Euphoria Shifts From Stocks To Commodities

Tyler Durden's picture




 

Silver and Gold remain the major outperformers year-to-date but the rest of commodities - most notably oil is catching up very fast having over taken stocks this week. It appears that the new-found flood of liquidity that we have been so passionately banging the table on for weeks, has found its way into the energy complex as European Sovereigns, European Financials, European Stocks, and US Stocks have all flattened or turned down as Crude and WTI surge. And as a hint to anyone who hasn't jumped on this tidal movement yet, one thing to note is that unlike stocks, commodities always have the risk of marginal or weak hands being shaken out via CME...margin hikes.

Year to date performance shows Crude is now outperforming US equities and closing in on Gold's great run. Silver remains the double-levered liquidity trade-d'annee.

 

But how has the flood of liquidity dooshed   sloshed around the world of global assets...

(Click chart for larger version)

It appears there have been five periods to this post LTRO love-fest with nominal values of assets.

1) Post the LTRO and through January (black dotted rectangle), markets generally tracked each other higher in a narrow liquidity and euphoria-driven range with US Stocks having a higher beta than most assets in general (as everything was floated up with the best performers being the worst performers of last year); this bullet-proof rally had just begun to fade as everyone waited for something real to confirm what was before their eyes...

 

2) As January ended and February began, the most wondrously 'adjusted' NFP print in the US re-engaged the liquidity pump and those most beaten down of last year's assets were grabbed with a vengeance once again as European Stocks, US Stocks, European Sovereigns & Financials, and Brent Crude all levitating rapidly while WTI Crude fell (as the spread rose on Middle-East tensions). European stocks were the major winner in this period as financials flew on the LTRO solution and so the liquidity sloshed into that bucket more broadly.

 

3) The impressive short-squeezing dash-for-trash 'its real coz the BLS says it is' rally continued until a week into February when European concerns reared their ugly heads with badly weaker macro data in Europe (plus a re-emergence of Greek contagion concerns as Portugal blew) dragging European credit (Sovereign and Financials) considerably weaker and European stocks sideways to modestly down. Maybe the LTRO expectations had finally run out of juice. Liquidity sloshed back into US equities (don't worry we're decoupling) and WTI Crude (decoupling and Iran) - hoorah...

 

4) This lasted til last week when credit markets really took a turn for the worse and stocks began to follow but the flood of liquidity was not to be stopped and together with some entirely confusing constantly contradictory newsflow from European leaders that all was well in Greece and that China would not suffer a hard landing every risk asset rose in value - spurred on by yet another liquidity flood from a surprise RRR cut by China (which seemed to shake the last weak shorts out as we have drifted since). However, it seems that the need for China to do this (concern that it must be bad for them to do this) along with concerns over the next LTRO and the growing stigma the market is pricing into European banks who used it seemed to slow the liquidity surge into broad equity and credit risk assets and...

 

5) The energy complex was saturated with liquidity pressures. As Iran tensions rose, the surge in Brent and WTI (and Tapis) crude prices reflects not just the sabre-rattling and supply concerns (which havent changed dramatically in a day or two) but much more simply the only thing that matters - central bank largesse. The last week has seen US and European equity and credit markets slide lower - with Europe underperforming the US (decoupling hopes again and the fact that the US is a hot and open market that will always enable that liquidity to flow more easily).

 

Meanwhile Gold and Silver have cruised comfortably higher on the growing realization that slowly but surely investors need real value protection not nominal wealth - no matter which liquidity bucket the printing press is spewing into.

The problem now - as John Burbank of Passport Capital so well described is, the oil complex won't stop until the economy's back is broken as there is nowhere for the liquidity to flow given the negative feedback loops all the central banks in the world have created.

 

With LTRO 2 already priced in, and the Fed having been handed the baton of printing by the rest of the world's central banks this weekend at the G20 meetings, we suspect the liquidity will remain pumping in Oil until the CME steps on its throat or someone disappoints a perilously over-the-top market for stocks (and slightly less so credit now as it has started to awaken from its risk slumber) with a PSI deal fail, disappointing LTRO, new record Oil, or our favorite the unknown unknown consequence.

