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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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Thu, 11/10/2011 - 14:43 | 1866898 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Or you can buy physical gold. 

Gold is monie, fiat is not.

Thu, 11/10/2011 - 14:52 | 1866950 101 years and c...
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.

 

Thu, 11/10/2011 - 14:59 | 1866981 Deadpool
Deadpool's picture

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

Thu, 11/10/2011 - 15:45 | 1867228 eisley79
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.

Thu, 11/10/2011 - 18:54 | 1868082 kito
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......

Thu, 11/10/2011 - 15:15 | 1867046 Mr Lennon Hendrix
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.

Thu, 11/10/2011 - 17:13 | 1867640 IrritableBowels
IrritableBowels's picture

M-O-N-E-Y

Thu, 11/10/2011 - 15:16 | 1867073 Honey Badger
Honey Badger's picture

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

Thu, 11/10/2011 - 15:21 | 1867109 Mad Cow
Mad Cow's picture

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

Thu, 11/10/2011 - 15:38 | 1867188 SheepDog-One
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?

Thu, 11/10/2011 - 15:51 | 1867260 Deadpool
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.

Thu, 11/10/2011 - 15:41 | 1867204 tmosley
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.

Thu, 11/10/2011 - 14:42 | 1866899 Gubbmint Cheese
Gubbmint Cheese's picture

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

 

Thu, 11/10/2011 - 14:48 | 1866933 slaughterer
slaughterer's picture

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

Thu, 11/10/2011 - 14:49 | 1866939 kito
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.................

Thu, 11/10/2011 - 14:54 | 1866958 SheepDog-One
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. 

Thu, 11/10/2011 - 14:57 | 1866975 Kreditanstalt
Kreditanstalt's picture

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

Thu, 11/10/2011 - 15:00 | 1866985 Deadpool
Deadpool's picture

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

Thu, 11/10/2011 - 15:14 | 1867064 kito
kito's picture

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

Thu, 11/10/2011 - 15:29 | 1867145 Deadpool
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!

Thu, 11/10/2011 - 15:52 | 1867264 Honey Badger
Honey Badger's picture

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

Thu, 11/10/2011 - 16:16 | 1867356 Deadpool
Deadpool's picture

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

Thu, 11/10/2011 - 15:42 | 1867212 tmosley
tmosley's picture

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

Noted.

Thu, 11/10/2011 - 15:35 | 1867178 SheepDog-One
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.

Thu, 11/10/2011 - 15:57 | 1867289 reload
reload's picture

SD--I agree with a lot that you post on here, but what on earth makes you think the printing is done?

Thu, 11/10/2011 - 18:56 | 1868089 kito
kito's picture

BECAUSE BEN KNOWS IT DOESNT WORK AND THE FED IS THE VILLIAN IN REPUBLICAN PRESIDENTIAL DEBATES AND ITS AN ELECTION YEAR!!!!!!!!!!!!

Thu, 11/10/2011 - 15:42 | 1867208 tmosley
tmosley's picture

Food, maybe energy.

Thu, 11/10/2011 - 15:20 | 1867095 Saro
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.

Thu, 11/10/2011 - 15:42 | 1867209 NotApplicable
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.

Thu, 11/10/2011 - 14:54 | 1866959 magpie
magpie's picture

.

Thu, 11/10/2011 - 14:55 | 1866960 magpie
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.

Thu, 11/10/2011 - 15:11 | 1867044 kito
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. 

Thu, 11/10/2011 - 15:19 | 1867089 magpie
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.

Thu, 11/10/2011 - 15:31 | 1867153 kito
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.

Thu, 11/10/2011 - 15:41 | 1867197 magpie
magpie's picture

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

Thu, 11/10/2011 - 15:58 | 1867292 kito
kito's picture

how is jettisoning the laggards keeping the project alive?

Thu, 11/10/2011 - 14:42 | 1866901 Deadpool
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?

