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The Two Charts Showing How The S&P Downgrade Of The US Broke The Market
By now, most sane market observers and participants understand that perhaps, just perhaps, everything we believed about neoclassical economics is not without fault. In fact it is possible that the entire macro-economic safety net of Keynesian policy has come into question. One look at the chart below of the changes in US financial stock prices should be enough to show that when S&P downgraded the mighty USA's credit rating, they proved the impossible is possible. The market is now entirely paranoid. Investors have fled the market in droves, as we have discussed endlessly. The banks themselves seem to question their own existence given the plunge in liquidity, and the huge rise in volatility and correlation appear to suggest the market is indeed terrified of its own shadow.
The chart shows the daily percentage change for XLF (the financial ETF). The regime change post US downgrade is simply incredible as each and every day, the slightest shift in momentum is interpreted as all-is-good or all-is-bad and nothing in between. We can only hope that all those long-only value investors have adjusted their holdings to account for the massive jump in volatility.
At the same time, market participants started to price expected (implied)correlation higher and higher (or the potential for a catastrophic event). Realized correlation is extremely high as, just like in the XLF above, the broad market is reflexively judging every rip and every dip as the end of the world or the beginning of Nirvana.
Charts: Bloomberg
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US Is Broke...
Living off the FED Fiat Credit Card.
Sure they're broke but downgrade didn't break the market.
Complete bullshit!
The market was already broken.
Anybody seriously think we wouldn't be where we are now if it weren't for the downgrade?
Jeez, Euro-Farce puts the downgrade in the shade.
Relentless unprosecuted fraud broke the market.
Exactly, Mr Big Ching
Elite Navy SEAL commando gets his ass kicked in a parking lot:
http://www.theblaze.com/stories/real-or-fake-video-shows-alleged-navy-ve...
looks more like an elite couch potato
There it is. Still waiting for even one politician to state plainly that it is long since time to prosecute the fraud and execute some of these theives.
If TPTB want mob rule, then mob rule is what they will get.
How does a thoroughly corrupt and fraudulent establishment prosecute itself? Members of the "justice" system prosecuting their colleagues, friends, bosses, and masters? Not gonna happen.
Eric Holder is par for the pathetic and criminal course of the American "justice" system.
Like millions of shareholders suddenly cried out and were silenced! -- With apologies to Obi-Wan
In addition, those charts look like someone just turned the volume knob up to 11 -- that rumbling sound is the noise floor, looking for the resonant frequency to amplify, then blow out everyone's eardrums! :>(
It's a TRADER'S wet dream!
Misery in America living under the muslim el douche.
Man, you are one broken-down one trick pony.
muslim, blah blah, muslim, blah blah, muslim, blah blah, muslim...
The ugliest thing I've seen is Freddie's mother doing a muslim gang bang with the caboose being a camel. She enjoyed it but the camel wore a bag so it wouldn't have to see that hag. I think it was a double-hump camel.
Ugh. Go back to your bridge and goats...
We entered bizarro world once the world's reserve currency was no longer an AAA currency. Try to explain that to an alien civilization.
Could it be that the "risk free asset" is not so risk-free at all ???
http://journey-to-alpha.blogspot.com/2011/12/europe-divided-again.html
I ain't afraid of nothin' [except the last hour of trading when I turn off the computer and hide under my bed.].
http://vegasxau.blogspot.com
Excellent!
DavidC
With a European downgrade around the corner which will do this to their market times 2.
but when does American Idol start?
8PM followed by Benny Hill and The courtship of Eddies fathers bitchezzzz
but when does American Asshole start? Fixed it for ya.
When Does American Asshole start?
When Barry gets his teleprompter back from the shop.
The above description is indicative of a top, or a bottom. I'll let you choose, but that is what it means...trend change imminent.
Indeed, just a little pump cushion today for the coming dump. Here at DOW 12,100 treading water at 1 year average, actually a 30 year average, and that is yet only due to all-out pumping blatant manipulation and shoving in money as fast as they can.
I think we are only a few weeks away from an epic crash, just a feeling...
Squid HFT running Fed money to juice dead market. Plunge protection.
