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Equities Yet To Wake Up To End Of Operation Twist-Style QE3
Despite our agreement with the general premise of the curve shape changes that the Fed is likely to undertake in any QE3 (Operation Twist or Operation Torque as we posted earlier) should it occur, we are also in agreement with our earlier guest post related to both the hurdles and anticipated impact of further quantitative easing. It is becoming abundantly clear that market participants are at best befuddled (as Pisani has been so eloquently indicating all day) and at worst missing the point dramatically as fixed income markets are turning their heads to any action by the Fed while equity markets remain more delusional.
Whether the combination of high short interest, month-end window-dressing, HFT, and hopium is to blame, the rebalancing across asset classes that is supposed to be what helped us rally so impressively in the last few days on vapor-thin volumes does not appear to have been 'rebalanced' in bond markets.
This disconnect, and one we have been pointing to for a few days now, is nowhere more evident than in the hope vs reality of the 2s10s30s butterfly and the S&P 500 futures market. We wonder who will be proved correct?
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deflation and hyperinflation at the same time. love efficient markets.
there is no market without criminal activity in the modern world today. Agree that def and hyperinflation at the same time, hard assets inflating to the moon until the currency changes to some new BS with Pisanis Head on Quadrillion dollar bill. Debt addicted assets deflating or staying the same, but only because of the denial bc if you sell you found yourself naked.
Some guys are just out of touch and wasting their clients money on 'hopium' big time!
delete
Guys, does anyone know how to create 2s10s30s in bloomberg? Thx
Ouch. The mother of all compressions coming right up. Looks like the perfect QE3 set up to me. Winding that rubber band rather tight this time.
I keep sayin' it.....
The markets are just gonna fall 15%+ in a week once they realize no QE3.
QE3 is a lock, imo.
Jim Willie sez: " The USFed never discusses the risk to USTreasury auctions, the real reason they instituted QE1 and QE2, and the actual reason they will be forced to institute QE3 "
hope < reality
Could you put something more useful on the x-axis?
Thanx
Market is also floating on rumors of Obama's grand plan to get the economy going. Undoubtedly it will be a rehash of all his other stupid ideas, but any excuse to party is accepted by the equities party.
No shit. It would be sooooo stupid to maybe learn from history and put all those receiving UC/EUC on some WPA-style project where a little dignity is returned for other people's money. Seems there is work to be done in the NE.
yes...o's plan will involve massive spending and the establishment of a highway to hell "infrastructure bank"
Biflation is a bitch, and debt does not = wealth. Debt saturation sucks and we're gonna have to try to live through it and get back to markets that aren't manipulated and medicated but mete out real price discovery. Let the flush and reset happen ASAP!
Hence, "We are Worse than Japan Now".
Despite GOP posturing and acting 'scandalized', we're getting a jobs package, mortgage package, business tax breaks and other fiscal stim.
The word "desperation" comes to mind. He probably already suspects this round of stimulus will be as inneffective as the last, but he also probably realizes that a few more months of better numbers are his best chance of getting reelected,
It's all about power and control = getting re-elected.
The last round of stimulus was a pack of lies that might have worked had it been used for the purposes for which it was advertised. Barry has lost credibility and they are desperate to configure a fresh line of bullshit to throw at the sheeple.
To give real service you must add something which cannot be bought or measured with money, and that is sincerity and integrity.
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In sum: Federally AdministeRed Transfer payments.
What has become of the U.S. when the masses are waiting with baited breath for the central planners to unleash a "jobs package."
Oy.
I know this is going to sound ignorant, but what IS the ES and 2s10s30s?
2s10s30s = 42, the answer to life, the universe, and everything.
omg
You know you like it.
Henceforth, that spread shall be referred to as the 42s.
We have normality. I repeat, we have normality. Anything you still can't cope with is therefore your own problem.
Douglas Adams
x! = r(x+1) = root (2*pi*x) * (x/e)^x*
show-off
ES is the eMini S&P 500 futures contract
and the 2s10s30s is a butterfly based on Treasuries of different maturities.
As you can see they sort of moved together, then diverge: implying that they need to come back together at some point - either equities down or 2s10s30s up, but given the current environment, many would argue that the former is more likely.
There is a theory which states that if ever anyone discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarre and inexplicable.There is another theory which states that this has already happened.
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"s" = Sum
.
ES are the S&P 500 in derivitive form compared to the 2yr 10 and 30 yr treasuries.. Stocks represent risk while bonds are seen as a safe haven. One of them is correct and it's usually not the stock market. Nice work Tyler.
When are we going to stop using the term, "Market"??
I agree, henceforth the "market" shall be replaced with "casino" and specific sectors shall represent specific "tables".
