Liquidity is a funny thing, in general in our markets over the last 10 years or so pretty much every asset is the contagiously relative to liquidity pressures. If liquidity is being provided by central banks then we have seen all assets rise…when a margin call develops to the point of significant liquidity stress in one large asset or an asset class such as equities or commodities it starts to spread to all other classes and we tend to end up with the same result nearly all assets trade in the same direction at the same time with the exception of turning points. The chart of Gold below shows clearly how gold is primarily correlated to equities. Times when Gold has significantly uncorrelated from equities has been indicative of significant stress and usually precipitated significant market fluctuations.
Below is the same chart with proper percentage performance scaling…what we can see here is how much air lies beneath commodities and also how much QE went into them…Moreover, it appears that the most QE sensitive securities are now looking for deflation and an end to QE. It starts with a break of Trendline A in the below chart.
Of course, the number 1 biggest bubble blowers can not see a bubble when it hits them in the forehead…I am quite sure these guys have the same problem with not being aware of their own flatulence...
