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Credit Vs Equity: Spot The Odd One Out

Tyler Durden's picture




 

When it comes to question of "who is right" in the market, the debate usually ends with credit (investment grade) or equity (and its high beta equivalents in the fixed income arena: high yield bonds). And since the question is rhetorical we will kill the suspense and cut straight to the answer: always, and without fail, credit. The chart below shows that once the manipulated ramp up in high beta risk equivalents such as the ES and HY is over (especially since IG is now losing its artificial JPM-induced bid, or technically offer, which is unwinding positions across all vintages and buying protection to close short positions), the way down to a credit-implied fair value of 1335 on the S&P will be fast and furious.

 

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Fri, 05/11/2012 - 10:55 | 2417385 Dr. Engali
Dr. Engali's picture

I wonder how much money  they are pumping in to prop these markets today? A hundred billion?

Fri, 05/11/2012 - 11:02 | 2417418 HarryM
HarryM's picture

Einstein wouldn't be able to calculate - - the players have almost unlimited funds and the rules don't apply to them.

Fri, 05/11/2012 - 12:47 | 2417795 Raymond_K_Hessel
Raymond_K_Hessel's picture

It's not a ponzi scheme, it's a buy the fucking dips scheme... http://www.zerohedge.com/news/btfd

Fri, 05/11/2012 - 11:11 | 2417451 FlyoverCountryS...
FlyoverCountrySchmuck's picture

The 401K's of the Sheeple CANNOT be allowed to fall until after election day, no matter the cost.

THE MESSIAH MUST NOT BE ENDANGERED BY BAD NEWS. After all, it's just taxpayer money, who cares how much it costs!

(I believe I called this last night (bows))

Fri, 05/11/2012 - 11:35 | 2417546 slaughterer
slaughterer's picture

The story is not complete unless you overlay AAIIBEAR: IND

Fri, 05/11/2012 - 10:54 | 2417387 Cdad
Cdad's picture

Once again, and for the third time this week, a totally toxic equity session.  

You go, Ben.  Buy that ramp up...'cause that will surely restore Average Joe's confidence in markets.

Fri, 05/11/2012 - 11:02 | 2417417 SheepDog-One
SheepDog-One's picture

Benocide is sooooo desperate to get retail to buy his stawks!

Fri, 05/11/2012 - 11:46 | 2417581 Cdad
Cdad's picture

Not good...not good at all, equity bounce masters.  The problem is...there has not been nearly enough selling for a sustainable rally here.  In the nonmarket, where selling equals rising price, and buyinig equals falling prices, you need sellers everywhere, HUGE red spires of volume in order to rally the ponzi market.  We didn't get that this morning.

Add to this fact that B. Pisani over at the BlowHorn [CNBC] is confused again...and it does not bode well.

Such are the completely stupid metrics of a broken market.  Thanks again, Ben, for this wasteland that you created.

Fri, 05/11/2012 - 10:56 | 2417390 firstdivision
firstdivision's picture

Brian Sack is furiously bringing on JPM's "assets" onto the Feds books.

Clearly the Fed is moving the market to help JPM out here.  Shows you how "free" the market truely is. 

 

Fri, 05/11/2012 - 10:56 | 2417391 rajat_bhatia
rajat_bhatia's picture

Bullshit! 1420 here we come

Fri, 05/11/2012 - 11:13 | 2417462 GMadScientist
GMadScientist's picture

Ah, rajat, I remember when you were just a baby troll...telling us about your massive copper positions and shorting gold.

I see your intellect remains as dull as ever.

 

Fri, 05/11/2012 - 11:29 | 2417515 ThirdWorldDude
ThirdWorldDude's picture

4:20, where's my lighter?

Fri, 05/11/2012 - 10:55 | 2417394 mayhem_korner
mayhem_korner's picture

 

 

Chutes & Ladders broken-cookie-jar space, muppetz.

Fri, 05/11/2012 - 10:57 | 2417395 Nid
Nid's picture

Oh my, we'll break the 1340 "bogey" that "all the traders are talking about"? But then the "real trouble" will just be pushed to a lower level....carry on, nothing to see here.

Fri, 05/11/2012 - 11:00 | 2417408 economessed
economessed's picture

Equity market:  Where stupid money goes to die.

Fri, 05/11/2012 - 13:36 | 2417985 Poetic injustice
Poetic injustice's picture

Replace money with fiat. Money never goes to die, it sits in boats/cellars/safehouses.

