If you find your head bobbing up-and-down, up-and-down as you listen to some lackey on CNBC mumbling about markets de-coupling, bemoaning about how they "quote" -- breakdown, then it's time for you to do some pushups. It is the pseudo-intellectualism du jour to pontificate about these matters. In reality, markets are not de-coupling. Yes, sometimes they behave oddly, but it is mostly the introduction of an unknown lag at play, and not a pure decoupling. Decoupling marks a regime change, where previously defined relationships are no longer valid for structural reasons.
Last week, we beheld a week-long confusion campaign between the Euro/Dollar and the SPX. They are supposed to move together with a Person's correlation near 1.0, but as we saw last week, this was oddly not the case. If your Excel spreadsheet is beginning to smoke, do not worry. It's time you threw that thing out anyway. The time has passed for central bank manipulations and the "quote" -- coupling -- is back on. As I see it, the Euro has some catching up to do so I will be little-surprised with an SPX rally without Euro participation.
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