Dominoes – Part 2 Cash is King – What Cash ?
This is a scary correlation chart.
Using Bloomberg data, 1 for most correlated and -1 for most -ve correlation, the 2 tables show how much correlations have grown in the past year as compared to a 2 year period prior in the past. I used Mar 2011- Feb 2012 vs Feb 2008 – Feb 2010 (to even out the global financial crisis and avoid QE1)
What has changed ? For one, the numbers on the top table have grown bigger either more positive or more negative, implying correlations are closer than ever. S&P and 10Y UST have grown more negatively correlated with the USD since the advent of QE and somehow, Gold has become much less correlated to the EUR/USD.
Where are we on the month ?
Looks like Silver leads the way, followed by her commodity siblings. And people in Japan have only coffee, nickel, orange juice and natural gas. And as for the equity rally, the volumes do not look that hot except for Russia, ,Oman and Saudi Arabia.
Frankly, I am not about to jump on any bandwagon right now even with a gun to my head.
Pimco is right for once ! DEFENSE !!!