Credit Vs Equity. Logical Vs Illogical?

Tyler Durden's picture

Via Peter Tchir of TF Market Advisors,

S&P futures have moved more than 20 points since 3:30.  The first big move was on the back of a story that Greece really will commit to the whatever the EU demands.  The second move was after China re-pledged to invest in Europe.  IG17 is about 1.5 bps tighter than the wides of the day and is unchanged this morning.  In Europe, Main is unchanged while stocks are up about 1% across the board.  Even the 10 year bond which saw yields drop from 1.98% to a low of 1.92% are only back to 1.94%.




A letter from Samaras is unlikely to sway the EU from their path of “orderly” default.  Whether or not the EU makes the right noises today and finally releases the PSI details, the path is for “orderly” default (whatever that means).  Greece is not prepared to default yet, but for first time, it seems like both sides are actually preparing for that eventuality rather than hoping beyond reason that the situation will work out.  Stocks chose to rally on the news of the letter (credit did a bit too), but the reality is it isn’t enough to change the path which is default.


The China story doesn’t seem anything new.  Hasn’t China pretty much always remained involved.  I think every credit person understands that China will lend money to Germany, France, and the Netherlands.  They are somewhat indifferent about lending it directly or lending it via unleveraged EFSF.  That isn’t news and shouldn’t be treated as news.  If China says they will lever up EFSF, or give money to banks, or even buy Italian and Spanish debt directly, then it is interesting and new.  This other stuff is just noise and a headline that changes nothing, since it is what they have pretty much said all along.


The GDP data out of Europe is “encouraging”.  It came in at -0.3% vs expectations of -0.4%.  Hmmm…That is annualized, so the estimate for the quarter was -0.1% and the number was -0.08%.  That seems like rounding error.  And the 3rd quarter was revised down by 0.1%.


We get some data today.  I expect it to be okay since things like industrial production should benefit from the good weather, but any miss will definitely surprise the market.

Sentiment seems overly bullish, overly complacent, and the credit markets are sending a warning sign to stocks about irrational exuberance.

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evolutionx's picture


We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments.  Thus most of these assets are also worth-less.

So the world financial system is a house of cards where each instrument’s false value is artificially supported by another instrument’s false value. The fuse of the world financial market time bomb has been lit.  There is no longer a question of IF it will happen but only WHEN and HOW.  The world lives in blissful ignorance of this.


Schmuck Raker's picture

You're planning on posting this to EVERY SINGLE thread today, aren't you?

Just admit it. We're all friends here...

djsmps's picture

Headline right now on CNBC: Futures Up on China Pledge to Help Europe

Zero Govt's picture

Double-up on double-dumb

Equities and Govt bonds ..Blowjob Ben has your back

undercover brother's picture

irrational exuberance is clearly justified.  wouldn't you be irrationally exuberant if you know the hand of god (the central banks and their unlimited funds) are backstopping the financial markets?  of course you would. 

lolmao500's picture

Logic? In this market? Impossible I say!

nolla's picture

There's a huge support line in EuroStoxx50 (Europe's main equity derivative index) and the index is fighting to the teeth to hold it.

Today the support level is at about 2475 - index is now 2495. Support line starts from Nov. 25th intraday bottom @ 2066 and is clearly visible through bottoms in Dec and Jan.

Last night, before the lunacy started, the ESTX future was flirting with the support but bounced up to 2% in today's session. But now again there's less than 1% difference to the rapidly rising support line.

Watch out below.

SmoothCoolSmoke's picture

Good info.  Thanks.  I also see the SP 500 is at a double top on the weekly chart. 

nolla's picture

Yes, all US indices are really, really overbought. What they all (US&EUR) still can manage to do is to go sideways when the rising trend is broken. More volatility, sideways moves and then some serious declines from May... there's a good chance that we might be repeating 2011 all over again. 

satan2liberals's picture

Same Shit Different day, more manipulations coming your way.

That will work well until ........ it doesn't.


Remember when (the paradign shifted) collectively:  everyone  woke up and realized "hey home prices can decline"


I just hope I can stay short until that day arrives.

SmoothCoolSmoke's picture

Bernanke knows that on the Great Depression analog we are appraoching early 1937.  From there, in 12 months the Dow fell 51%.  He is insanely committed to not let it play out that way this time.  Fraud, theft, rape, murder, pillage...... whatever it takes.


gjp's picture

US dollar up, US bonds up, US stocks relentlessly, continuously, acceleratingly up.  What could be wrong with this picture?  Happy days are here.

Really though, it looks like there are only two possibilities to make the market face reality.  China pulling the plug (not likely), or runaway commodity inflation.  This is why the battle on the paper commodity exchanges and oil geopolitics are the front lines.

The financial system needs to be shown that its paper is no good.  Then we'll see how they like reality.  Until then it is full on farce and fraud.

forexer's picture

This time it's different. What goes up, stays up... and my ES puts are bleeding. Bitch.

satan2liberals's picture

To steal a phrase :" I feel your pain"


300% short emerging markets since Christmas, it's been on a tear compared to S&P.

lemarche's picture