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Chart Of The Day: The Real, The Fake And The Soon To Be Ugly

Tyler Durden's picture


The chart below is the perfect summary of the dilemma facing traders and investors: that primary marginal risk setter, the EURUSD (recall the all time record correlation between the 250x levered EURUSD and the ES), is trading inbetween the Italian-Bund spread, which following the massive ECB intervention in the past two days, is largely "fake" and thus irrelevant for price discovery purposes, and the French-Bund spread which is ineligible for ECB intervention as noted yesterday, and hence presents the real risk perspective in Europe. Naturally, with optimism and a bullish bias (bonds are closed today so momos and robots are in charge) ruling the day, the EURUSD is well bid toward the "fake" side of the spectrum. However, unless the key question at the heart of the European dilemma, the math of the Italian bailout is answered, expect the French spreads to continue slipping ever wider, and the EURUSD to eventually catch up once this latest bout of optimism expires. That is, unless of course, Sarko tips his hand and demands an ECB bailout, an action which will unleash the endgame as vigilantes put France in rearview mirror and head, from every possible direction, right for Frankfurt and the German spread (with itself) directly.

Chart via Bloomberg, h/t David


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Fri, 11/11/2011 - 09:01 | 1869401 AngryGerman
AngryGerman's picture

German spread with itself. like to see that. like merckel blowing her own cock.

Fri, 11/11/2011 - 09:04 | 1869404 KxAlpha
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Eww, you almost made me eat my lunch twice... oh, the picture will stay for a long time

Fri, 11/11/2011 - 10:25 | 1869575 Harlequin001
Harlequin001's picture

Just think of RobotTrader, I think that's how he picks his stocks...

Fri, 11/11/2011 - 09:50 | 1869476 Taint Boil
Taint Boil's picture

Kind of like peanut butter – spreads for bread?

Fri, 11/11/2011 - 09:03 | 1869403 wang (not verified)
wang's picture

First we take Paris, then we take Berlin

Fri, 11/11/2011 - 09:11 | 1869417 Joeprimo55
Joeprimo55's picture

 "Zee cabbage does not run away from zee corn-beef."

-Pepe Le Pew

Fri, 11/11/2011 - 09:05 | 1869407 GeneMarchbanks
GeneMarchbanks's picture


Ugly it is.

Fri, 11/11/2011 - 09:05 | 1869409 Tense INDIAN
Tense INDIAN's picture

INVESTORS.....whats that ....there are no investors here...we are all SPECULATORS now...

Fri, 11/11/2011 - 09:17 | 1869432 topcallingtroll
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I wish people would learn the generally accepted distinction between investing and speculating.

There are quite a few people here who are speculating when they think they are investing.

Fri, 11/11/2011 - 09:53 | 1869488 Harlequin001
Harlequin001's picture

Buy gold; no speculation there, it's a dead cert...

Fri, 11/11/2011 - 10:12 | 1869539 Harlequin001
Harlequin001's picture

Ah, that'll be my little puppy dog following me around again with the red arrows.

It must really piss you off having just the one vote...

Fri, 11/11/2011 - 09:25 | 1869440 achmachat
achmachat's picture

I am in all honesty invested in precious metals. I do not regard myself as a speculator as the whole lot is stashed away for a very long timeline and is not used for trading in this market.

Fri, 11/11/2011 - 09:54 | 1869489 Harlequin001
Harlequin001's picture

Just need to take care of the taxes then now, eh...

Fri, 11/11/2011 - 10:22 | 1869565 achmachat
achmachat's picture

I don't know how it is where you live, but over here there is no tax on gold. zip. nada. And there's just 7% tax on silver.

There is no record anywhere about who owns precious metals here.

I pay taxes on my income and on my real estate. Nobody cares about how I've spent my money after paying my income tax. Spending it on fuel, expensive restaurants and fancy escort girls is the same, on the books, as spending it on gold and putting it away.

I hope I understood your question about taxes correctly and was able to give you a satisfying answer.

