Credit Is From Mars, Stocks Are From Venus, Or Another Reason Why This Market Looks Increasingly Like 2008

Tyler Durden's picture

From Peter Tchir of TF Market Advisors

Credit Is From Mars, Stocks Are From Venus

So stocks rallied into the conference call.  Stocks rallied after the conference call.  I have the various headlines and stories surrounding the statements following the conference call.  I am bearish, but I try to adjust for that as I read things to attempt to see if something has changed. I cannot find anything particularly appealing about the conference call summary.  Certainly nothing new, and if anything, the bearish side of me could say they spent time figuring out how a post default Greece could remain in the Eurozone.  That is too bearish, but I fail to see anything new or particularly compelling about the stories in the immediate aftermath.

It is still ironic that Greece's way to a budget surplus is through austerity, but our path to austerity is the big new jobs program?

The SPX is up over 3% on the week, but SocGen stock is down a smidgen, HYG is up less than 1/2% and IG16 is 4 bps tighter, while MAIN, at the center of the maelstrom is only 6 tighter.  Stocks seem to have outperformed credit rather handily.  It is particularly curious since the headlines imply that stocks are doing better because credit, and the PIIGS in particular are doing better.  Yet the Greek 2 year bond hit an all time low of 47.5 today.  That has to be the single cheapest asset out there.  All Greece has to do is muddle along for 11 more months (the debt has an August maturity) and you would more than double your money!  Heck, if you can buy the debt and get paid 71, where the bond was less than a month ago, that would be a 50% return.  What are the odds of the SPX being at 1775 any time soon?  What is recovery on Greece?  If it is 40, you lose 7.5 points.  Yes, that is a 16% loss, but will the SPX not breach 1100 if Greece defaults?  From 1190 isn't there easily a 10% downside move in SPX? 

The fact that stocks keep reacting more positively to Greek news, than Greek bonds is scary.  It is somewhat reminiscent of 2008 when stocks kept rallying on allegedly good news even when debt struggled to perform on the news that was supposed to impact it most. 

And for all the talk that Greece is priced in, the reaction after the erroneous headline about Austria approving EFSF shows that is unlikely true.  Stocks hit 1163 on that news and the decline only stopped because the correction was printed.  That is over 2.5% lower than we are right now, so I don't think Greek default is priced in.  Stock futures are up a full 3% from their overnight lows.  Crazy and broken moves. 

For all the talk of BRIC's buying PIIGS debt, Italian 10 year bonds are still 1.5% lower on the week.  Yes, stocks are up because Italian debt is not as down as much as it might be?  Fuzzy logic at best.  At least earlier in the week, treasuries participated in the risk on trade by selling off.  Today, in spite of such a strong move in stocks, treasuries are barely unchanged.

The truly scary thing is we haven't even had the full "Eurobonds announced" rally.  Where does that take SPX?  1230 again?  I just can't convince myself that long is the right trade right now.  Ironically, strong stocks may be their own worst enemy, as they give some European politicians the strength to do what they want - and not provide more funds to bailouts.  Now I'm clutching at straws, but hey, what else to do as stocks march higher.  I have checked the newswire several times while writing this.  Expecting to see some new comments or twist on the comments that justifies this push in stocks, and I just can't see it.  And I really don't see a strong reaction in the credit markets either. Even BAC cannot seem to rally back to Warren's strike price, let alone where they got in the immediate aftermath of his headline grabbing, stock spiking, investment.


As an aside to Pete's excellent point, we noticed that Capital Context's risk-basket was indicating equities are in a world of their own to some extent this afternoon relative to broad risk-assets:

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Bokkenrijder's picture

Anyone want to remind us of what happened to gold in 2008 after Lehman Bros...?

Gubbmint Cheese's picture

sure - it fell a little.. and then marched up to a recent high over $1900.


TruthInSunshine's picture

Krugman is from Mars, Bernanke's from Uranus.'s picture

I tried to +1 TIS's post but I can't. Cursor does not turn into a little hand and arrow is unclickable. When my cursor is over arrows on other posts on the page it does turn into a little hand. I've seen this before. What is it?

Temporalist's picture

I've seen that before too and I don't know either but have meant to bring it to ZH's attention.'s picture

And now, page two:

TIS's post is now +2 but it's still unclickable for me.