Bottom. DOW 360,000 cometh.
DOW 360,000 perhaps....but you'll have to fight gay bikers in assless chaps wiedling weird arrow guns attached to their arms for gas fillup from a moving tanker truck.
LOL! Good one, Dog.
Check how that assless chaps play turned out [ANF]. Carter Worth's bonus...not so much.
sheepdog... priceless... im still laughing and gasping for air
Yeah, I like Mad Max too.
Thunder Dome. Long oil.
I wanna drop a snake on you from my autogyro for that tasteless remark, huh, huh...
If the first chart was a polygraph, it goes from what is your name to lie,lie,lie
Dead bodies piling up everywhere
I'll have a complete list when we break out to new highs for the move next week.
Retail index within spitting distance of making world record highs.
http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosetti...
Yep, you should only sell when it is a Solar System Wide record...for sure.
in relative terms?
LOL! Robo AGAIN predicts 'new world record highs' in a market barely treading water at a 25 year avg, and thats WITH all-out manipulation pumping, shoving in piles of money daily just to stay even.
Hey Robo, isnt this just your same old recycled call from a couple months ago when you declared we'd rip far higher from DOW 12,700?
'Dead bodies piling up everywhere'....yea how does it feel being under that pile of dead bodies, Mr. 'Sell gold here at $900, its the top'....and your 'Im all in here at DOW 12,700, we rip higher to the moon from here'
Actual track record is less than friendly to you Robo.
Where was this POS yesterday???
Oh yeah, one more thing.
Hope nobody is short shopping mall REITs
SPG is now up from $25 to $125 in 3 years.
http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosetti...
Where is the huge depression?
"Where is the huge depression?" ---> Check between your ears. Everyone who is not a bulltard at ZH knows that.
Hahahahahaha! +1
Go ask those 4500 Citibank minnows who got laid off recently!!
Go ask the 46 million on food stamps.
Thanks for the great short idea!
Yeah, I love to see low volume gap fills.
Depression has started in the periphery and is coming to main street.
And there's nothing you could do to prevent that from happening.
FYI When the market starts to reflect that and girlie anchorettes on business news networks start wearing black w/o cleavage .. it is too late to sell.
GS below $75 in May 2012.
He's trolling again today.
The more you respond to his comments, the more he trolls.
<=== Robo_T is a zH fixture
<=== Robo_T is a fuking troll
i see R_T as as a fixture, kinda like "radio free europe" in the inverse
he gives non-stop reportage of what the finacial retail boiler-room boyz are saying and cooking up, next
R_T is like the cartoonage in the new yorker sometimez... but for a while now, i've been thinking he just passes along what he's hearing around the office...
Just curious if anyone here used to follow Calpine in the yahoo message board when they were on their way to bankruptcy.
There was one guy named Baghdad Bob who used to troll in there. His posts were awesome. He basically wrote in the style of Tariq Aziz from Hussein's regime, denying until the very and...and a few days after.
I dunno, where your manhood was supposed to be?
The market is not broke. It continues to be an efficient means of taking money from the populus and putting into TPTB.
And que Rally
I wish there was a "bear indicator" at the top of ZH...this way when it was full tit green (ludicrous speed bearish) I would know when to put in my "buy orders" for stawcks.
Stock market is unchanged for the year, although you would be broke from rebasing due to stop losses being hit from record vol and correlation.
You just described my 'strategy' until about a month ago.
I would say that post debt downgrade the focus shifted to europe, which explains the increase in the frequency and size of opening gaps. 1987 crash, 1990 recession plunge, 1998 LTCM fail, 2000 dotcom scam, 2002 pre-war, 2008 credit collapse, 2010 flash crash... and now all have similar opening gap characteristics. The only exception is the tech bubble and burst as it was a very prolonged period of exceptional opening gaps; back then people actually knew what 'limit down' was.
This is what happens when the market participants dwindle down. Those that were in the middle of the boat to dampen the fat ones running from side to side, have decided to jump ship. All that is left are the tuby ones running back and forth from port to starboard.
I keep praying for the day when I read a headline that says, "Leveraged ETF's investigated for market manipulation".