Fri, 11/11/2011 - 10:31 | 1869590 Harlequin001
Harlequin001's picture

Not really but you get my drift.

I too own physical pms but I am only too aware that when all these defaults occur, the govt will need to raise income and gold will be the primary target principally because it will be one of the few things making any gains, except food that is. A wealth tax is coming, from which you pay every year. Might be worth considering, that's all...

Fri, 11/11/2011 - 10:34 | 1869602 Odin
Odin's picture

Im calling a severe drop in Gold in the short term... Let's not forget that the sheeple will run into the US dollar when Europe finally shits the bed....It's great as a long play though...

Fri, 11/11/2011 - 10:52 | 1869641 Harlequin001
Harlequin001's picture


Fri, 11/11/2011 - 09:50 | 1869475 SheepDog-One
SheepDog-One's picture

Just rollin the dice, bettin on black....but 'investing'? Dont make me laugh. Its not an investment to put up your money based upon the idea someone else will print more and match it for you, thats actually insanity.

Fri, 11/11/2011 - 10:01 | 1869491 Harlequin001
Harlequin001's picture

In an environment where everything from the CB down is holding something the value of which is dependent on inaccurately valued bank assets, anyone who thinks they are 'investing' is simply fucking deluded.

In an environment where everything from the CB down is bought and traded through electronic means through which the bank itself knows where all its clients stop losses are set, (and therefore just waits to be taken out at the banks convenience); anyone who thinks they are 'investing' is just someone else's mug. Literally.

just buy gold, it's the only way to be certain...

Fri, 11/11/2011 - 09:09 | 1869414 Silverhog
Silverhog's picture

Musical chairs with the volume so low it's hard to hear when the music stops.

Fri, 11/11/2011 - 09:11 | 1869418 youngman
youngman's picture

I think the the run to German bonds will be a bad bet as Germany will collapse ..they are an exporter and if no on can buy your crap anymore...the golden goose is I assume they will run elsewhere...US treasuries..I hope not but most will....PM´s..I hope so ...the faster that becomes the world currency ..the faster we get out of this mess...

Fri, 11/11/2011 - 10:14 | 1869518 Harlequin001
Harlequin001's picture

Ultimately pm's are the only place to go... but not yet.

When you consider how much money is held on deposit either at the bank or by the bank at the ECB/ Fed, that sum constitutes the minimum available inflationary pressure. When that money moves to product/ commodities you will see inflation like never before entirely irrelevant of the collapse in credit assets. It will be very fast, and with every passing day more inevitable. If you aren't holding gold and silver then, you won't be...

Fri, 11/11/2011 - 09:12 | 1869420 HelluvaEngineer
HelluvaEngineer's picture

If I recall correctly, the last time the bond markets were closed ES took off like a rocket.  All those hot Benny Bucks gotta go somewhere.

Fri, 11/11/2011 - 09:20 | 1869423 topcallingtroll
topcallingtroll's picture

I remember bond vigilantes from my youth.

My guaranteed student loans were at nine percent. CD's at 15 percent.

Fuckin pussy Italians cant handle 7%?

Fri, 11/11/2011 - 10:07 | 1869522 Harlequin001
Harlequin001's picture

I bet yanks can't handle 5%...

Fri, 11/11/2011 - 09:12 | 1869424 disabledvet
Fri, 11/11/2011 - 09:15 | 1869429 G-R-U-N-T
Fri, 11/11/2011 - 09:58 | 1869493 SheepDog-One
SheepDog-One's picture

Right, most feared worst case scenario is here 'death of the Euro'...but thats OK hey I know lets jack futures up triple digits. 

Fri, 11/11/2011 - 11:54 | 1869859 Mark123
Mark123's picture

The people who provide real liquidity to the markets are all thinking the same thing....the markets are controlled.  Some believe that this is wrong and damages the real economy (like myself), the others believe that it is good and provides stability (MSNBC et al).  I know of very few people that still believe the financial markets are an efficient tool that allows for real price discovery.