And now you know the rest of the story.*


*With apologies to Paul Harvey

GeneMarchbanks's picture

Yes. The opportunity of a lifetime.

Temporalist's picture

Yes a bunch of douchebags buying paper on margin got screwed like the rest of the fiat universe...but people that were buying and holding physical gold and silver are now wiping their asses with FRNs.

Quinvarius's picture

When the S&P was at 666 gold was at all time highs, and you couldn't buy any anywhere. 

Doing the math based on this chart, puts gold at $485 in 2008 money:

It is already 50% cheaper than post Lehman.

GeneMarchbanks's picture

'The fact that stocks keep reacting more positively to Greek news, than Greek bonds is scary.'

That's your mistake: asking questions. Just repeat: Greece is fixed.'s picture

Greece always gets the squeaky wheel.

Gubbmint Cheese's picture

up up and away.

I'm done with this bullshit - goodbye stocks see you at S&P 650.


Corn1945's picture

Definitely strikes me as similar to 2008. If I remember correctly, there were real signs of stress developing but the market kept rallying. It made no sense at the time either.

We've got a lot of the same. Insolvent banks. Bank CEOs on TV. Rumors all over the place.

The market just doesn't seemt to care about the bad news. At least six months ago, there was some decent news mixed in. Now the decent news is totally gone.

Divided States of America's picture

Yeah bad news all over, NBA lockup is imminent...but hey, NFL is back so lets sit back and look forward to Sunday!

vote_libertarian_party's picture

In Michael Lewis's book about the 2008 crisis he mentions interviewing hedge fund managers and how they could not understand what was going on.  The worst the news got the more aggressive the buying was.  They found out later it was a combination of hedge fund managers doubling down to catch up and quants chasing momo. 


Looks like the same thing to me again.



Cdad's picture

This is how the big boys play in the New Normal market.  They run prices up and get the algos chasing.  They let the dumb algos take the last leg, which the big boys sell into.  You can see it now, the block selling.  

The secondary benefit is that, now that the algos have marked stocks to "stupid", the institutions have the green light to bear raid without much fear of the market snapping back on them.

Oh...and also...prices don't mean anything anymore.  The computer Pachinko machine market can price things anywhere...and then change them in seconds.  And you won't know what happened until you see the roll up quotes in the after hours, when it will be revealed that massive selling was going on...but most folks could not see it as it was perpetrated through an anlternative exchange.

These last two hours...entirely for the sucker fish.

alien-IQ's picture

I'm just sitting here, with mouth agape, watching the /ES climb like there is no end in sight and no trouble on earth.

an absolutely amazing display of fantasy over reality.

(I have no positions at the moment on anything)

LongBalls's picture

When you can print money out of thin air, in secrecy, and spread rumors via your bought and paid for media outlets, you can string a crisis out for a long time. There is no reason for the markets behaving like this. Stocks up gold down, blah, blah, blah. Currencies being printed like no tomorrow, banks insolvent, economies stagnant, countries on the verge of collapse, and gold goes down? WTH is going on.......!?!?!?!?

No one can figure this crap out except those that create the inside information. I am sitting on the sidelines waiting for more concrete direction. I think after Bernanke's speech we will get more predictable movement.

prains's picture

I'm long chinese embedded HFT algo's doing a whack job in the near future.

firstdivision's picture

We have had a 42+ handle move in the past 3 days based on nothing but headline algos.  This disconnect between FICC and equities is idiotic.  This smells as a corrdinated effort by the Banks and HF community to drive up the price and then leave investors holding the flaming bag of dog shit. 

chunga's picture

Meanwhile...DJIA up 200. Makes more sense trying to predict the gyrations of a Lava Lamp.

firstdivision's picture

That is a lot easier as all acting forces on the lava lamp are grounded in reality, so there is a fair amount of predictability.

Breaker's picture

Well, lava lamp bubbles usually go up. Just like the stock market. But they don't go up faster on bad news like the ES does.

Breaker's picture

Well, lava lamp bubbles usually go up. Just like the stock market. But they don't go up faster on bad news like the ES does.

Lye's picture

Market can't tank on "news," because there are so many rumors floating around there's no way to know what to believe.

monopoly's picture

And are you aware how different this is than 2008. At that time central banks were selling gold, now they are buying it. And individuals like us from all over the world are stashing gold. It is Not for Sale. Do not care where it goes short term. Totally different now.