Thu, 11/10/2011 - 15:46 | 1867240 fuu
fuu's picture

<golf clap>

Thu, 11/10/2011 - 14:42 | 1866902 Bazooka
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.

ALL THE SAME MARKET

Thu, 11/10/2011 - 14:48 | 1866936 Kreditanstalt
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.

Thu, 11/10/2011 - 15:04 | 1866998 PumpnPump
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.

Thu, 11/10/2011 - 15:07 | 1867025 Kreditanstalt
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...

Thu, 11/10/2011 - 15:01 | 1866988 Deadpool
Deadpool's picture

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

Thu, 11/10/2011 - 15:44 | 1867223 tmosley
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.

Thu, 11/10/2011 - 14:43 | 1866903 GeneMarchbanks
GeneMarchbanks's picture

Does WTI make sense?

Thu, 11/10/2011 - 14:49 | 1866937 Mr Lennon Hendrix
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.

Thu, 11/10/2011 - 14:52 | 1866947 TheSilverJournal
TheSilverJournal's picture

It's called print, print, print.

Thu, 11/10/2011 - 14:55 | 1866964 SheepDog-One
SheepDog-One's picture

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

Thu, 11/10/2011 - 15:02 | 1866996 Deadpool
Deadpool's picture

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

Thu, 11/10/2011 - 15:15 | 1867047 TheSilverJournal
TheSilverJournal's picture

.

Thu, 11/10/2011 - 15:32 | 1867159 SheepDog-One
SheepDog-One's picture

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

Thu, 11/10/2011 - 15:46 | 1867241 tmosley
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.

Thu, 11/10/2011 - 15:58 | 1867293 TheSilverJournal
TheSilverJournal's picture

You have the normalcy bias. You think things are going to get better so they won't have to print and probably think that hyperinflation is not even a possibility because we're the US. The problem is that mispricing money (0% rates + QE) is causing so many malinvestments that the economy is no longer able to keep up. The choices are to either allow the malinvestments to become exposed and allow depositors to lose their money, or to keep printing. And more printing means even cheaper money which means even greater malinvestments which means even more printing must occur to keep the malinvestments from becoming exposed. Get it? 

Fact: they're printing right now by definition of ZIRP. If rates would be allowed to float, the banks go bust and you won't be able to take money out of your bank account.

Fact: Europe is going to kick the printing presses into high gear in order to keep Italy from going bust. If Italy goes bust, you won't be able to take money out of your bank account.

All signs point to print

Thu, 11/10/2011 - 16:19 | 1867367 Deadpool
Deadpool's picture

sarc alert:

don't worry, the Christmas Tree tax will cure the economy.

Thu, 11/10/2011 - 15:20 | 1867077 TheSilverJournal
TheSilverJournal's picture

They're printing right now. How do you think they keep rates at 0%? They don't just wave a wand..the Fed must print in order to hold rates lower.

Thu, 11/10/2011 - 15:07 | 1866910 blu
blu's picture

Some day soon "traders" will be the guys who roll into town on wagons twice a year, buying and selling goods as they go, and bringing news of far away places. The excited children will run along side the large wagons begging for candy.

Admit it, you are all totally ready for that.

Wait for it. It will find you.

Thu, 11/10/2011 - 15:24 | 1867124 Dr. Engali
Dr. Engali's picture

More like this:

 

http://youtu.be/grbSQ6O6kbs

Thu, 11/10/2011 - 14:44 | 1866912 bnbdnb
bnbdnb's picture

The last hour or so EUR has stayed up down between 1.3616 and 1.3631. Weird.

Thu, 11/10/2011 - 14:45 | 1866917 Kreditanstalt
Kreditanstalt's picture

These "investors" are our leaders!  Follow them over the cliff.

 

Thu, 11/10/2011 - 14:45 | 1866921 Motorhead
Motorhead's picture

OT - Bloomberg TV may not have the flash & glitz of CNBS, but their chicks are hot.