Now one could say "hey Tyler, how are things in the casino today, particularly what is the action with 2s3s5s over at the bond table?"
Don't forget to tip your primary dealer
Why tip the dealer. They only work for the casino. The casino is owned by the Elitist who own the HFTs.
I'll only tip the dealer when he finally throws all the supply of equitities they are holding on the table.
They only dumped a small amount today. They have a lot more to get rid of.
The house is still looking for suckers to buy some first.
I'm befuddled at what's coming out of CNBS!
Today, Liesman: "we know the NFP will be bad, but..." WTF?
It's like the network had an epiphany and their propaganda message/agenda has changed. Could they too, be trying for some distance from the one, the Barama? Are they in effect signaling that this economy is going down hard?
Damage control perhaps. Have the shills on CNBC manage a orderly 120 point today so the drop tomorrow is only 300 after the negative NFP print.
Major fallout coming October at the latest.
My favorite CNBC moment:
"I would not get in the way of this bull maket."
~Maria Bartiromo . . . literally just before the bottom fell out in 2008. I remember thinking, "this could be a good time to sell."
@Yardstick
"I would not get in the way of this bull maket."
With a comment like that, how does she keep her job?
Correction:
"with a comment like that, you know her job is secure."
http://www.zerohedge.com/news/equities-yet-wake-end-operation-twist-style-qe3#comment-1624014
The link is to rocker's post, 4 above your question, the answer to the question of motive in your query is addressed in the last lines of his post.
The job of CNBC is controlling mass thought for the benefit of those writing the script.
They did a stealth QE during the month of Aug. How'd that work out. QE plus PPT = no go
How can you say that? Have you seen a chart of Con Edison lately? Or XLU? These stocks don't have the pesky maturity dates that bonds do, that bring their prices back to earth as they get close. QE3 is Dividend Paying STOCKS, and 28/30 Dow Jones Industrial component stocks pay higher after-tax returns than the 10 yr T-note.
We are Daaaancccinng in the raaain
Daaanccinng in the raaain
Hopppinng for no paaaain
Just Dannncinng in the rrrraaiin
beams bullets and bullion.
These fuktards are completely out of ideas other than spending OPM that they have to borrow.
High school general business class would do better than this admin!
I seriously have no idea what the NFP is going to show tomorrow. All reality points to a terrible number but the total manipulation of said reality is so off the charts we could have a +500k report.
Maybe the hurricane actually claimed 1.2 million lives and we just didn't see it. No babies were born at all for the entire month of August and miraculously every single person who died was about to be fired so there were actually no layoffs at all.
Tyler, aren't you (and morgan stanley, goldman, et al) predicting that QE 3 will be an attempt to flatten the 2s-10s-30s? If that's what will happen, then QE 3 is getting priced in now, according to the chart. Once it starts, the Fed will crowd buyers out of the longer bonds and into stocks.
Good luck to Bubbles&BananasBernank if that's his goal.
In times of uncertainty such as the current one that The Bernank has helped engineer (good job, Ben), liquidity rules the day.
Could not agree more
Re:"This disconnect, and one we have been pointing to for a few days now, is nowhere more evident than in the hope vs reality of the 2s10s30s butterfly and the S&P 500 futures market. We wonder who will be proved correct?"
I am sure glad I take responsibility for my own trades because if I relied on ZH I would be an unemployment statistic. All week you have been spouting off about a low volume meltup in expectation of QE3. And now you wonder who will be correct in this divergence. All I say is condolonces to whoever believed that BS earlier this week.
ES needed to correct to the 1200 breakout. We got it today, and maybe even tomorrow. Ready the casketa.
I love ZH for general views. Nothing better. Trading not so much.
Looks like Obama has Bernanke
doing a warm-up for him. Bernanke is now scheduled to speak
the day before Obama. Some people believe Ben is going to announce some form of QE to boost
the effect of Obama's job initiative. It will be like a one-two punch to juice the hopium market.
It sure should juice the PM market.
Lets be clear - Bambam works for Bernanke.
this is a 12-day chart. if convergence is the norm (1st 8 days or so) then buy the divergence with a spread: sell the blue, buy the red. when they come together again, take the profit. it doesn't matter where they converge, up, down or in the middle, you can buy the gap (open the positions) and sell the convergence (close the position for da dough).
doesn't matter which one is correct; as long as they re-converge, you cash
http://www.xtranormal.com/watch/12373724/q-a-w-larry
What is the 2s10s30s butterfly? Is it buying 2s and 30s while selling 10s x 2? Is there a way to trade that butterfly without actually buying bonds, i.e. with a small portfolio?
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