We Are All FX Traders Today...

Tyler Durden's picture

From Peter Tchir of TF Market Advisors

We Are All FX Traders Today...

The correlation between SPX and EUR has been high, but it seems to have hit unprecedented levels today.  All you need to know is where EUR is and you can pretty much nail where treasuries, SPX, and an assorted number of other assets are.

The connection and how program driven the market has become is highlighted by the 30 year auction.  It was a weak auction, which translated to treasuries down, EUR up, and SPX up.  I'm not sure a weak 30 year auction is a sign of risk-on, but then again, who knows. 

HYG is trading at 87.60, down only 1 point from Tuesday.  HY17 is trading at 91.125, up only an 1/8 today and still down 2.5 points from Tuesday.  With RESCAP in the index, that explains some of the move, but once again we are getting a separation of the "professional" hedging tool, and the "individual" risk taking tool.  Cash seems firm, and somewhere in between the two indices.  Not sure it is quite the right time, but long HY17 and short HYG may make sense again.


Pete's points are extremely well taken on RESCAP and DYNEGY in HY17 but nevertheless the chart below shows the huge divergence between equity (correlation-driven) and credit this week. Perhaps even more critically obvious is the intrday action today - in blue (equities) have made a higher (or equal) high today, as IG and HY are making much lower highs intraday. In fact - IG and HY are near the lows/wides of the day as stocks are near their highs - just another un-reality disconnect.

Chart: Bloomberg

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Mr Lennon Hendrix's picture

Or you can buy physical gold. 

Gold is monie, fiat is not.

101 years and counting's picture

if i take gold to wal mart, will they accept it?  no?  then its not money.  i can take a piece of plastic, preappoved for thousands of 1's and 0's and walk out with tv's, groceries, iPads, underwear, beer, smokes and condoms.


Deadpool's picture

good point. I'll wait until it breaks thru $3000 and resupply my Wal mart brand comdoms. thanx.

eisley79's picture

You could take my Canadian Dollars to your walmart, and they wouldnt accept them, or the Fijian Dollars I have left over from my recent holiday, and they wouldnt accept those either.

Both are money, and fiat.

Gold is money, even if your local store isnt set up to handle it.  Gold is not useful for everyday transactions, which is why paper money came into existence.

But his point about fiat, is that your credit card, and your federal reserve notes, aren't backed by anything, and they printin' ninja, they printin.

kito's picture

are they printing because you say so? are they printing because its the "in" thing to say? ben is not printing, ecb will print over germanys dead cold corpse...get over it. we are in a deflationary period and the fun has only begun. by the time the fed/ecb wakes us to the realization that they held off too long, it will be too late. 2008 times 10 is coming......

Mr Lennon Hendrix's picture

You are saying WallMart knows what monie is?  Your argument holds no merit.  I could give a shit what Wallmart thinks.  Don't try to apeal to authority.  It doesn't work.

Monie must meet four standards.  One is it must maintain wealth.  Fiat does not maintain, because it loses its value to inflation, and it can burn up in the case of a fire, or in the case of Mother Fucking Global, it can just vanish....poof.

Gold is monie, whether your fascist stores admit it or not.

Honey Badger's picture

If you save dollars for 20 years, do they preserve their purchasing power?  no?  then its not money.

Mad Cow's picture

He who has the gold, makes the rules. Including what "legal tender" is.

SheepDog-One's picture

101 Years, its a good point....can anyone name a store today where you can trade for gold today? I know of 1 place, a gun store, but thats it. 

So after 'the shit hits the fan' and we're living in some kind of collapsed society, who then will take gold and silver for trade? How many people even could tell you what gold and solver is worth right now on the street...1 out of 50?

Deadpool's picture

as of now you can take it to any coin shop in any city anywhere and trade it for currency and go shop. When the shit hits nobody can be sure cash will work either. could be Road Warrior where gas is king.

tmosley's picture

Confusing money and currency is the sign of a sheep.  You don't want to be a sheep, do you?

If you would, I'd like to make a nice stew, and have you for dinner.

Gubbmint Cheese's picture

It's all good.. buy and hold over the weekend.. what's the worst that could happen?


slaughterer's picture

You forgot the /sarc.  Besides, I want to enjoy the weekend.  

kito's picture

get out of gold before the tsunami comes. germany will not allow printing to oblivion. its not hard to fathom, yet inflationistas dont seem to get it, but germany actually understands hyperinflation and wont allow their currency to become confetti. they will sooner cast off the dead weight in the eu than destroy their own country through hyperinflation a second time. we are looking a massive deleveraging and deflation wave that will wipe out all in its path.................

SheepDog-One's picture

Yea I have to ask all those who believe $20,000 gold is right around the corner with all the present mass printing done, then what will drive it up there going forward? People really think theyve only just begun printing? The printing is over, gold is about $1,700, and I dont see it going up much at all from there. 

Kreditanstalt's picture

Question: Do you see ANYTHING going up in real terms? :)

Deadpool's picture

let's see...what's up 25% year to date?.....oh, right. Gold.

kito's picture

looking at whats been.....great way to analyze future performance..not.

