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Which Way Now? As Bonds And Stocks Dislocate Again
The dislocation between 10Y Treasuries and the S&P 500 is once again becoming wide as bonds continued to press 'a sombre reality' and stocks 'a new hope' - whether this is QE-positioning is unclear but we wonder which way the correction will come this time with TSY snapping on March 30th - the last time we dislocated so far so fast.
Chart: Bloomberg
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Bonds never lie....
So...when they snapped back on the 31st of March, they were just takin' the piss?
Back in the day I would have agreed with you... but these days, the bond market is as fake as the stock market.
100% agree, it used to be the Bond Market knows all, but when you have the FED buying upto 70% of paper, and the PD's buying the rest, can you really trust the Bond Market.
Anyone buying 30yr paper with 3.0 -3.5% yeild really has to question the logic.
....And yet they continue to buy it.
Ah, you think they're buying it for the coupon? That's precious.
Trade bonds much? Check out the cap gain on todays's paper when the 30 yr goes to 2%.
Yes, I'm sure it's "different" this time.......
Oh so the biggets buyers of 30yr paper over the many decades, pension funds, other central banks, they trade the 30yr.
WOW you learn something new everyday
My psychiatrist told me to not watch financial markets. I'm relapsing.
'QE3 positioning'....LOL I dare them! I dont actually believe that for a second but hey go for it idiots, make it $4 trillion and make gas $7! I dont really care, you lunatics!
I agree. My commodities portfolio will love them for it. Go ahead, continue ZIRP (QE by any other name) and do some more outright monetization, I dare you.
Like David Rosenberg said yesterday QE3 would have to be larger than QE1 and QE2? So about a $3 or $4 trillion QE is what would be needed to effect equities and support markets at all now as Rosie says....hey go for it idiots I'd love to see you try!
And isnt it bizarro how here we are at only a few % from all time HIGHS, and everyones screaming for more QE mainlined into stocks and bonds? Clearly this is all a farce set to implode at any time.
I watch the S&P everyday, I can't believe it's above 1400 (near its 2008 highs) given U3 Unemployment @ 8.3%, China & Europe slowing, 45M Americans on foodstamp, gas above $4, end of tax cuts, and extended EI benefits in 2013, and no growth vector.
It's like watching a pump n dump chart for penny stocks, where everyone ignores fundamental. Like that dumbass analyst who says AAPL is going to $1000 (market cap of $1Triliion!! wtf).
Its all totaly insane, yet people keep presenting charts saying 'heres whats going on'...its all just BS so I cant take any of it seriously at all.
"... And isnt it bizarro how here we are at only a few % from all time HIGHS, and everyones screaming for more QE mainlined into stocks and bonds? Clearly this is all a farce .... "
+1 bump.
Like the drug addict that needs larger and larger doses to get high.
Whats next?
Human sacrifice; dogs and cats living together; mass hysteria; Sturmbannführer Pelosi in tights; Bernank failing Econ 100; Obama reading the Bill of Rights; Another cb money printing program with a new euphemistic name to replace QE; ... ?
How do you know that any new 'play money' (printed into existence via QEx), won't be used to "paper short" crude prices (at least for awhile)...
I mean... If the claim is that it is done all the time with silver & gold, why not crude?
Then... after the 'shelf life' of that game is played out (probably after a short half-life), they can whoosh in and say "Look ~ QE has no correlation to crude prices)...
What? Why would they do that? Chu and everyone in the media just loves $5 gas, and tells us we love it too!
Seems too obvious, we know what the short positions are, a spike in such crude futures would be a huge "tell". Also, as you point out, short-lived. Like the trim-tabs outlook, with everyone parked in various positions and volume near record lows, TBTP have the "stick" as it were.
Yea well 'TPTB' have printed their fake money trillions and pumped stocks and bonds and stuffed it all into PD bank vaults and now theyre crying on CNBC 'Where oh where is RETAIL??' all day....they may have the stick, but the wings have clearly fallen off.
My current theory (crazy or not), is that the S&P, in 2012, will top on or around the time Romney gets the last delegate in the GOP primaries to secure the nomination...
In 2008... North Carolina put Obama over the top, and the market basically started the largest part of it's slide at that point... I can't guarantee that that was the precise correlation (but the timing allows for the theory)...
My guess is that the "top" is going to be in the 1474-ish range (& that the 'correction', which will be completed by mid summer will extend roughly 20% ~ about the same as the 2010 one, which also started in May)...
With that out of the way, & with, basically 2 "monkey boys" in the bag for the elections... It will be business as usual...
You guys are discussing this like they possibly won't.
Possibly wont what? 'QE'? Hey its like my original post says, go ahead I dare you.
Yes sorry like they possibly won't print. I know where you stand so I am part sarcastic but it's beyond obvious by now and if people are really still on the fence they are insane.
I'll tell ya which way...up up and away
Hell, I'll go on record now. Bonds will rally to equities, at least until november. The inflation trade is a major problem for TPTB, at least for now. This, coupled with a full-court press to suppress PMs.
I disagree. Both will lose value. Bonds have been in a fear trade bubble for some time and ultimately will have to be written down. Stocks are a junior claimant on cash flow in the system and are trading at ridiculous valuations (despite what the financial media would like you to believe).
so, you are saying that interest rates will raise making it impossible for the U.S. to service the debt? I still maintain that the likes of PIMCO are simply "staged opposition" to the Fed. Bond prices will go up, fiat purchasing power, not so much. Overall from the standpoint of purchasing power both lose value. How's that?