Housing & Jobs look bleak. We need a Mega-QE3:
I think an ingrained misconception that still permeates the market like believing the world is flat is that foreclosures only happen to poor people. Nothing can be further from the truth and in places like California foreclosures are hitting every single market. Even the infamous Beverly Hills is filled with foreclosures except these are well buried in the shadow inventory. I figured that I would spend some time today examining every single active foreclosure in Beverly Hills and try to shine a light on the ill-conceived notion that only poor areas are impacted by foreclosures.
http://www.doctorhousingbubble.com/beverly-hills-real-estate-loan-balanc...
Problem is, now QE3 is basically a harpoon gun pointed at the bloated bubble, fire it and its all over.
That load would be blown very quickly...no half life for such actions any more. Though maybe it would hasten the endgame.
bring back the floor and pits.....when the pit had to absorb risk...when you didnt trade for 1/4 of a penny after scratching on the trade but getting paid to provide liquidity....f'ing joke
These days, crime does pay – for the clever professional…for those who own the HFT machines and the exchanges and the rating agencies...
Video: Trends analyst Gerald Celente joins RT to discuss the real state of unemployment as well as the passage of the Senate bill that repeals the Fifth Amendment to the Constitution – forecasts economic martial law :
“You need 125,000 jobs a month just to account for the new people moving into the economy and population growth,” says Celente. He believes the inaccurate unemployment numbers reported by the mainstream media are going to make President Obama look better.
Celente opposes S. 1867, which allows for the indefinite detention of Americans. “This is unprecedented in American history,” he comments. Celente points out that the people in charge have an agenda for war and the military industrial complex is taking over the country. “They’ve turned the whole country into one big homeland security and the priority is on military.”
The trends forecaster predicts economic martial law is coming. “When the new year comes, the winter of discontent is going to set in and reality is going to bite.”
http://lewrockwell.com/celente/celente87.1.html
Economic martial law, we're in it.
While it's certainly alarming, it's not unprecedented. There's been a few times we've done something similar. Oddly enough, Abraham Lincoln is on the list of offenders:
http://en.wikipedia.org/wiki/Habeas_corpus_in_the_United_States#Presiden...
Also something I think we'll see come down the pike soon:
http://en.wikipedia.org/wiki/Alien_and_Sedition_Acts
That was John Adams, then good ole Woody Wilson did it again. My friends, we could find ourselves as rebels/criminals soon without ever commiting a criminal act.
Oddly enough, Abraham Lincoln is on the list of offenders:
The only thing odd would be finding a US President who didn't. Name one.
Too bad Celente didn't practice what he preached. Good to see he can still afford link pimps though.
very interesting seeing the DOW soaring but the Euro stagnating you would think that after all this time the pumpers would have their game plan down.
Their last EU summit is a failure; the changes to the Treaty that they need would take years, and they don’t have years. It's over.
The pumpers are hard at work trying to offload their stocks to retail.
December is not only the time for a magic manipulated "Santa Rally".. . it is time to cover tax expenses (which means selling has to commence soon). Selling to whom?
Amen.
exactly! to whom?
it keeps me flabbergasted how they can keep pumping it up without any financial consequence (loss). Are they playing ping-pong? an endless zero-sum game?
or does the DJ move up on one dollar trades
the tale of a broke country
I'd like to see the first chart plotted against WTI daily price swings. How can any organization budget?
revised axiom: 'the Fed can manipulate the market a lot longer than you and I can remain solvent'.
That’s what Marie Antoinette thought.
The downgrade by S&P was a reaction to Bernanke breaking the US financial system. Bernanke's decision that savers should be forced into risk on of the stock market has forever caused this crisis to worsen.
“There is a hidden and deeply unfair ‘tax’ that is costing US savers in excess of $500 billion per year. Through forcing interest rates far below the rate of inflation, the government has effectively created a tax on savings that not only takes all real interest income, but quite deliberately confiscates wealth from tens of millions of savers every year - for the direct benefit of the government.”
This is the financial analysis of Dan Amerman in his stunning report on the great Bernanke robbery that’s financing Bloomberg’s touted recovery.
