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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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment slaughterer
slaughterer's picture

The story is not complete unless you overlay AAIIBEAR: IND

Fri, 05/11/2012 - 10:54 | Link to Comment 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 | Link to Comment SheepDog-One
SheepDog-One's picture

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

Fri, 05/11/2012 - 11:46 | Link to Comment 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 | Link to Comment 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 | Link to Comment rajat_bhatia
rajat_bhatia's picture

Bullshit! 1420 here we come

Fri, 05/11/2012 - 11:13 | Link to Comment 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 | Link to Comment ThirdWorldDude
ThirdWorldDude's picture

4:20, where's my lighter?

Fri, 05/11/2012 - 10:55 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

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

Fri, 05/11/2012 - 10:57 | Link to Comment 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 | Link to Comment economessed
economessed's picture

Equity market:  Where stupid money goes to die.

Fri, 05/11/2012 - 13:36 | Link to Comment 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 | Link to Comment tocointhephrase
tocointhephrase's picture

Fuck off Fed!

Fri, 05/11/2012 - 11:03 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment Bear
Bear's picture

I saw on Facebook that they were oversubscribed

Fri, 05/11/2012 - 11:31 | Link to Comment SheepDog-One
SheepDog-One's picture

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

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

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

Fri, 05/11/2012 - 11:02 | Link to Comment slaughterer
slaughterer's picture

This divergence can last quite a while yet.

Fri, 05/11/2012 - 11:07 | Link to Comment tocointhephrase
tocointhephrase's picture

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

Fri, 05/11/2012 - 11:08 | Link to Comment 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 | Link to Comment tocointhephrase
tocointhephrase's picture

yeah, hes an ambidextrous WANKER!

Fri, 05/11/2012 - 11:08 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment Samsonov
Samsonov's picture

Now that is one fine question.

Fri, 05/11/2012 - 13:00 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment Winston Churchill
Winston Churchill's picture

What ,a whole dollar each.

Fri, 05/11/2012 - 11:29 | Link to Comment cnhedge
Fri, 05/11/2012 - 11:32 | Link to Comment nobusiness
nobusiness's picture

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

Fri, 05/11/2012 - 11:44 | Link to Comment 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 | Link to Comment 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 | Link to Comment Boilermaker
Boilermaker's picture

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

Fri, 05/11/2012 - 13:13 | Link to Comment piliage
piliage's picture

Did Million Dollar Bonus get a new avatar?

Fri, 05/11/2012 - 11:56 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment virgilcaine
virgilcaine's picture

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

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