I have not had any stocks for a long while outside of miners. And I like what I got. And as posted, just cannot short this market.....yet.

Bokkenrijder's picture

Governments are also buying up ther own sovereign debt through their proxies: the FED and ECB.

Is that a good investment as well?

p.s. Gold fell about 30% after 2008, so why buy now for $1800 when you can by it for $1200-1300 in a few months?

LongBalls's picture

Your assuming you can get your hands on it.

jbc77's picture

Sometimes Zerohedge can read my mind. I'm looking at the ramp in the markets today and asking myself how this could be happening when a systemic crisis has infected European banks. Are we chalking this up to a broken market or what? Another day in the Twilight Zone.

NotApplicable's picture

Given there are no humans trading anymore, this manipulation is hardly surprising.

TradingJoe's picture

(This "Game" is for MEN not Children!)..said one trader and sold at a loss :)))))!

Yes I agree it is 2008 all over again and yes, trully, "this time it's different" too :)))!

Was cautious enough to roll my puts into next month on that big (last?) down day, i'm good, for nwo at least!

Got to keep trying, some day these suckers will get what they deserve and I want to be there!!!

nobusiness's picture

Searching for sanity in an insane world

runlevel's picture

the peter SCHIFF shoaOHHH

baby_BLYTHE's picture

Peter Schiff Testifies Before Congressional Jobs Committee 9/13/2011

Dr. Richard Head's picture

You can tell Schiff definitely challenged the standard thought process of some on the committee.  They will remember his words, but will refuse to act on them.  Facts cannot get in the way of the governmental maching.  They really do need to continue to be breaking our legs, handing us crutches, and then going on TV to show how they helped a man walk. 

Spirit Of Truth's picture

My thesis is that this is literally the case, i.e., man as a species is insane:

Specifically, we suffer from collective manic-depression, i.e., the mad genius syndrome.  One of the most telltale signs of this is the seasonality of mass mood swings.  Note that the "Fall" is typically when their are boughts of collective panics and onsets of major depression.

This is also typical of bipolar patients in mental hospitals.

So when you comment in jest about the world being insane, I believe a well-grounded scientific study of mass human behavior reveals that, in fact, this is the case, in perfect contradiction to the extraordinary popular delusions in economic "science" where "rational expectations" and "efficient markets" are touted to be the case.  Little do economic theorists realize that they themselves are shining examples of the incredible IRRATIONALITY of man.


ironymonger's picture

So this couldn't just be the continuation of a short squeeze? I thought that was the point of yesterday's article on open interest.

Belarus's picture

All this is is a short covering rally. It's like the fire was lit under the feet of shorts and as it gets hotter and hotter than shorts capitulate one by one. I know Sheep Dog will hate this statement but the time to short will be when the shorts are exhausted, battered, and bruised. That's when this fucker will topple. BTW, the author said he was lightening up on his shorts the other day--good job. 



LookingWithAmazement's picture

I'm looking forward to October 1st. Nice date; all "Armageddon-bankruptcy-eurobonds" talk will be over. Greece will receive money, pay everything and doomprophets and markets will quiet again. No Armageddon by then. Sleep well.

taraxias's picture

You forgot the "Boring world we live in" troll

POpatriot's picture

It looks like Germany and possibly China is going to transfer their wealth to losing countries. No question it will stave off the collapse for awhile.  This obviously isn't a long term solution and fixes nothing besides giving someone who is broke a new credit card cosigned by a buddy. 

pschwammerl's picture

I am similarly dumbfounded. But then I reminded me that some bears are tougher than others, like on the other side.

slyhill's picture

and some bear's mothers are tougher than other bear's mothers...

LookingWithAmazement's picture

Maybe I will buy euro's, they will rise after all the doom.

1000yrdstare's picture

but I am hedging for Armageddon!!!


nachtliche's picture

Since when is long EVER the right trade according to zerohedge? And since when did the markets react rationally? 

Belarus's picture

BTW, I think gold and silver is also showing this is like fall of '08. If europeans are running from banks, they are also running from brokerage accounts, which means GLD and SLV get go buy, ahem, Gold and Silver. 

It really is two markets in Gold and Silver. 

pasttense's picture

If this were true there would be a massive increase in premiums to buy physical gold and silver. Does anyone see it?