“It is the economic equivalent of a 90% tax on savers... equal to more than half of all individual income taxes…nearly three times as large as total corporate income taxes.”
http://www.marketoracle.co.uk/Article31937.html
"Milton Waddams"...Of course, that's what the CRIMINALS would like you to believe...
As for me, PROVE IT!...I sense fear!
There might also be some other considerations...
In order to keep an accurate, unbiased view on the status of our economy, I have started keeping my own set of statistics. I use raw retail data from this source http://www.census.gov/retail/
It is raw and unadjusted for anything including seasonality.
The Census provides 67 distinct divisions of data. I keep three charts of each category of data examined.
(1) The unadjusted raw data. This is the headline data in dollars or percentage change that is typically announced.
(2) Raw data adjusted by the BLS (Bureau of Labor and Statistics) official USD inflation rate.
(3) Raw data adjusted by the BLS Pre-1982 inflation calculation. For this I go to http://www.shadowstats.com/ and more specifically here http://www.shadowstats.com/alternate_data/inflation-charts for the inflation data.
Using this approach, here is the raw unadjusted retail sales data up through the preliminary September release.
http://i1140.photobucket.com/albums/n579/bearasaur/Census%20Retail%20Data/PMStats_15273_image001-1.gif
Here is the raw data adjusted by the BLS official inflation rate.
http://i1140.photobucket.com/albums/n579/bearasaur/Census%20Retail%20Data/PMStats_13087_image001-1.gif
And here is the raw data adjusted by the BLS Pre-1982 inflation calculation.
http://i1140.photobucket.com/albums/n579/bearasaur/Census%20Retail%20Data/PMStats_8998_image001.gif
This last chart is properly considered the net value being spent. Another way of saying this is that if inflation (dilution of the money supply) was not a factor, this is what the raw unadjusted data would be.
Summarizing what I see in a few sentences:
(1)
Using the Retail sales total category, using the linear fit trendline from Jan., 2005 to Sept. 2011, there has been approximately a 65% reduction in real money spent.
(2)
The trend does not seem to be slackening in any appreciable way.
(3)
This generally tells me that customers continuing to cut net value spending and that they continue to do so as the economic pain continues. Customers are spending only about 35% real value of what they were in Jan. 2005. Any way you slice it, that is a lot of belt trimming.
(4)
Where does it slacken or stop?
Accepting the assumption that food is the one thing for which there are true minimums and that food is the bottom line driver for action when all else has failed. Here is the data for Supermarkets and other grocery except convenience stores adjusted to the Pre-1982 inflation calculation.
http://i1140.photobucket.com/albums/n579/bearasaur/Census%20Retail%20Data/PMStats_15759_image001-1.gif
Summarizing what I see:
(1)
The dip you see in 2009 in nearly all other categories is not present here. Speculations about various factors that make other categories more flexible than food are probably valid, but they are still speculation. This chart represents the best approximation of retail data I am aware of, in other words, closest to fact absent speculation.
(2)
Like tax receipts from income, food is a coincident indicator that does not lend itself to delays. People have to eat constantly; therefore as an unadjusted indicator, it is pretty faithful and little subject to uncertainties that other categories might be.
(3)
Again using the Supermarkets and other grocery except convenience category, using a linear fit trendline, you can see that from Jan., 2005 to Sept. 2011 people have cut about 64% of real spending value.
(4)
Wondering where the end of this trend might lead…November/December of 2012 puts that trendline at about 25% of what is was 8 years previous. In other words, a 75% reduction in net food spending in 8 years (Jan. 2005 to Jan. 2013). That is a radical change without any real indication I am aware of that it will change soon, and considering it involves food, has very serious implications for the future.
To me this is interesting stuff…
Zadok,
That is great work...and damn, you even adjusted for inflation (pre-'82)!!!
It is more than interesting...it is downright frightening.
Good stuff, finally I see something that reflects my life - buying the same amount of food but paying at least 3 times more for it comparing to 2001.
Interesting stuff as you say, Zadok. I wonder if a similar situtation is happening in heating fuel expenditures – only in this case, more money spent year after year for less and less heat used.