 

Charts: Bloomberg

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Fri, 02/24/2012 - 18:30 | 2194395 JPM Hater001
JPM Hater001's picture

Euphoria is a good thing in small doses.

Fri, 02/24/2012 - 18:33 | 2194406 trav7777
trav7777's picture

cocaine is a helluva drug

Fri, 02/24/2012 - 19:36 | 2194527 Ancona
Ancona's picture

Only if it hasn't been "stepped on" too hard...........I'm just sayin'

Fri, 02/24/2012 - 19:36 | 2194529 Ancona
Ancona's picture

.......You know......like Greece's balls?

Fri, 02/24/2012 - 20:16 | 2194569 hedgeless_horseman
hedgeless_horseman's picture

 

 

Fuck Bernanke.  I am at the Easy Tiger wearing overalls.  Drinks are on me for the next two hours.

Fri, 02/24/2012 - 20:44 | 2194636 RobD
RobD's picture

Can I make it there in a cab from Reno? I've already had a couple of beers dammit!

Fri, 02/24/2012 - 20:50 | 2194639 hedgeless_horseman
hedgeless_horseman's picture

 

 

Uncle Warren says to try NetJets.

Enjoy Austin's finest beer, sausage, pretzels, and cheese.  All free if you can get here in an hour.

Fri, 02/24/2012 - 21:28 | 2194691 RobD
RobD's picture

mmm, sounds like a great place, though I think I will tip one from here, maybe next time :)

Fri, 02/24/2012 - 22:02 | 2194746 johnu1978
johnu1978's picture

Tell Uncle Warren to stop running his Gayco commercials!

 

-John
http://www.youtube.com/johnu78

Sat, 02/25/2012 - 07:22 | 2195352 vato poco
vato poco's picture

Austin's only got the worst traffic in Texas. You can't get *any*where in an hour. "Call a place a paradise, kiss it goodbye."

Sat, 02/25/2012 - 10:30 | 2195471 ndotken
ndotken's picture

herd mentality ... but the view never changes if you're in the back of the herd

Fri, 02/24/2012 - 19:38 | 2194532 Herd Redirectio...
Herd Redirection Committee's picture

The drug trade has been a real money maker ever since the British Empire saw how profitable the black market opium trade was.  The money from the Golden Triangle, the Mexican drug lords, etc. where do you think they went to 'make that money clean'?  Certainly not Wall Street!  /sarcasm

Check out the latest from the Capital Research Institute, "Time to Break Up the Media Monopoly"

http://www.capitalresearchinstitute.org

"As everyone knows by now, the US election cycle is in full swing.  Concerned about the economy?  The welfare of the nation?  What kind of country your grandkids will grow up in?  If you listen to the mainstream media (msm) then you 'know' the answer is to choose a political party, stick with them, and everything will work out fine...  The problem is, this couldn't be further from the truth.  The political parties no longer serve the people..."

Fri, 02/24/2012 - 19:51 | 2194551 ChrisFromMorningside
ChrisFromMorningside's picture

http://img.scoop.co.nz/stories/images/0202/feb12fab54a8589b4b0e.jpeg

 

NYSE's Richard Grasso meeting with a commander from the FARC in Colombia. Just in case ya'll forgot. 

Fri, 02/24/2012 - 20:20 | 2194593 disabledvet
disabledvet's picture

Romney/Paul could run as an independent. Peanut Butter and Jelly--money/organization meets actual sanity.

Fri, 02/24/2012 - 21:27 | 2194689 Conrad Murray
Conrad Murray's picture

Kill yourself.

Sat, 02/25/2012 - 10:13 | 2195453 bdc63
bdc63's picture

How about Paul/Romney .... just say'in ...

Sat, 02/25/2012 - 19:40 | 2196437 UP Forester
UP Forester's picture

How about Kennedy/Johnso....

Oops.

