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No New Punchbowl Promises Send EUR Ever Closer To Fair Value

Tyler Durden's picture




 

EURUSD has tumbled hard following the FOMC minutes as the much-hoped for 'we promise to print USD to infinity at the next meeting no matter what we see' phrase was missing. Two months ago, when the EURUSD was at 1.30, we asked if a 1000 pip move lower, based on relative central bank balance sheets, is in the cards. Today, we are 80% of the way there, with the Euro having tumbled 800 pips against the dollar as NEW QE gets priced further and further out - now implying a 20% likelihood of getting a new USD printing from the Fed within the next 3 months.

 

and perhaps more interesting, the ebulience in the Sovereign risk market of the last few days seems directly opposed to the weakness of the EUR; who is right? We hesitate to guess but for sure there is room for convergence to some reality.

Charts: Bloomberg

 

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Wed, 07/11/2012 - 14:27 | 2606950 Temporalist
Temporalist's picture

Looks like a ride at Euro-Disney.

Wed, 07/11/2012 - 14:53 | 2607099 Taterboy
Taterboy's picture

2:01 pm-"No crack! What do you mean,there's no crack in this pipe. I need my crack Benny."

Wed, 07/11/2012 - 15:05 | 2607153 TruthInSunshine
TruthInSunshine's picture

Breaking News - Hide your assets and lock everything down. Even Simone Foxman (and her ghostwriters) at BusinessInsider, that low brow proxy rag of the New York Fed, just conveyed that 'The Fed' for the first time has acknowledged that Quantitative Easing may be "market destabilizing." No shit, BI.

And it only took her about a thousand words to utter what most here have known all along:  "The Bernank broke all markets."

See her last sentence: "This would appear to be the first time that the Fed has expressed any public trepidation about QE destabilizing markets in this way."

 


http://www.businessinsider.com/federal-reserve-june-minutes-2012-7

This seems to be the money paragraph:

A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee's goal. Several others noted that additional policy action could be warranted if the economic recovery were to lose momentum, if the downside risks to the forecast became sufficiently pronounced, or if inflation seemed likely to run persistently below the Committee's longer-run objective. The Committee agreed that it was prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability. A few members observed that it would be helpful to have a better understanding of how large the Federal Reserve's asset purchases would have to be to cause a meaningful deterioration in securities market functioning, and of the potential costs of such deterioration for the economy as a whole.

That last statement also seems to hint at another problem we've been talking about recently: the scarcity of safe assets. Some investors have complained that the scarcity of safe assets—given the Fed's unprecedented purchases of Treasury bonds—could disrupt markets, particularly in the case of big negative shocks. This would appear to be the first time that the Fed has expressed any public trepidation about QE destabilizing markets in this way.

Wed, 07/11/2012 - 15:30 | 2607304 HD
HD's picture

Great post mate.

Wed, 07/11/2012 - 14:27 | 2606959 FL_Conservative
FL_Conservative's picture

What is the FV of toilet paper these days?

Wed, 07/11/2012 - 14:29 | 2606977 WiretapWilly
WiretapWilly's picture

If u r referring to gold, it's on its way there.  It's a riot that anyone thought the ZIRP was anti-saver.  The stackers of fiat are the only ones who will come out ahead in the coming deflationary depression.

Wed, 07/11/2012 - 14:40 | 2607035 FL_Conservative
FL_Conservative's picture

Whatever you're smoking, you should have set down a while ago.  Actually, I'd be incredibly appreciative of the buying opportunity if the PM market were to collapse (it won't).

Wed, 07/11/2012 - 15:03 | 2607150 pods
pods's picture

You and me both!

As to what Willy is smoking, I think bath salts are all the rage today.

pods

Wed, 07/11/2012 - 15:22 | 2607259 silverserfer
silverserfer's picture

good luck with that. Who needs simple math skills when you have economic nearsightedness to guide you. 