I agree, the cartel cannot afford rising rates because it will suck liquidity out of the market. It's anti-QE in a sense. Of course, the Fed can print more to compensate, but they do not want to cause mass exodus from bonds.
I suspect the debt problem will bubble up from below, not from the top down. You will see rising consumer defaults and the continued inability to extend credit to worthy borrowers. Continued printing / QE further weakens the USD and domestic consumption. Taxes will disproportionately focus on the top 1% and CAPITAL GAINS because the perception is that we have a demand problem and the marginal propensity to consume of the wealthy is much lower. In short, when you look at the relative impact, stocks will get hit far harder. But, both will ultimately lose value.
Most here believe we will see unlimited printing and inflation. I suspect we will be headed for deflation (because of fundamental structural issues in perpetuating domestic consumption growth) and that US centric stocks will get crushed.
Yes, the true cost of creating capital without adding any real value, but timing is everything and in some cases outright collapse can take several lifetimes, so much so that when it occurs the younger generations do not recognize it as such (perhaps this is the plan).
When you can simply "add zeros", tell me, what "regulations" are in place to stop printing from occuring? Especially when the whole world is doing it?
Ultimately, CONSUMPTION is the balancing loop. 70% of our economy is driven by consumption. Wages WILL NOT increase because of global competitive pressures (I plan on contributing many articles on ZH starting in May and will expound more then), thus even NOMINAL consumption will falter as the wealthiest 10% cannot and will not make up for the loss of consumption elsewhere and city, state and federal taxes increase along with commodites because GLOBAL wages are increasing...
Thats nothing. Look at 5 year chart. Huge dislocation since April, 2010. stocks could fall 50% here or bonds could crumble. lets be conservative and say they'll meet somewhere in the middle: 10yr at 3% and spx near 900.
http://finance.yahoo.com/q/bc?s=%5ETNX&t=5y&l=on&z=l&q=l&c=%5EGSPC
ouch and ouch.
Would you like a Federal Reserve Band Aid for those ouchies?
You need a little lipstick on that porcelain...
That is funny.
Most are expecting QE#3, it seems a contrarian play should be put on... on the dip, lets say 10% - 15% (maybe more) then QE#3 will be announced & I think it will be much larger than all the projections because the QE programs are having deminishing returns...
Cramer to Cashin: "Where's retail?"
I think the street is honestly shocked the public is no longer the complacent, predictable sheep they have been in better days. People are better connected to those around them than at anytime in history - that's not a good thing for those that thrive on running the long con.
The realization that the trust is broken AND Ben can't keep all the balls in the air anymore is starting to hit home. The fear is just slowly starting to creep in.
Who will be th first out?
Where oh where is RETAIL! We figured we'd stage another stock market bubble and retail would again come in and buy all the fake money printing we've done and then we'd collapse the markets and win again....can it really be retail has figured out we're a bunch of scam artist and pirates? The horror....
Naw, retail just doesn't understand how being lied to and stolen from at every opportunity is good for them - if only someone could let them know...
Hey, Ben...why don't you teach a class? Go on the magical, mystery BS lecture tour!
I don't think the retail investment community is necessarily smarter, just that now they have less money. Most people I know will happily borrow money to buy a house, and will use credit cards for pretty much everything, EXCEPT to buy stocks. For some reason, stocks are only bought with (now non-existent) excess cash.
I dont know whether or not retail has figured anything out, but 1 thing is for sure retail is broke. This makes Wall St delusional if they actually believe retail is about to come in with trillions of dollars and relieve them of their Ponzi stock holdings.
And, stocks are sold and will continue to be sold to fund our existing lifestyles which are, at the end of the day, unsustainable...
Yes, dumb money is no longer there. It was burned during 2000 & 2008 crashes. Those who have cash are not that dumb to invest in this market.
Cramer is the biggest retail pump job player out there. He must be scared retail is not coming back because he primarily backs MOMO plays designed to screw retail.
The reality is that retail has figured out that as long as the dollar is the world's reserve currency, there is a limited downside to holding cash compared to the option value of being in cash (the dollar simply cannot and will not lose 25% of its value in a few short weeks as long as it is the basis of global commerce). So, retail is sitting on cash and can wait for all this to crash.
Wall Street thought is could go "all in" and compel retail to follow. It was wrong. There is ZERO trust of all of the big financial players.
They've also miscalculated in that retail investors are selling stocks to continue to fund existing lifestyles, which is why consumption has held up as well as it has, but why outflows continue... That is the piece of the puzzle that everyone seems to be missing. Those without enough cash are selling stocks. The beautiful irony is that it will be WS institutions holding the bag when everything craters because retail investors still have some good old fashioned horse sense...
I'm getting creamed on my Macy's short, why is that stock making new highs?
This market is a total joke.
I gave up long ago with all their bullshit market stick saves, theyre trying to make sure no one would dare actually trade this market, yet are hoping retail comes back to buy the market off their hands. Theyve ruined the markets its game over.
I think they got a bail-out after the 2008 crisis. Too connected to fail.
They're getting great deals from their suppliers and the top %80 or so are still buying new clothes......
i think we have a good wolfe wave target in 30 min chart pointing to that 1390 area
Will the ECB become the EU's "Bad Bank"?
I thought it was the fed's 3 day buying program pumping up the bonds.. It ends wednesday right? All the Bond ETF's had a divy monday aswell.. The 10 year took a pretty big dump at these levels friday, so lets see what happens now.
waiting foe the fed to reaffirm the 2014 low rates and mention no qe details.
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