Sat, 02/25/2012 - 07:09 | 2195344 vato poco
vato poco's picture

"Drug trade has been a real moneymaker since the Brit Empire..."

Now THAT is a very interesting notion. Especially here in the US, *especially* when one starts looking at timelines. 45 seconds of web search yields this:

1907 - Panic of '07. Morgan (essentially) essentially bails out the country's banking system, thus "saving" the country and maybe more imprtantly, Teddy Roosevelt's rep. How might a grateful nation - or its banking/political class - repay Pierpont for his wonderfulness? And maybe throw in a little sumthin' sumthin' for themselves?

1913 - Federal Reserve System created: bankers happy

1913 - 16th and 17th amendments allegedly ratified. Income tax & direct election of Senators: politicians happy.

1914 - Harrison Act passed. Opium made illegal. Street price of opium rises.

1919 - Supreme Court ok's expanded Harrison Act: and we're off to the races.

1924 - Heroin made illegal.

1932 - United States Narcotic Act. Maryjane now illegal. **Big** bucks can now be made in The Drug Trade, as in days of yore.

etc etc etc. When viewed this way, it couldn't be clearer.

Fri, 02/24/2012 - 22:15 | 2194772 SAT 800
SAT 800's picture

US Stocks have flattened or turned down. Gee, I must have missed that. My portfolio and the Dow is doing fine.

Fri, 02/24/2012 - 18:58 | 2194469 Freddie
Freddie's picture

"liquidity has douche'd around the world.."  LOL!

Hope & Change with The Bernank and hopey Islamic douches.

Fri, 02/24/2012 - 21:32 | 2194698 Conrad Murray
Conrad Murray's picture

Barry Soetoro is as much a Muslim as Urban II was a Christian.

Fri, 02/24/2012 - 21:47 | 2194722 TheFourthStooge-ing
TheFourthStooge-ing's picture

Freddy's on another Friday night gas-huffing binge.

 

Fri, 02/24/2012 - 22:44 | 2194805 Goldilocks
Goldilocks's picture

Hat Tip to Ann Barnhardt
BarnhardtPatrickHenrySpeech.mp4
http://www.youtube.com/watch?v=Cup9CgSjr9g (8:03)

who...

Hat Tips... to BrutallyHonest.org

who...

Hat Tips... to Taylor Mali

who... did this...

Killing the Speech - "Modern" Kids losing Language and Confidence? - Observed/Poem by Taylor Mali
http://www.youtube.com/watch?feature=player_embedded&v=hnjJvzprjN0 (2:46)

~//~

Grateful Dead Touch Of Grey Video (Band In Bones)
http://www.youtube.com/watch?v=pmT6udys8Tc (4:43)

Grateful Dead - Touch of Grey
http://www.youtube.com/watch?v=wOaXTg3nAuY (5:49)

Long Cool Woman in a Black Dress - The Hollies
http://www.youtube.com/watch?v=lP94PlEtsEQ (3:15)

Fri, 02/24/2012 - 18:31 | 2194397 TalkToLind
TalkToLind's picture

You should have stacked, Bitchez!

Fri, 02/24/2012 - 18:33 | 2194409 yabyum
yabyum's picture

You still can stack. Buy a little each payday, befriend your local coin momger!!

Fri, 02/24/2012 - 22:26 | 2194794 espirit
espirit's picture

Just don't stack fiat, you just never know who printed that $50 or $100 dollah bill.  First fake bonds, now fake fiatscos.

Phyzz in the hand is the only real money.

http://finance.yahoo.com/news/u-could-pressure-north-korea-tomorrow-quit-100-094000585.html

Fri, 02/24/2012 - 19:01 | 2194474 SilverDoctors
SilverDoctors's picture

Seems Blythe and The Morgue weren't too happy about the euphoria in silver.