Fri, 05/11/2012 - 11:02 | 2417410 tocointhephrase
tocointhephrase's picture

Fuck off Fed!

Fri, 05/11/2012 - 11:03 | 2417424 SheepDog-One
SheepDog-One's picture

Yea I really do wish the FED would just fuck off and die....I was sick of this shit a year ago just piss off FED!

Fri, 05/11/2012 - 11:03 | 2417416 neutrinoman
neutrinoman's picture

Actually, if you take the previous 10YR-TSY/SPX500 chart seriously:

  http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012...

it's more like low 1200s as "fair value."

Credit markets aren't always right, versus equities, but they usually are. The important point is this: in secular bull markets, credit markets, with rising interest rates and higher bond prices, lead the way, typically by a year or 18 months (viz., 1981-82 or 1993-94). Equity markets then follow. What never happens in secular bull markets is equities leading the way and credit lagging.

We're a secular bear market; the pattern is bonds doing their own thing, equities periodically breaking out, then collapsing. So-called analysts will claim that equities are "leading the way" -- they aren't.

Fri, 05/11/2012 - 11:07 | 2417443 scatterbrains
scatterbrains's picture

Nice little wedgie calling for 1290ish straight ahead but 1200 ultimately sounds about right to me too.

Fri, 05/11/2012 - 11:03 | 2417419 ChickenTikka
ChickenTikka's picture

They illuminati need the markets to stay up just long enough for Goldman to make a fortune off of Facebook. 

Fri, 05/11/2012 - 11:04 | 2417432 SheepDog-One
SheepDog-One's picture

Facebook....didnt they just yesterday say they'd like to delay their IPO as demand is weak?

Fri, 05/11/2012 - 11:11 | 2417452 Bear
Bear's picture

I saw on Facebook that they were oversubscribed

Fri, 05/11/2012 - 11:31 | 2417524 SheepDog-One
SheepDog-One's picture

'Oversubscribed' lol yea with bots. Hell even Blogtv plays 'fake viewerbot' nonsense.

Fri, 05/11/2012 - 11:12 | 2417461 FlyoverCountryS...
FlyoverCountrySchmuck's picture

They want the fees booked by the end of the Quarter. Bonuses, BABY!

Fri, 05/11/2012 - 11:02 | 2417421 slaughterer
slaughterer's picture

This divergence can last quite a while yet.

Fri, 05/11/2012 - 11:07 | 2417433 tocointhephrase
tocointhephrase's picture

Wow, what a strong market, Ben, you have such big biceps (WANKER)!

Fri, 05/11/2012 - 11:08 | 2417440 mayhem_korner
mayhem_korner's picture

 

 

I think it's just his left-hand pinky (Ctrl) and right-hand ring finger (P).

Fri, 05/11/2012 - 11:09 | 2417447 tocointhephrase
tocointhephrase's picture

yeah, hes an ambidextrous WANKER!

Fri, 05/11/2012 - 11:08 | 2417442 piliage
piliage's picture

What the hell is going on with this market today?

1) Greece can't form a government, it's over

2) EU just admitted Spain is in deep deep shit as far as the recession

3) JPM is probably on the hook for A LOT more than the 2bil if they try to unwind

And yet the DAX is running up like an F22 with afterburners. This is MANIPULATION. If a bunch of my friends were to do this, we would be arrested. Yet, if the ECB is doing it, its OK. Fucking thieving bastards!

Fri, 05/11/2012 - 11:17 | 2417473 SilverTard
SilverTard's picture

Mommy, why is that man with the beard over there on the computer slamming ctrl-p over and over on the keyboard?  What does this mean mommy?  He doesn't look very happy, he scares me.

 

 

Fri, 05/11/2012 - 11:23 | 2417487 DaveyJones
DaveyJones's picture
THOUGHTS LEADING UP TO MOTHERS' DAY by DJ    

>MOM: an individual who, while loving you unconditionally, places more conditions on you than any other human being

"I can make it all go away...but I can just as easily bring it back at the most inopportune moment"

The only insane person you listen to for advice

The world's nutrition expert

The reason the word is spelled the same backwards and forwards should be clear by now

The only person who can truly make you feel young again

Fri, 05/11/2012 - 11:20 | 2417479 DeadFred
DeadFred's picture

So the thesis is that unwinding JPM's position will put downward pressure on IG and therefore on the S&P? Is there any chance this JPM thing is a set up, in other words how sure are we that they really are out on a limb and not just waiting to reel in the fish (hedge funds) that try profit from their supposed position. I know it's paranoid and probably crazy but I don't trust the slimy snakes. They lie simply because it's their native tongue.