Sat, 07/14/2012 - 15:49 | 2616260 MeelionDollerBogus
MeelionDollerBogus's picture

What deflation? The depression is an inflationary depression.

This is the truth - http://flic.kr/p/cutWa7 - no way out of it. paper fail + gold win.

Wed, 07/11/2012 - 14:34 | 2607008 Winston Churchill
Winston Churchill's picture

New or used ?

Wed, 07/11/2012 - 14:27 | 2606962 Peter K
Peter K's picture

Fair Value for a virtual currency that is not backed by anyone? OK 1.2000 will do. But so will .6000 :)

Wed, 07/11/2012 - 14:34 | 2606963 TruthInSunshine
TruthInSunshine's picture

I believe that I was the first to predict EUR-USD parity within a year, and that was 5 months ago.

(Easy...relax...real wealth crowd - in the relative land of toilet paper printed by blind fractional reserve alchemists, the one eyed fiatski is king  -  http://www.dartmouth.edu/~matc/math5.geometry/unit9/09108.jpeg   )

We'll see how correct or incorrect I was.

Will that call be a real chimp-of-a-Cramer or a winning Burry?

Wed, 07/11/2012 - 14:27 | 2606964 orangedrinkandchips
orangedrinkandchips's picture

I WANT MY 2 DOLLARS!

Wed, 07/11/2012 - 14:29 | 2606978 midgetrannyporn
midgetrannyporn's picture

The miners CAN'T go any lower can they? THE PAIN! [/spock] lulz

Wed, 07/11/2012 - 14:58 | 2607122 swissaustrian
swissaustrian's picture

Depends on which miners, there are still some good ones out there...

Wed, 07/11/2012 - 15:29 | 2607292 silverserfer
silverserfer's picture

there is not a single significant mine that is subject to free market forces. They are one way or another manipulated, stolen from or cohersed by overseeing governments to ever be an honest entity that will be profitable that everyone hopes. Keep away from mining shares. They are allowed only enough wiggle room in stock price to act as a juggly worm to intice the investor to bite. Fish on! 

Wed, 07/11/2012 - 14:29 | 2606981 Everybodys All ...
Everybodys All American's picture

I don't see it Tyler. If they print more in this election year it's over for Obama. Inflation will be unleashed in such a big way even the liberals will say wtf.

Wed, 07/11/2012 - 14:38 | 2607024 Rip van Wrinkle
Rip van Wrinkle's picture

What inflation?? Everything is rigged.

Wed, 07/11/2012 - 14:45 | 2607059 Everybodys All ...
Everybodys All American's picture

I'm not talking about the reported CPI or PPI.  I'm talking about what you pay for in the way of a commodity, food, etc in a normal shopping day. I've not believed the government reported number for years.

Wed, 07/11/2012 - 14:50 | 2607083 Dr. Engali
Dr. Engali's picture

You're kidding right? It doesn't matter who is in the office at this point. They are both playing for the same team,and it's not ours. TPTB don't care if it's Obummer or Mittens...they own them both.

Wed, 07/11/2012 - 14:51 | 2607095 john39
john39's picture

why is this obvious fact so hard for people to understand?

Wed, 07/11/2012 - 15:16 | 2607181 Everybodys All ...
Everybodys All American's picture

I'm talking in the form of liberal monetary policy. With exceptions more often it has been my experience that the Keynesians are the people who are of the liberal mindset as an aside. Mittens as you like to call him has gone on record to want to get rid of Bernanke as has Ron Paul btw. There are differences Doc however minor. I don't want to give up hope just yet.

Sat, 07/14/2012 - 15:47 | 2616252 MeelionDollerBogus
MeelionDollerBogus's picture

There are no differences. Obama did the opposite of what he said. Romney will do only as his banker masters tell him and NOT what he says today.

Wed, 07/11/2012 - 15:39 | 2607342 silverserfer
silverserfer's picture

ur just bitter "they teook yer jaaab!" Retard, yeah the "liberals" created the fed and planned this whole thing. Liberals want everyone to be debt serfs, not the poewer elite who orchistrate the whole thing. Put your mittens back of before mom finds you.