The cartel dropped 102.5 MILLION paper ounces of silver on the market in only 7 minutes this afternoon...only to see silver perform an OUTSIDE REVERSAL!!
Check out the netdania 1 minute volume/ price chart:

http://silverdoctors.blogspot.com/2012/02/cartel-dumps-1025-million-ounces-of.html

Blythe just had an MI.... LOL

-Doc

Fri, 02/24/2012 - 19:39 | 2194536 s2man
s2man's picture

Thanks, Doc.  That's sweet

Fri, 02/24/2012 - 21:05 | 2194659 Bastiat
Bastiat's picture

Man, that is fantastic!  ROFL!!  Great news to end a Friday with.

Sat, 02/25/2012 - 00:04 | 2195033 UP Forester
UP Forester's picture

Hope they've got them spankin' new toilets, 'cuz someone's shittin' bricks!

Sat, 02/25/2012 - 13:07 | 2195446 Bastiat
Bastiat's picture

A friend who has traded silver in her own account off and on for years, checked her data and saw the price movement but NOT the volume.  Could that be bad data from Netdania?  She was using Esignal and saw the max 1 minute volume at the spike low at 105.

[after sending a closeup of the chart to my friend, she saw it was spot -- her data was futures.  It is still such an extraordinary event that some confirmation would be good. There have been erroneous data feed and charts.  But if that data is good . . .  WOW!]

Fri, 02/24/2012 - 20:21 | 2194596 disabledvet
disabledvet's picture

i've always found it hilarious that people would think you could break a bank with gold. Silver on the other hand...

Fri, 02/24/2012 - 22:22 | 2194779 HungrySeagull
HungrySeagull's picture

Normally something like that will break silver back down below 30.

Now suppose they print imaginary shares over the weekend and dump 100 million paper ounces into the silver pit?

I have always said paper burn paper.... but now see Blythe for the truly enemy of Metals followed by a thought of how many imaginary ounces are ON the market?

This is going to be very interesting.

Blythe is stuck.

If they do this again, it goes either way. From my point of view I am in the money.... excepting that stupid lakeside trip we had just got back from... or I can back the truck and stack some more.

I am drifting off to sleep dreaming of $1000 per ounce or 1000 ounces of (Am a very long way from that goal...) silver. And I think that may happen someday. Why should Silver be the runt while all the others are trading in 4 figures?

Fri, 02/24/2012 - 22:30 | 2194801 espirit
Sat, 02/25/2012 - 04:12 | 2195272 StychoKiller
StychoKiller's picture

What's her prognosis, Doc?

Sat, 02/25/2012 - 09:10 | 2195413 buckethead
buckethead's picture

Someone BTFDs?

Fri, 02/24/2012 - 18:32 | 2194404 Fortunes Favor
Fortunes Favor's picture

Stalking The Bear: Trouble In Transports

http://seekingalpha.com/article/391391-stalking-the-bear-trouble-in-transports

Strong Oil prices may be the culprit

Sat, 02/25/2012 - 00:05 | 2195035 UP Forester
UP Forester's picture

Nah.  Someone shot the Transport Unicorn.

 

Either that, or someone got a glimpse at some real numbers, for once....

Fri, 02/24/2012 - 18:33 | 2194407 swissaustrian
swissaustrian's picture

Crude is technically overbought, the dollar is oversold, the Iran story is overhyped, the US is considering to release some oil out of the national reserves, and Saudi Arabia is increasing supply, everybody is screaming about high gas prices. Prepare for a pullback before this rally continues. I think the same applies to PMs.

Fri, 02/24/2012 - 18:39 | 2194422 JPM Hater001
JPM Hater001's picture

I read the whole thing and here is what I think:

At 78.36 I think the dollar is about 6% higher than this time last year with infinite more printing occuring

At 35.51 we are still 14 dollars lower than this time last year with infinitely more instability in currencys worldwide

At...well, housing we just saw that

At...well, we just saw the price of oil

At...well, at least I can still afford to play my Harmonica...

Fri, 02/24/2012 - 19:06 | 2194485 swissaustrian
swissaustrian's picture

Last year arround the risk of real supply disruptions from Libya was significantly higher than this time arround from Iran. Economic activity was higher (take for instance US energy consumtion, BDI, even the cooked GDP numbers).