Deadpool's picture

oooookkkkkk, how about what is up 327% in 10 years (32.7% annualized for you math imparied Naddlerites) and poised for it's 11th year in a row of positive gains? let me think a moment. Oh, right, also GOLD!

Honey Badger's picture

327% over 10 years is 15.62% compounded:  (1+cumulative return)^(1/years) -1

Deadpool's picture

I said annualized. anyway, kicks ass over everything else except AAPL.

tmosley's picture

Yes, you would rather we ignore history and listen tothe ravings of those who have never been right.


SheepDog-One's picture

Oh I have plenty of gold myself, most all of it bought under $500 too...but Im sure as hell not holding my breath for 'Gold=$20,000', thats simply never going to happen.

Saro's picture

When they can't kick the can down the road anymore with bullshit political rumors and no-volume algo pumping, they will be left with two options:

1. Let the whole thing come down around their heads.
2. Monetize the debt.

Personally, I believe this is a "Scorpion and the Frog" scenario.  The nature of the central banker does not permit him to choose anything but #2, consequences be damned.

NotApplicable's picture

They don't have to print anymore. The downward flow through Exeter's Pyramid will provide plenty of support for appreciation of the fiat price of gold.

Remember, most of the printing has been kept in the financial sector. Now that it is becoming obvious to more and more that this is no way to store wealth over time, it will leak out seeking the safety of tangible assets.

magpie's picture

There aren't that many people around anymore from the post WW2 reset let alone the Weimar Hyperinflation and GD 1.

The more recent freebie D-Mark / GDR Mark exchange 1:1 after the reunification could have left people with some silly ideas instead. Only those in East Europe who had to go down the hard way into capitalism have any real idea what TSHTF looks like.

kito's picture

sorry magpie, but history stays personal, and carries on into generations. mistakes made in past german eras are still looked at today as "thier" mistakes, even if the newer generations had no involvement. 

magpie's picture

Either you make or made history ?

No, there is no gold standard today, no war indemnity either (even if one can ever be fully sure about that).

Only depends on what the export sector wants and what Merkel thinks she can get away with the next election.

kito's picture

magpie--youre flat wrong. germany can go about this two ways. lose their economy  by propping up the deadbeats until they are on the hook for an obscene amount of money and their currency gets destroyed or let the deadbeats go, strenghen their currency, and lose some export power. however, with that loss in export power comes an advantage to their consumer in cheaper imports, and whatever they lose out in exports to greece italy, spain etc will more than be made up by the exponential growth to asia.

magpie's picture

Frankly believe any rational overall economic considerations will be outweighed by those of keeping the "European project" alive.

kito's picture

how is jettisoning the laggards keeping the project alive?

Deadpool's picture

Correlation Time, Come on! It's a correlation. There's a party goin' on right here; a correlation to last through out the year...

Cool and the Gang, right?

Bazooka's picture

Gold and Silver also in sync with equities.....not exactly 1:1, but heck, when equities crash...Gold and Silver will crash, so will oil, so will Euro.


Kreditanstalt's picture

True, but eventually, slowly, those assets in most limited supply, with highest demand profile and greatest price inelasticity will find their way to the top as wealth preservation vehicles.  Chief among them is gold.

PumpnPump's picture

But not until the very end.  Until then, TPTB have complete and utter control of your investment returns.  Gold is going absolutely nowhere until this plays itself out.  If anybody thinks they can sit in paper gold and make money, they are playing with fire and will be hammered again and again like a towel boy at Penn State, until the real collapse comes, and by then they will be too frazzled to take the trade, just like the permabears who shorted all last year.  Boo, hoo, hoo.

Kreditanstalt's picture

Nahhhh....don't think so.  Holders of paper gold or paper cash can get slowly inflated to death or bled dry with trading commissions...but the real metal is a sure bet long term.  Best bet is to use some of that useless paper cash and buy canned beans, toilet paper and bags of flour.  With all the short-term trading noise going on, the long-term case gets better and better...

Deadpool's picture

are equities up 28.5% year to date? I think not. gold is.

tmosley's picture

Who gets to claim the wealth when all the paper exchanges follow MF Global into oblivion?

Oh right, those who hold physical gold and silver.

GeneMarchbanks's picture

Does WTI make sense?

Mr Lennon Hendrix's picture

I also think that the Major Banking Houses have dumped their prop oil trades on the market to get liquidity.  This started in August, and by now those shares have been picked up.  So it is share action involved as well.  Look at how much turnover happens at the end of each day in the Oil Majors.  The High frequency Machines are using oil to flip fiat, and that trick can only last so long at any given price.

Oil is very complex for sure.

TheSilverJournal's picture

It's called print, print, print.

SheepDog-One's picture

Theyre done printing, sorry to say. For those counting on vast further printing anyway.

Deadpool's picture

Really? they've made this mistake for 99 years and now they're done?? I doubt that.

SheepDog-One's picture

Youll make a big costly mistake doubting that and going with 'normalcy bias' at this point, I guarantee it.

tmosley's picture

Historically, what has stopped people from printing more, after they have come to rely on printed money to fund their government excess?

Claiming they will stop printing now is like claiming a heroin addict will stop cold turkey before hitting rock bottom.