Wed, 07/11/2012 - 14:29 | 2606982 Jlmadyson
Jlmadyson's picture

Stopler never had a chance.

Wed, 07/11/2012 - 14:33 | 2606990 VonManstein
VonManstein's picture

this dollar rally is losing steam i think, its been fundementally weekend by the FED and USgov.. if you look ad DXY and EUR/USD last time EUR/USD was at these levels DXY was around 87.

dollar cant gain much steam even with collapsing euro.. money moving out of dollars in fits and starts. its finnished. 90 is a dream, why are people constantly hoping for QE to weaken the dollar. ITS ALREADY DEAD FOLKS its just kicking around a bit.

SELL DOLLARS BUY PMs

Wed, 07/11/2012 - 14:37 | 2607019 surf0766
surf0766's picture

"why are people constantly hoping for QE to weaken the dollar."

Because they want to destroy capitalism.

Wed, 07/11/2012 - 14:45 | 2607055 FieldingMellish
FieldingMellish's picture

Capitalism was destroyed in 1913 on Jekyll Island.

Wed, 07/11/2012 - 14:55 | 2607108 TruthInSunshine
TruthInSunshine's picture

Actually, it was destroyed before it could ever take root, as the shrewd discovered how forcing/bribing/blackmailing/cajoling the 'elected representatives' of 'sovereign nations' to "borrow" from them was the best racketeering operation to have ever been devised.

And the year of damage where the great meeted to beat on Jekyll Island was actually 1910.

But your example is a correctly cited iteration on the theme.

Wed, 07/11/2012 - 15:05 | 2607159 earleflorida
earleflorida's picture

timing is everything when your opening salvo gambits the future

Wed, 07/11/2012 - 15:06 | 2607164 FieldingMellish
FieldingMellish's picture

Sorry, I conflated the meeting with the legislation.

Wed, 07/11/2012 - 18:23 | 2608033 TruthInSunshine
TruthInSunshine's picture

No need for apologies...

...'twas only a minor detail I cleaned up re Jekyll Island, otherwise known as the meeting of Morgan, Paul Warburg (Warburg is literally the father of the latest version of a fractional reserve central bank we now have) and other notables- including a sole mystery person whose identity to this day remains a mystery- (in other words, Lieutenants of The House of the Red Shield), - although they refused the then President of the United States admission.

The de facto deed was done in 1910, but public acknowledgement wasn't allowed until the puppets in Congress passed The Federal Reserve Act of 1913 (I encourage everyone to read it b/c it's acually quite interesting in all of its details and ambiguities, and despite what some may claim, you need not be an attorney or legislative historian to understand its plain, if often ambiguous or incomplete, language).

 

Chapter 3 - Federal Reserve System (112-90) - U.S. Code
  • uscode.house.gov/download/pls/12C3.txt

"Federal Reserve Act" -STATUTE- 12 USC § 226 - “Federal Reserve Act” The short title of the Act of December 23, 1913, ch. 6, 38 Stat. 251, shall be the "Federal Reserve Act." -SOURCE- (Dec. 23 ...

Wed, 07/11/2012 - 14:48 | 2607061 VonManstein
VonManstein's picture

i think silver breaks out soon. bounced off of golds 200MA like it did back in 2010 without these slamdowns on stupid press releases and other FED bollocks they are going up

it beggins today, the next leg down for USD and UP for PMs betya!

Sat, 07/14/2012 - 15:45 | 2616249 MeelionDollerBogus
MeelionDollerBogus's picture

When I have time I'll try to roll forward this 52-week ROC pattern for gold, trend-pattern in place (with some breakage) since 2005 - 2012 apr 17 gold ROC trends | 52week ROC gold to 2400/oz - and I have this silver to gold price-mapping scatterplot 2012 06 24 scatterplot gold vs silver 10yr 03 | goldpricemodel to go with this gold price prediction chart 2012 06 18 277week roc 02 goldpricemodel 2011 Jan to 2012 Dec 28

good luck - 200 DMA doesn't even factor in as a controlling / predicting metric.