The DXY has become basicly irrelevant imho, because everyone is inflating like there's no tomorrow. As the DXY is heavily EUR weighted, it's basicly a comparison between trash ($) and garbage (€). The only use I have for the DXY is to put it into relation to commodity prices and to figure out which fiat currency is currently overbought/oversold. The DXY beeing 6% higher this year arround than last year actually means that oil/gold etc. will go higher once the $ weakens further (in € terms Brent is at all time highs...). But in the short term the DXY is oversold, so I expect commodities to fall somewhat in $ terms. Additionally, WTI and Brent quite significantly are overbought. Gold, silver are close to beeing overbought.

Fri, 02/24/2012 - 21:05 | 2194660 hedgeless_horseman
hedgeless_horseman's picture

 

 

Everyone is inflating like there is no tomorrow?  Ex-fucking-actly! 

Synchronized diving, bitchezzz!!!!!

Fri, 02/24/2012 - 22:32 | 2194809 espirit
Fri, 02/24/2012 - 18:44 | 2194429 Frastric
Frastric's picture

Purlease! This ain't about technicals anymore. Only three things really determine oil's price now: central bank liquidity, CME margin hikes and GDP growth (or lack of). The other factors are just noise...

But there will be some crazy volatility along the way as oil (WTI in particular) goes to $150 and beyond...

Fri, 02/24/2012 - 18:48 | 2194444 swissaustrian
swissaustrian's picture

Iran news have driven the price during the last months. ZH has documented this very well.

I did this too, over here (I actually started covering it even before ZH did): http://www.ronpaulforums.com/showthread.php?322176-Oil-and-gold-prices-set-to-soar-on-the-developing-IRAN-story&p=3639233

Sat, 02/25/2012 - 10:25 | 2195464 bdc63
bdc63's picture

I see it a bit differently.

I agree with 1). central bank liquidity and 2). CME margin hikes.

Not so much GDP ... unless there are HUGE unexpected swings that they can't figure out how to hide or lie about (in the short term at least)

But I would add

3). Iran and general middle east unrest & sabor rattling

4). Strategic Oil Reserve releases (or even just the 'discussion' of releases)

Fri, 02/24/2012 - 19:33 | 2194522 jomama
jomama's picture

it's a (sort of) free country!  

don't let us keep you from taking your own advice.  that is, if you really are.

Fri, 02/24/2012 - 20:27 | 2194602 disabledvet
disabledvet's picture

ignore the price of oil entirely and go long the natural gas technology play. the "Big Oil/Big Mind-martian" play is getting killed. The only people who have are "fereiners"--and we need to start playing nice now. of course "when we're killing everyone" that's not easy. maybe we can start with Vets here at home!

Fri, 02/24/2012 - 20:37 | 2194624 nmewn
nmewn's picture

There ya go!

"ignore the price of oil entirely and go long the natural gas technology play."

I'm going long pond scum!!!

"Feb. 23 (Bloomberg) -- The Energy Department plans to invest $14 million to make transportation fuels out of algae, according to the White House.

“We could replace up to 17 percent of the oil we import for transportation with this fuel that we can grow right here in the United States,” President Barack Obama said today in Miami during a speech on energy policy."

http://www.businessweek.com/news/2012-02-23/u-s-to-invest-14-million-for-algae-biofuels-white-house-says.html

When unicorn farts just won't do anymore ;-)

Fri, 02/24/2012 - 21:09 | 2194662 Cheesy Bastard
Cheesy Bastard's picture

Heh.  Yep, I saw that one today.  And I remember back when he said if we keep our tires inflated we wouldn't even need to drill for oil.  

http://www.youtube.com/watch?v=akjXqfvLu28

That guy is just full of solutions.   What's next, burning dead people to heat my swimming pool?  Oh, wait...

 http://www.newsvine.com/_news/2012/02/24/10494749-an-insult-dead-bodies-to-heat-uk-swimming-pool

Do NOT follow this link or you will be banned from the site!