 

Thu, 11/10/2011 - 14:45 | 1866922 Irish66
Irish66's picture

I'm going with a flat close

Thu, 11/10/2011 - 14:46 | 1866924 mfoste1
mfoste1's picture

strong correlations=strong trend forming.....

Thu, 11/10/2011 - 14:47 | 1866929 AmazingLarry
AmazingLarry's picture

Short oil, long Benny bucks.

Thu, 11/10/2011 - 14:47 | 1866930 The Deleuzian
The Deleuzian's picture

One eqaution...One machine...One order!

Thu, 11/10/2011 - 14:49 | 1866941 monopoly
monopoly's picture

These markets are so broken. Glad I stopped trading them long ago. Only Cramer knows what he is doing every day in this 3 ring circus, what a loser he is and what a clown. Oh oh, I just insulted clowns, so sorry.

Thu, 11/10/2011 - 14:50 | 1866944 High Plains Drifter
High Plains Drifter's picture

on a side note. i cannot imagine how much money this situation at penn state is going to cost the school . the sharks are circling for sure on this deal. the school is cuplable and paterno knew what was going on and had for a long time, by his own admission. what were they thinking? that nobody would find out?  this sick sob  sandusky, should be sent to prison for the rest of his life for doing this shit and it was correct to fire joe paterno......and the president of the school.  this bullshit will cost that school some major cash , no doubt in my mind. if that happened to me, i would get the best gun slinger i could and go after them for all i could get...........

Thu, 11/10/2011 - 14:56 | 1866969 SheepDog-One
SheepDog-One's picture

They all think theyre untouchable and no one will ever find out.

Thu, 11/10/2011 - 15:06 | 1867016 Dr. Engali
Dr. Engali's picture

It's all part of a failing once great country. People loose faith in the people and institutions that they once thought were great only to find out it was all an illusion.  Look at the disappointments in the last few years. I'm not listing in order of importance just what pops in my head. 1)Tiger Woods -Phoney- I loved that guy. 2)The SEC- frauds nobody has been carted off to jail for the crimes committed. 3)The free  market- We found out that's not so "free" A lot of institutions should have failed. 4) Government-and their response to  Katrina-the illegal wars -the bail outs 5) The Catholic church and the sex abuse scandle. Now this . It's just another institution or ideal that people are losing faith in. As these institutions crumble so does our society.

Thu, 11/10/2011 - 15:27 | 1867133 blu
blu's picture

All too true.

I would only add that it is generally a mistake to have faith in "institutions". Abstractions like that are good places for bad people to hide. Sociopaths are excellent liars but are easily uncovered when they operate alone. They work best in the fold among trusting victims, lying and fawning and playing pretty games against undeserved trust.

Governments, corporations and religious organizations are all crawling with the worst kind of living garbage ever produced by our species. Specifically because that is their fertile hunting ground.

We have faith in these institutions. I don't know why. We do so only at our immediate peril.

Thu, 11/10/2011 - 15:45 | 1867230 NotApplicable
NotApplicable's picture

Amen.

Thu, 11/10/2011 - 14:51 | 1866946 slaughterer
slaughterer's picture

"Not sure it is quite the right time, but long HY17 and short HYG may make sense again."  Keep it simple: TBT time.

Thu, 11/10/2011 - 14:56 | 1866962 slewie the pi-rat
slewie the pi-rat's picture

this too shall pass

we may not be around to trade it, tho...

this is tres good: Talking With Matt Taibbi » Counterpunch

this is ridiculous!  Fukushima Mama by Radio Free Earth - YouTube

 

Thu, 11/10/2011 - 15:00 | 1866982 The Deleuzian
The Deleuzian's picture

Jesus H Slewie!  Where did you find that!!!

Thu, 11/10/2011 - 15:29 | 1867144 jowenchrist
jowenchrist's picture

Good stuff Slewie - thanks for posting.

Thu, 11/10/2011 - 15:55 | 1867281 fuu
fuu's picture

Is that you on guitar?