(old scatterplot 2011 dec 27 gold 07 | 10 years gold vs silver scatterplot and 2011 dec 27 gold 08 | scatterplot gold vs silver zoomed in) essentially unchanged.

 

Wed, 07/11/2012 - 14:46 | 2607065 MillionDollarBoner_
MillionDollarBoner_'s picture

because they want to destroy crony capitalism - there, fixt it 4 ya ;o)

Wed, 07/11/2012 - 14:49 | 2607081 VonManstein
VonManstein's picture

TheQE camp are the conies so you way of sony

Wed, 07/11/2012 - 14:34 | 2607007 FieldingMellish
FieldingMellish's picture

QE will come when it has been completely priced out. Oh the irony!

Wed, 07/11/2012 - 14:36 | 2607014 Jlmadyson
Jlmadyson's picture

Yup

Wed, 07/11/2012 - 14:36 | 2607018 RobotTrader
RobotTrader's picture

Gold blowtorched, "Paper" screaming towards new highs.

 

Everybody got it wrong.

Go Dollar!

Go Bonds!

Go Munis!

Stocks selling off, but still way over 12,000

Wed, 07/11/2012 - 14:41 | 2607045 Robot Traders Mom
Robot Traders Mom's picture

I was wondering what happened to you! Check in with me every now and then. Your parole officer has come by looking for you. Remember, you are a Level-3 offender, so you have to update your address.

Wed, 07/11/2012 - 14:45 | 2607056 midgetrannyporn
midgetrannyporn's picture

you should be proud. sonny boy has been killing it lately.

Wed, 07/11/2012 - 14:53 | 2607103 Robot Traders Mom
Robot Traders Mom's picture

The only thing he's been killing is gerbils.

Wed, 07/11/2012 - 14:59 | 2607126 Paul Atreides
Paul Atreides's picture

You're probably out of tape too...

Wed, 07/11/2012 - 15:02 | 2607142 Pancho Villa
Pancho Villa's picture

So far, his prediction that European financials would be the top performing sector of 2012 doesn't seem to be panning out.

EUFN: -2.31% YTD vs. S&P500: +6.26% YTD

Wed, 07/11/2012 - 14:42 | 2607049 VonManstein
VonManstein's picture
Silver 26.973 +0.091 +0.34%       Copper 3.416 +0.018 +0.53%      
Wed, 07/11/2012 - 16:09 | 2607528 LawsofPhysics
LawsofPhysics's picture

As long as robo wants to have rear-view short-term calls, can he say WTI?  what a useless troll.

Wed, 07/11/2012 - 14:45 | 2607057 fuu
fuu's picture

Umm, I hate to be the one to tell you, gold is up on the day so far. Don't you have access to a chart thingamajig?

Wed, 07/11/2012 - 14:48 | 2607076 MillionDollarBoner_
MillionDollarBoner_'s picture

don't worry - they will slam dunk it in the after-market, as usual ;o)

Wed, 07/11/2012 - 16:10 | 2607529 LawsofPhysics
LawsofPhysics's picture

Looks like they forgot to hammer oil.

Wed, 07/11/2012 - 15:18 | 2607240 Vincent Vega
Vincent Vega's picture

Yes, muni's are kickin' it! Especially San Bernardino, CA.

Sat, 07/14/2012 - 15:12 | 2616198 MeelionDollerBogus
MeelionDollerBogus's picture

nope, paper down, gold up. Looks like you're not good at reading charts.

Truth is here - http://flic.kr/p/cutWa7

Wed, 07/11/2012 - 14:38 | 2607027 hedgeisforpussies
hedgeisforpussies's picture

interesting the dxy reacting rather poorly to this and oils moving higher. copper is cofirming weakness in sp. but oil is fighting its 50day ma. will we break 1320 in sp? 