Fri, 05/11/2012 - 11:26 | 2417501 Samsonov
Samsonov's picture

Now that is one fine question.

Fri, 05/11/2012 - 13:00 | 2417481 John Law Lives
John Law Lives's picture

Faber Sees ’87-Type Crash If U.S. Stocks Rise Without QE3

http://www.bloomberg.com/news/2012-05-10/faber-sees-crash-like-in-1987-i...

Unbelievable greed by these SOBs... and 100% FUBAR.

Fri, 05/11/2012 - 11:22 | 2417490 I Am Not a Copp...
I Am Not a Copper Top's picture

This market is for tossers and sheepshaggers

Fri, 05/11/2012 - 11:25 | 2417495 distopiandreamboy
distopiandreamboy's picture

This is one of those days where I like to play a game called spot the algo in the S&P.

Fri, 05/11/2012 - 11:24 | 2417497 crawl
crawl's picture

Fast & furious crash to 1335 on the ES?  The TPTB aren't playing that game. Manipulation won't allow a dip, let alone a sell-off.

Fri, 05/11/2012 - 11:34 | 2417534 SheepDog-One
SheepDog-One's picture

Right, therefore this 100-150 point S&P drop everyone is saying will be any minute and then we get QE3-4.New or whatever wont ever happen.

Fri, 05/11/2012 - 11:26 | 2417498 SAME AS IT EVER WAS
SAME AS IT EVER WAS's picture

I had a feeling a bear trap, one with methodical precision was being set these last few days.

Fri, 05/11/2012 - 11:28 | 2417510 Boilermaker
Boilermaker's picture

Ben is flopping his 10 pound trouser snake on the table for all to see.

This is fucking ridiculous.

Fri, 05/11/2012 - 11:28 | 2417513 Winston Churchill
Winston Churchill's picture

What ,a whole dollar each.

Fri, 05/11/2012 - 11:29 | 2417517 cnhedge
Fri, 05/11/2012 - 11:32 | 2417523 nobusiness
nobusiness's picture

Small caps are already retreating.  S&P next then QQQ

Fri, 05/11/2012 - 11:44 | 2417575 gatorengineer
gatorengineer's picture

sure as hell looks like they are holding the door open to let the euro banks out doesnt it.......  this afternoon should be interesting.....

Fri, 05/11/2012 - 11:46 | 2417580 skepticCarl
skepticCarl's picture

Retail, Home Builders and Commercial Real Estate are leading the market higher.  The low for this correction has been seen.

Direct FED intervention didn't cause this correction, and FED intervention isn't responsible for the forthcoming rebound.  The HFT algo's are frontrunning, by nanoseconds, the 15% of the volume that belongs to the everyday money managers, and the public.

Fri, 05/11/2012 - 11:48 | 2417585 Boilermaker
Boilermaker's picture

I wrote that down.  Thanks for sharing those absolute and known facts.

Fri, 05/11/2012 - 13:13 | 2417898 piliage
piliage's picture

Did Million Dollar Bonus get a new avatar?

Fri, 05/11/2012 - 11:56 | 2417607 GS-DickinDaMuppets
GS-DickinDaMuppets's picture

Do you think buying a little FAZ today, for Mondays open, might be the way to play today's forced market melt-up....?

It is nice to know that "Bennie and the Jets (FMOC)" are working on a Friday instead of out playing Golf, even it it means they are doing it to the MUPPETS AGAIN !!

 

...doing GOD's work...GS-DickinDaMuppets

Fri, 05/11/2012 - 12:00 | 2417619 graymnzrc
graymnzrc's picture

It will be interesting to see how many players hold thier positions over the weekend. The last hour may be interesting.

Fri, 05/11/2012 - 12:04 | 2417633 Nid
Nid's picture

Yes of course, the consumer play...what, with all of his newly found money due to the decline in gas prices (a truly fundamental decline, of course)...clearly, buying stocks here is a no-brainer.

Fri, 05/11/2012 - 12:14 | 2417664 SheepDog-One
SheepDog-One's picture

Makes me laugh....how does anyone figure a 5 cent drop in gas prices, from record top highs is somehow is a honeypot of 'new free money'? Its just stupid. Maybe if gas was BELOW decade avg there might be a case to be made, but this is just stupid.

Fri, 05/11/2012 - 12:24 | 2417697 virgilcaine
virgilcaine's picture

Close is all that matters and it's going to be ....RED>

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