Your figures on food made me curious as to how much increased government expenditures on food stamps is having on the total food picture. It appears that the $64.7 billion in food stamps distributed in 2010 fiscal year accounted for a little more than 5% of total food expenditures of $1,240.4 billion in 2010 (correct me if I’m wrong). Spending on food away from home accounted for 47.9 percent of total food expenditures in 2010; spending for food at home accounted for 52.1 percent.
http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/
Checking Wikipedia, I see where Secretary of Agriculture Tom Vilsack says that “Every dollar of SNAP (Supplemental Nutrition Assistance Program) benefits generates $1.84 in the economy in terms of economic activity."
In reality, it is hard to determine just how much of the economy is recycled money – from tax payers to tax receivers.
Interesting observations and questions. Putting this together initially was not exactly a small project, so as much as I would like to look at everything under the sun, I do limit it due to time availablity. I have done it for Au, Ag, housing, poverty, wages and a few other things too.
That said...I looked into the data and found gasoline as a catagory. Here is the data. Interesting there was a step-function drop in 2009 that has not recovered yet. I looks like a 59% or so drop since Jan. 2005 with a clear downtrend forming since 2009 but not at the slope of food or retail in general. One could speculate that people are trimming where possible and some things are more able to be trimmed than others. All told, it looks like a people in a squeeze that are having to make inconvenient choices that clearly interfere with their lifestyles at the very least.
http://i1140.photobucket.com/albums/n579/bearasaur/Census%20Retail%20Dat...
Zadok,
Please post your housing charts. I have been wanting to see a housing chart pre-'82 inflation adjusted.
http://www.theburningplatform.com/?p=15875
The second is inflation adjusted, but using regular CPI.
If the Tylers were smart, they'd let you do a guest contribution.
@JR
I found another catagory for Fuel Dealers. I was not sure what that was so here is the definition.
An establishment primarily engaged in the retail sale of fuel oil, bottled gas, coal, wood, or other fuels.
Given the lower sales volume it seems like it would be your propane, fuel oil, coal dealers. So this perhaps might give a potential answer to the question on home heating. About a 65% reduction since Jan. 2005, so this is right in line with total retail sales and consistent with belt tightening on anything flexible despite discomfort or inconvenience. It is also in a clear downtrend that appears pretty linear without perceptible tapering off in recent years.
All these items are telling me that the US consumer as an entity is essentially broke and is shifting anything flexible to substitution, step downs or just plain elimination from the budget.
http://i1140.photobucket.com/albums/n579/bearasaur/Census%20Retail%20Dat...
Thanks, Zadok; your research and analysis verify my thinking and expose Bernanke’s Orwellian claims. In short: “Who you gonna believe? The Fed - or your lying eyes?" The Fed has deceived a lot of people into thinking that debt monetization is on hold and that the economy is in full recovery mode. Yet I find myself eating Chipotle tacos with hot sauce, wearing layered clothing, trying to keep warm in an office with the thermostat set on low. It’s nice to know I’m not alone.
The fiat dollar is drifting into the sunset. QE has become the norm; as Jim Willie points out, the 2010 and 2011 years show a steady linear growth in yearly monetary aggregate – heading toward hyper inflation.
I think you’ve come along just at the right moment, Zadok, and hope to see continued updates of your analyses. To quote Willie again: “Phony money not only produces phony wealth, but phony faculty research and phony integrity of financial systems. Over one third of all university professors with chaired posts are funded by the USFed.”
Their’s is FED FLUFF; yours is reality. Only reality will help us find a solution to the malaise.
Impressive compilation, you should tag it to the bottom of robo traders comment.
"no big depression here"
.
I would be interested in seeing the process and spreadsheet formulae that you used to compute those graphs. Find my email at:
http://www.frontiernet.net/~jimbot
Deficit spending of 8% of GDP year in and year out is not sustainable. The market knows this. This fiscal year's deficit was the second largest on record, next year's is projected to be slightly lower, but may come in higher. This is 3 years into the supposed recovery.
Sooner or later something will give.