Wed, 07/11/2012 - 14:38 | 2607029 orangedrinkandchips
orangedrinkandchips's picture

Check the daily broadcast email....

 

WHO IS IN CHARGE OF THE RUMOR TODAY? Someone in Eurpoe drop the ball?

 

MUST.....BULLSHIT......AGAIN.....

Wed, 07/11/2012 - 14:40 | 2607033 azzhatter
azzhatter's picture

Cue Herman Von Rumpboy with a "turned the corner" comment

Wed, 07/11/2012 - 14:38 | 2607030 HaroldWang
HaroldWang's picture

Looks like the morons are figuring out that stocks NEED to go much lower before any QE. SPX has to be down around 1100 before any QE hits this market again.

Wed, 07/11/2012 - 14:42 | 2607041 Conman
Conman's picture

One hour to go for the daily rooomer. We need a nice juicy EU is saved rumor today. Not sure if a QE rumor would help today. Or PPT can do what it usually does and just BTFD at 3:30 since no one minds the fat finger anymore.

Wed, 07/11/2012 - 14:41 | 2607043 RobotTrader
RobotTrader's picture

New highs for Uncle Bucky

 

Peter Schiff must look really stupid right now.

Wed, 07/11/2012 - 14:49 | 2607075 Conman
Conman's picture

Hay there, hows your retails doing?

Wed, 07/11/2012 - 14:54 | 2607105 surf0766
surf0766's picture

I was in the local sears store. One aisle was closed with a cone in front of it. Someone took a crap right in the middle of the row. This was on Friday.

 

Nuff said about retail.

 

 

Wed, 07/11/2012 - 15:02 | 2607137 Temporalist
Temporalist's picture

I didn't take the crap inside I took the crap outside and left it in the aisle because it was making my knapsack smell.  Beside it seemed to fit right in with the rest of the stuff on sale there.

Wed, 07/11/2012 - 15:01 | 2607138 Vincent Vega
Vincent Vega's picture

If it was in the women's lingerie area it was most likely Robo.

Wed, 07/11/2012 - 15:01 | 2607139 Paul Atreides
Paul Atreides's picture

Thanks, my monitor is covered in ice tea now...

Wed, 07/11/2012 - 15:11 | 2607193 Jlmadyson
Jlmadyson's picture

Retail worse than expected.

Wed, 07/11/2012 - 14:46 | 2607062 Bazooka
Bazooka's picture

How many episodes of [laughter] during the FOMC were noted? For Prechter the frquency of those bastards laughing their asses off is correlated to social mood. 

 

Wed, 07/11/2012 - 15:19 | 2607247 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

In 100 years, I don't think they have stopped laughing.

Wed, 07/11/2012 - 14:46 | 2607066 SmoothCoolSmoke
SmoothCoolSmoke's picture

Ben's take'n it down.....'til Jackson Hole town.

Wed, 07/11/2012 - 14:46 | 2607067 hedgeisforpussies
hedgeisforpussies's picture

if we have a pull back towards 1335/40 area it is a nice opportunity to add to es shorts. i hope they squeeze it a bit to get a better entry point. 

Wed, 07/11/2012 - 14:47 | 2607069 Ivanovich
Ivanovich's picture

I'm sure end of the day rally will save it (for now).

Wed, 07/11/2012 - 14:47 | 2607071 Raymond Reason
Raymond Reason's picture

The only real reason to print is to fund the public deficit.  So if they keep the dollar strong, all other currencies will convert, and park themselves at the US Treasury.  This may preserve the status quo for quite a while yet. 

Wed, 07/11/2012 - 14:48 | 2607074 YesWeKahn
YesWeKahn's picture

i wanna my fucking 2c.

Wed, 07/11/2012 - 14:49 | 2607082 Taterboy
Taterboy's picture

Call Maria, we're of the "lows of the day".