In other words, this market is effectively dead and all that is left are people trying to position themselves to profit at the expense of others.  I am still playing in the cesspool but not in a big way, trying to outsmart the crowd that is still being conned....some days it is dismal.

Fri, 11/11/2011 - 09:19 | 1869435 Setarcos
Setarcos's picture

Well we are fucked, though I like to imagine how it might have been:

Fri, 11/11/2011 - 09:20 | 1869436 ziggy59
ziggy59's picture

Should have the music to go along.. Good bad ugly..

Fri, 11/11/2011 - 09:23 | 1869438 bankonzhongguo
bankonzhongguo's picture

The spreads are irrelevant. In fact the bigger and more "chaotic" the better.

When the printing presses, backed by the future labor of the masses, are there to cover any misses or downside, then heck you are better off with more risk.

Hard to collapse any of these markets that are buoyed by the 'invisible 'black" hand.'

I like how the "financial news" keeps reporting that various market players, read MF Global, made "bad bets" in describing their failed operations.

Bets.  Its pure gambling.

Except in this, they can ALWAYS retire to the ATM machine to recharge their wallet on their way back from the john.

We are going to use the guts of these banksters, lobbyists and the lawyers that keep them running to grease the treads of our tanks.

Today is Armistice Day.

Fri, 11/11/2011 - 09:25 | 1869439 fonzanoon
fonzanoon's picture

Let me get this straight. The federal reserve prints endless money and puchases our own bonds to prop up our phony economy and the market does not call bullshit on it. By most measurable standards our inflation is no worse than anyone else's and our borrowing costs are minimal. The ECB is fighting tooth and nail to keep from printing money. Europe has higher levels of inflation (I think) and their countries bond yields are getting blown out day after day. I will never ever understand this.

Fri, 11/11/2011 - 10:01 | 1869503 Chump
Chump's picture

"Yours is not to question why..."

Fri, 11/11/2011 - 10:01 | 1869505 disabledvet
disabledvet's picture

"don't phuck with toon town."

Fri, 11/11/2011 - 10:02 | 1869508 supermaxedout
supermaxedout's picture

Its easy to understand its all rigged and orchestrated.

Fri, 11/11/2011 - 10:12 | 1869538 catch edge ghost
catch edge ghost's picture

If (when) a supranational fiat replaces the $US as reserve currency, you'll see a more equitable treatment of US paper compared with Europe or anywhere else. 

I have a feeling Americans aren't going to like that so much.

Fri, 11/11/2011 - 10:21 | 1869561 BoNeSxxx
BoNeSxxx's picture

A lot has been written on ZH lately (some credible, some just incredible) about the petrodollar.  In this case, it is THE answer to your question.  At least the #1 answer.

As long as OPEC's oil is traded in US Dollars, the US has a much greater capacity to print (guaranteed demand).  The Euro, not so much -- they actually need to be careful with their supply.

Pull the petrodollar trade and that's when the music stops for the USD.

Fri, 11/11/2011 - 10:38 | 1869611 Odin
Odin's picture

What's there to understand? It's a giant, unorganized circus, where the performers are constantly juggling balls of shit, and calling it progress...

Fri, 11/11/2011 - 09:33 | 1869452 reload
reload's picture

Strap yourselves in folks - a Friday chop session lies ahead.

With regard to the article, it has been clear so far today in Europe that the main index futures are not quite so sensitive to the Euro/$ pair.

FTSE testing horizontal resistance (as is the Euro) again.

A false break to the upside is on the cards - purely because that will cause the most pain to day traders.

Fri, 11/11/2011 - 09:38 | 1869460 Dr. Engali
Dr. Engali's picture

What ever happened to the days when people would take risk off going into the weekedend? I fail to understand the adding of risk over the weekend. Unless it's just shorts afraid they will get caught up in some big announcement.

Fri, 11/11/2011 - 12:00 | 1869874 Mark123
Mark123's picture

The market is being moved by the primary dealers using free loaned money from the Fed.  These moves before the weekend are to provide confidence to the market and to create a cushion for losses on the days that reality rears its ugly head.