My dow 12k hat is getting worn out
"Show me 'Put hat on, take hat off!'" -- with apologies to Mr. Miyagi
"By now, most sane market observers and participants understand that perhaps, just perhaps, everything we believed about neoclassical economics is not without fault. In fact it is possible that the entire macro-economic safety net of Keynesian policy has come into question."
Or in other words, socialism es muerte:)
S&P has been busy last two days....man does this feel like a setup.
Woot. Looks like the V (fib) shaped recovery is here!
Ah yes. The great economic crash of December 8, 2011 followed by miraculous recovery of December 9, 2011.
The markets could simplify everything by simply using a single counter for both FX and commodities. Currencies are a commodity with an imagined value and we just need to accept it.
And maybe the market governing boards should allow equities to trade as a derivative of the options market - notions of notionals are logically emotional!
So let's back off the currency devaluation bashing for [just] a minute - look at what these downgrades do for the USD carry trade! The setup is so cool. The beauty of the carry is that price momentum of a given stock will infinitely trend up even if the issuer doesn't sell a thing (like cost of living raises for government emplyees). Perfection, under this scenario, prices will trend higer even if the issuer goes out of business (in fact - and itz a good bet - a lot of dem are already dead in the water),
Haven't worked the setup out completely - but I am sure there is a model where I can buy in when the FTSE closes - sell 30 minutes before the US close at a profit that will almost cover the value the USD sheds during the market. Saying almost cause still gotz to pay for the trade. Now them co-located traders are probably breaking even: ie they be closing their books with enough extra dollar count to cover inflation losses - ie and so on - by avoiding commissions. the co-located dudes can buy the same basket of goods and services at the end of the market with those extra bucks they could have purchased when the market opened.
What a way to make a living, huh!
Allow the argument that we need another stimulis shart real soon, or rumors of a plan to plan the plan to plan one soze to protect our prescious equity indexes from them commie AL KADA cowards seeking the safety of UST's (can't stop a giggle). Who they kidding. The yield on the 30yr was up one bp last night excluding cost of toaster ovens for 100 lot [or more] purchases.
Breaking - Michelle Bachman fessed up she didn't go to her senior prom because she was using her Gym Teachers crotch to floss her teeth and could not disentangle a tartar ridge on her left incisor from several very stout pub sprouts gushing from coach's rather generous mons. Attack of the Snatch Snatchers?
"By now, most sane market observers and participants understand that perhaps, just perhaps, everything we believed about neoclassical economics is not without fault."
Tyler, you are tied with Banzai for the best laugh of the day.
Let's be clear on S&P, Moody's et al.: David Cardona, former feeb, and worst choice possible for SEC, left the feebs for the SEC after proclaiming that there was really nothing to go after the banksters for.
Evidently, Cardona missed the 1st, 2nd and 3rd grade reading circles, and wasn't able to comprehend Phil Angelides' and Brooksley Born's Financial Crisis Inquiry Commission Report (FCIC) when they handed it to him?
There was plenty enough in there not only to go after the top banksters, but a number of douchebaggers at Standard & Poor, and Moody's.
Is everybody clear on that?????
http://www.allword-news.co.uk/tag/julian-assange/
“Why no financial crisis prosecutions? Ex-justice official (Cardona) says: It’s just too hard!” –Marian Wang/Propublica/News Report
I on a roller coaster weeeeeeeeeeeeeeeeeeeeeee
Hey ZH'ers. Long time listener, first time caller. Is there a reference someone might recommend that a non hardcore trading desk junkie might peruse to understand some of the finer points discussed here? I'm not looking to pass a series 7, but I'd like to know wtf esoterica (esoteric to a database admin geek anyway) like "the inversion of the 2s10s curve is truly the death knell" mean. For instance, this article has really pretty graphs, but I dunno what they mean; I mean, what they MEAN. I suppose I can invest in 'Finance, Econ, Trading etc for Idiots' but if anyone has better ideas for deciphering ZH jargon and concepts, lay 'em on me.
Don't you mean it fixed the market? By that I mean the fear and volitility had been suppressed. Now at least some of it is in the open.
Don't you mean it fixed the market? By that I mean the fear and volitility had been suppressed. Now at least some of it is in the open.