Wed, 07/11/2012 - 15:01 | 2607133 surf0766
surf0766's picture

Did you see the bounce?

Wed, 07/11/2012 - 14:54 | 2607104 Itch
Itch's picture

Think i'll have a little stab at that convergence trade, 1.24 it is then. Cant get any cheaper than this hourly candle low...jack be nimble, jack be quick, jack burnt his balls on a candle stick

Wed, 07/11/2012 - 14:55 | 2607110 swissaustrian
swissaustrian's picture

Quite an impressive export subsidy for the Eurozone, especially Germany. So why are US exporters valued so much higher again?

Wed, 07/11/2012 - 14:57 | 2607115 sudzee
sudzee's picture

Its all about the pre-election sticksave.

Wed, 07/11/2012 - 14:59 | 2607118 Temporalist
Temporalist's picture

Just waiting for someone to say the US drought is a global disaster and that the governments of the world will fix it by printing more money.

Obama: I will save the US from drought by pissing in the appropriate places.  I am your savior.

Romney: I will save the US from drought like I saved the Olympics from...whatever it was I will do it and create jobs.

Wed, 07/11/2012 - 15:01 | 2607135 swissaustrian
swissaustrian's picture

The way this is going, EUR/USD could overshoot the balance sheet equilibrium to ~ 1.10 before turning arround.

Wed, 07/11/2012 - 15:17 | 2607232 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

we asked if a 1000 pip move lower, based on relative central bank balance sheets, is in the cards. Today, we are 80% of the way there

Never mentioning that the President's Working Group on Financial Markets, run by the SEC, Federal Reserve, and Treasury, can buy what ever type of asset they want to leverage up the system.

Where is the deflation?

It's coming!  Ruuunnnn!!!!!!  Run away!!!!!!!!!!

We are caught in the Crash of the Fiat Ponzi.  Use logic.  Understand that price in fiat currency matters not.  Now all that matters are what they weight of your assets are.  How much food/water do you have?  What type of tools do you have?  What are your skills?  And when it comes to money, how much precious metal do you have?

Is money what makes us happy?  No, but it preserves wealth.  So the question is, how much wealth do you want?

Wed, 07/11/2012 - 15:18 | 2607241 Meesohaawnee
Meesohaawnee's picture

its 2:15.. time for bennie to fire up the algos...we cant be having any reality days now. not allowed.

Wed, 07/11/2012 - 15:30 | 2607302 negative rates
negative rates's picture

Never fear, squirrelio here, to save the day.

Wed, 07/11/2012 - 15:36 | 2607331 cosmictrainwreck
cosmictrainwreck's picture

ANECDOTE (fwiw): Friend has P/A for her mom; the broker (small town guy - not sure what affiliation, if any) told her to take ALL mom's "investments" (which are duly diverified) and put in bank. "If she had 10-15 years to come back, OK, but I'd hate to see her lose 30%, or 50%...."). I told her credit union, not a bank.

Wed, 07/11/2012 - 15:39 | 2607340 BlackholeDivestment
BlackholeDivestment's picture

Just in time for war.

Wed, 07/11/2012 - 15:51 | 2607420 Meesohaawnee
Meesohaawnee's picture

they dont even try to hide the manipulation anymore. IE last 45 min. Ben. Just tell us what you want the SP,DOW,NAS to finish for the the day that way we could just only pay attention to the last 5 minutes and some other fun things during the summer. . This is such a joke

Wed, 07/11/2012 - 16:13 | 2607550 falak pema
falak pema's picture

1.224 fair value on the horizon! When parity comes the WS asset bubble sinks like the Titanic! 

What a dilemma, damned if you do, damned if you don't, the FED and WS squid are tied to the mast as the sirens of financial armageddon encircle the boat in troubled waters. Only mutti Merkel can save the oncoming tide of contagion banker default.

Does FED have an ace up its sleeve?

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