Fri, 11/11/2011 - 09:40 | 1869465 monopoly
monopoly's picture

Yup, the inmates are alone today, no supervison so they can play the game any way they want to. I don't trade the market, so I don't care.

Like what I got. 

Interesting article: I rarely pay attention to MSM but this is in line with our thoughts here:

Gold's safe harbor offers new means of escape 

Fri, 11/11/2011 - 09:41 | 1869466 pmcgoohan
pmcgoohan's picture

I can see that the French bond yields are spiking up beautifully, but the long term chart (say 5yr) looks very different to Italy.

For example the French yields were higher than now in 2007 at the height of senseless global exuberance.

That compares to Italy which had half the yield in 2007.


What am I missing here- can someone explain why French yields still seem low long term? Is it outflows from riskier sovereigns into a (very) relative safe haven or what?

Fri, 11/11/2011 - 10:05 | 1869519 reload
reload's picture

The effect of ZIRP -its all about relativity now - or spreads.

Fri, 11/11/2011 - 10:18 | 1869554 pmcgoohan
pmcgoohan's picture

Excuse my ignorance, but can you explain this a little more?

I can see ZIRP keeping US/UK bond yields low, but why the French?

Fri, 11/11/2011 - 09:42 | 1869467 pantheo
pantheo's picture

Apart from Italy, Austria and France put Spain in the map again...

Fri, 11/11/2011 - 09:44 | 1869468 chrisina
chrisina's picture

You keep repeating this wrong info that french Govt bonds are ineligible for ECB intervention, that's not what the ECB's internal guidelines state :




Article 1 

Under the terms of this Decision, Eurosystem central banks may purchase the following: (a) on the secondary market, eligible marketable debt instruments issued by the central governments or public entities of the Member States whose currency is the euro;



Article 2 


Marketable debt instruments shall be eligible for outright purchase under the programme if they are all of the following: (a) denominated in euro; and (b) either: (i) issued by central governments or public entities of the Member States whose currency is the euro;



Clearly, French Govt bonds are as eligible as any other Eurozone Govt bonds under the SMP!


Fri, 11/11/2011 - 09:45 | 1869470 fonzanoon
fonzanoon's picture

Does anyone on here actually believe that anyone really follows any guidelines anymore? Hello? tap this thing on?

Fri, 11/11/2011 - 10:31 | 1869591 chrisina
chrisina's picture

ZH has published three articles in the last 24 h repeating that French Govt bonds are ineligible to ECB intervention so that info must be comming from  somewhere, where? The ECB's internal guidelines clearly state that French Govt bonds are eligible, so where is the guideline saying that it's not?


Whether they follow guidelines is another matter...

Fri, 11/11/2011 - 09:51 | 1869478 Undecided
Undecided's picture

Got to say yesterdays Keiser's report was right on the Money.  Jim Rickards knows his shit, and the upcomming currency war is going to be ugly.


Fri, 11/11/2011 - 09:55 | 1869483 SheepDog-One
SheepDog-One's picture

So! I see futures up almost +1% of course, so 'All is well' for today, again...just as long as disbelief remains suspended long enough for the markets to close without crumbling to a million pieces like the Wizards glass castle in Conan the Barbarian.

Fri, 11/11/2011 - 09:58 | 1869494 Dr. Engali
Dr. Engali's picture

Didn't we recently hve a firm go under that stole a bunch of clients money? I vaguely remember something like that. I'm shocked we don't hear about it. Obviously markets don't care. Party on.

Fri, 11/11/2011 - 09:52 | 1869484 zilverreiger
zilverreiger's picture

France was downgraded "mistakenly" briefly by S&P, why isnt ZH reporting this?,1518,797209,00.html

Fri, 11/11/2011 - 09:53 | 1869487 SheepDog-One
SheepDog-One's picture

They did, that was yesterday morning.

Fri, 11/11/2011 - 10:24 | 1869573 zilverreiger
zilverreiger's picture

ok thanks for clearing it up, I didnt scroll back far enough, so much bad news happening..

