deadly lame volume day.
SPY hasn't traded more than 200 mil shares since Dec 20, 2011. Today looks like it will barely break 100mil...if it breaks it at all.
If you do a rolling correlation of S&P versus euro you will see on a 15 day observation we peaked in Oct/Nov. Recovering US and stronger $ has been good for Europe in history. Remember Europe makes the best high end kit in the world. Full of exporters. Declining euro with LTRO I extremely good news and will reverse euro vs us earnings beat in q1 results if it persists. Q1 results in April/May.
If you do a rolling correlation of S&P versus euro you will see on a 15 day observation we peaked in Oct/Nov. Recovering US and stronger $ has been good for Europe in history. Remember Europe makes the best high end kit in the world. Full of exporters. Declining euro with LTRO I extremely good news and will reverse euro vs us earnings beat in q1 results if it persists. Q1 results in April/May.
Correlation has been strong--nothing is perfect though. Here is a longer term chart, interesting stuff.
http://i.imgur.com/iB2PV.png
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