vrijdag 19 oktober 2012

Stock - Cash - Bond Decoupling Has Started

As Marc Faber famously stated: "You can print money, but you can't control where the money will flow into." This is the most important line that investors need to keep in mind when we are talking about decoupling.

Since Ben Bernanke announced QE3 on September 13, 2012, we all know money is going to be created out of thin air. We just don't know where the money will flow into eventually, we can only observe.

As you may know, I started monitoring the correlation between stocks, bonds and cash since June 4th, 2012. Peter Schiff forecasted that once the decoupling started (meaning that stocks and cash drop at the same time), then the bond market would plunge. (Normally the U.S. dollar would strengthen when stock markets drop.)

Since a month now, the decoupling has started to emerge (Chart 0). As you can see the green, red and blue dots are all trending down since a month.

Chart 0: Decoupling between Stocks - Bonds - Cash

To see what this decoupling actually means for you, go here.

3 opmerkingen:

  1. Katchum, if all three are falling, where is the money supposed to be going?

    1. That's what I'm asking myself too. The gold price has moved up in the last 3 months. Foreign currency cash has moved up too. Hong Kong real estate has moved up significantly. Shanghai stock exchange and Shanghai property index has moved up the last three months. Stock market of Indonesia, Russia, Australia, Thailand, India have gone up recently and are continuing their trends.

      Looks like the money is flowing into Asia and the emerging markets.

    2. I really don't know if this decoupling will last though. People are fleeing in the U.S. dollar again.