Fri, 11/11/2011 - 10:00 | 1869496 Dr. Engali
Dr. Engali's picture

ZeroHedge-; read tomorrow's news today. You can't afford to miss a day.

Fri, 11/11/2011 - 10:11 | 1869531 Harlequin001
Harlequin001's picture

If you own physical gold you can miss whole weeks and it just doesn't matter...

But it's good to keep informed isn't it.

Fri, 11/11/2011 - 10:00 | 1869499 supermaxedout
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Sarko gets instructions from Washington to  tip his hand and demands an ECB bailout, an action which will unleash the endgame 

That would be the correct phrase.

Now the CIA agent Sarkozy is making his second and final strike. Lybia was number I. And now its the Euro number II. 

We will all see very soon. One thing is clear it has to happen soon. Because Sarkozy will not be president of France within a few months time anymore.  But who knows. Prior to the elections in April 2012 he still can call for martial law  in France to stay in power for a while. I would not be surprised. For sure one can find a reason, such as in order to prevent the destabilization of France , bla, bla, bla. 

Unusual times require unusual measures, so martial law in France no problem . It is only necessary to heat-up the crisis more and more to freighten the people. Then they are happy to have such an energetic and patriotic leader like Srakozy.

Fri, 11/11/2011 - 10:20 | 1869558 DoctoRx
DoctoRx's picture



So you are saying that when the bonds are open, the momos and bots are not in charge?  Really?

Fri, 11/11/2011 - 10:27 | 1869580 glepo
glepo's picture

The issue is that Monti needs support of both Berlusconi party and their main opposition the Democratic Party.
However, given that they have no choice might be able to agree on something for a little while. The most encouraging issue is that Italy is a wealthy country with low private debt. 600bn euro of public debt needs refi in next 3 yrs. Half of this is from abroad (Italians will stick with it) so if 150bn/3 ie 50bn per year of the need from abroad will be absorbed internally a positive feedback loop can be started. Italian net private sector assets are about 300% of GDP (plus italian many abroad estimated $1tr. (just do like US gov.) plus government assets @ about 100% of GDP) so wih a small wealth tax and property tax paid in government bonds it can be done. All this works if government is committed to long term reforms and gains international credibility so ECB continues to supports secondary market. It will be done since Italy primary surplus/GDP in 2012 is 3.5% but with a non linear function vs. interest rates can get out of control quickly (need to be closer to 5% then 7%) causing Italy exit from Euro with collapse of French, UK, German and US banks. Germans can now focus on why their very cyclical economy is doing so well now ie China. Then focus on Chinese anti competitive practices: IPR, labour laws, currency, subsidies, property sector, overcapacity etc. Uber alles!

Fri, 11/11/2011 - 10:28 | 1869582 Shizzmoney
Shizzmoney's picture

Lakshman Achuthan of ECRI came out on CNBC and basically said the recession is coming, nothing to stop it, and that the GDP indicators are the biggest factors because in the last 100+ years, ALL recessions+depressions have started with a positive spike in GDP growth 1-2 quarters BEFORE the crash hits.

The CNBC guys trying to shoot him down with the "infallible" market is full on unintentional comedy:

Fri, 11/11/2011 - 10:47 | 1869629 Belarus
Belarus's picture

Ah....Zero Hedge wrong again: The Italian bonds are declining in yield; which will only give the momo bond buyers confidence, which is a postive feedback loop for French bonds. 

Forget about Europe. At this point stocks will only go up because of it. The real issues are in the USA, which is basically all signs pointing to monetary inflation with M1 going parabolic. Anyone betting with ZH of a stock rout at this point should have there headz checked. 

What I do agree on though: Got Gold? 

Fri, 11/11/2011 - 12:32 | 1870016 Mark123
Mark123's picture

ECB is doing short term buying of PIIGS debt to build confidence.  They have no mandate (yet) to go hog wild....but if and when they do THEN we get real monetary inflation. 