Thu, 11/10/2011 - 14:57 | 1866970 slaughterer
slaughterer's picture

I really want to short SPX 1310.  I would be 500% short there.  Can someone get us there?

Thu, 11/10/2011 - 14:57 | 1866974 defn8Dog
defn8Dog's picture

Europe based, global companies are repatriating their cash holdings in anticipation of a recession of unknown magnitude and more immediately, due to tightening in Euro bank paper.   

Thu, 11/10/2011 - 15:01 | 1866989 Alea Iactaest
Alea Iactaest's picture

SLV trading higher than JPM again... time for a smashdown

Thu, 11/10/2011 - 15:11 | 1867045 reggiehammond
reggiehammond's picture

LOOK AT THIS FUCKING VOLUME FOR SPY. 

 

 

 

 

Volume:

151,953,388 Avg Vol (3m): 296,629,000
Thu, 11/10/2011 - 15:14 | 1867065 Racer
Racer's picture

They are just churning it until the get their big fat bonerses

Thu, 11/10/2011 - 15:52 | 1867265 WhiteNight123129
WhiteNight123129's picture

Kito,

Deflation Japan style can not happen in the US, you have to factor:

1 Japan had favorable external context for Japanese exporter to generate cash flow and delever

2 Japanese gov was able to increase gov debt to plug the ouput gap

3 Japan is cohesive society (income gap is low, murder rate low, drop out school rate low, prison rate low)

and so during their 2 of decades of deflation unemployment was very low.

As for Germany their bank losses will push up debt to GDP dramatically. China is starting to finally pay for their fixed asset miracle and demand from periphery will be week, so unlike Japan external context sucks for Germany and exports will plumet with a strong Deutsche Mark. That will be horrible deflation period not a middle Japanese one.

So Germany will need a devaluation like US needed one in the 30s by using a different price of Gold, how do you devaluate if you do not want to have negative rates and money pumping?

You will have to use a peg of DM against Gold. Germany has some Gold so yes you could see first a very sharp drop in Gold when it looks like we are "Japan", but in the US the currency would implode with large deflation. As a student of Japan and Koo and having lived in Brasil you have to understand how scraping the bottom multiplier can start to kick in when the population is at the end of the rope, hyperinflation starts in environment which look deflationary. So the "appreciation" if you will of the DM could be smaller than in USD and could the result of devaluation as opposed to printing.

 

 

Thu, 11/10/2011 - 15:52 | 1867267 WhiteNight123129
WhiteNight123129's picture

Kito,

Deflation Japan style can not happen in the US, you have to factor:

1 Japan had favorable external context for Japanese exporter to generate cash flow and delever

2 Japanese gov was able to increase gov debt to plug the ouput gap

3 Japan is cohesive society (income gap is low, murder rate low, drop out school rate low, prison rate low)

and so during their 2 of decades of deflation unemployment was very low.

As for Germany their bank losses will push up debt to GDP dramatically. China is starting to finally pay for their fixed asset miracle and demand from periphery will be week, so unlike Japan external context sucks for Germany and exports will plumet with a strong Deutsche Mark. That will be horrible deflation period not a middle Japanese one.

So Germany will need a devaluation like US needed one in the 30s by using a different price of Gold, how do you devaluate if you do not want to have negative rates and money pumping?

You will have to use a peg of DM against Gold. Germany has some Gold so yes you could see first a very sharp drop in Gold when it looks like we are "Japan", but in the US the currency would implode with large deflation. As a student of Japan and Koo and having lived in Brasil you have to understand how scraping the bottom multiplier can start to kick in when the population is at the end of the rope, hyperinflation starts in environment which look deflationary. So the "appreciation" if you will of the DM could be smaller than in USD and could the result of devaluation as opposed to printing.

 

 

Fri, 11/11/2011 - 02:33 | 1869146 merchantratereview
merchantratereview's picture

Inflation? I think the worry is over deflation, with housing values down and 99% of new jobs to be found paying very LOW.

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