Would someone well versed in the markets kindly explain the significance of these graphs?

[Tod]

http://www.zerohedge.com/news/2014-05-23/tick-tick-tick

There is no commentary on these graphs, and I don't grasp the significance. It looks as though the volume of trading is declining, but why is that significant? Does that imply the point at which people change from buying to selling?

 

[thoughtomator]

it means that the buying that ran prices up to the peak is petering out

 

[enoch150]

That's volatility, not volume. Falling volatility is sometimes associated with a rising market, so the chart is implying that, with volatility at a low, the market has to top. That might happen, but isn't a foregone conclusion. If the chart went back further, you would see rising volatility with a rising market from 1995 to 2000.

 

[HOLLYWOOD]

All the "Graphs" are converging


Graph: St. Louis Adjusted Monetary Base - FRED - St. Louis Fed

Velocity of M2 Money Stock - FRED - St. Louis Fed

 

[osan]

All the "Graphs" are converging

This first graph is outright scary.

Also, notice how the first perceivable bump begins almost precisely at 1945/46 as the cold war and the military industrial complex began their lives in earnest. It's been a steady race to the bottom ever since. That is has taken this long and THAT much debasement of the currency to bring this economy down even this far is testament to its staggering immensity. I do not believe it is humanly possible to wrap one's head quite around the wealth of this nation. That it is being drained away, that we are allowing to to be, is a shame so great as to qualify as one of the greatest crimes in all human history.

Graph: St. Louis Adjusted Monetary Base - FRED - St. Louis Fed

Velocity of M2 Money Stock - FRED - St. Louis Fed

The "ratio" is "Calculated as the ratio of quarterly nominal GDP to the quarterly average of M2 money stock." This seems to imply that our economy is, in the terms given, only about 87% of what it was in 1960, which in a system dependent upon GROWTH, this is truly worrisome. Don't forget, these are ratios and not absolute numbers, so in a very significant sense should account for inflation of all varieties.

I can only wonder, however, whether this chart is quite honest, because it plots a ratio of GDP/M2. Were it plotting the ratio of GDP/MB, the plot would almost certainly look vastly worse. There was a whole hell of a lot less unprinted money in 1960, whereas today it is the vast majority of the population. I coined "MT" to represent all money, period, mainly because I suspect that MB is a subset of that... though it may not be. Anyone? Assuming I am right, the ratio GDP/MT is likely to produce a graph that would have most people running to the store to buy long-shelf foods and ammunition. I am wondering whether that ratio might even be under unity, or at least sweatingly close to it.

If nothing else, this second graph tells us that our money and/or our economy has become alarmingly inefficient.

 

[Zippyjuan]

This first graph is outright scary.

Also, notice how the first perceivable bump begins almost precisely at 1945/46 as the cold war and the military industrial complex began their lives in earnest. It's been a steady race to the bottom ever since. That is has taken this long and THAT much debasement of the currency to bring this economy down even this far is testament to its staggering immensity. I do not believe it is humanly possible to wrap one's head quite around the wealth of this nation. That it is being drained away, that we are allowing to to be, is a shame so great as to qualify as one of the greatest crimes in all human history.




The "ratio" is "Calculated as the ratio of quarterly nominal GDP to the quarterly average of M2 money stock." This seems to imply that our economy is, in the terms given, only about 87% of what it was in 1960, which in a system dependent upon GROWTH, this is truly worrisome. Don't forget, these are ratios and not absolute numbers, so in a very significant sense should account for inflation of all varieties.

I can only wonder, however, whether this chart is quite honest, because it plots a ratio of GDP/M2. Were it plotting the ratio of GDP/MB, the plot would almost certainly look vastly worse. There was a whole hell of a lot less unprinted money in 1960, whereas today it is the vast majority of the population. I coined "MT" to represent all money, period, mainly because I suspect that MB is a subset of that... though it may not be. Anyone? Assuming I am right, the ratio GDP/MT is likely to produce a graph that would have most people running to the store to buy long-shelf foods and ammunition. I am wondering whether that ratio might even be under unity, or at least sweatingly close to it.

If nothing else, this second graph tells us that our money and/or our economy has become alarmingly inefficient.

Graph #1 shows banks increasing their reserves. Monetary base is the sum of cash money (paper notes and coins) plus bank reserves. Prior to the economic crisis, reserves were nearly zero. It is money the banks are not lending out. It is a measure of POTENTIAL money supply (money which could be getting used but isn't) but is not a measure of actual money supply and says nothing about "debasement". M2 is a measure of actual money supply.

If banks start loaning out more money (which means more people borrowing and spending it), then the Monetary Base will go down.

Velocity is how fast money changes hands. If I get a dollar, how long before I spend it. Higher velocity is typically associated with higher price inflation.

A GDP to Monetary Base ratio tells you absolutely nothing useful.

 

[Seraphim]

I would add that prior to 2001, volatility was higher even during bull markets largely because markets were still, more or less, allowed to run their course.

Now, especially since 2009, the markets are propped up and the Fed has outright stated it is supporting equity prices. Investors then load up on stocks (with very little desperate selling) because they **know** the Fed will support price points.

The same thing happend in the housing bubble. The Federal Government outright stated it would (and did) support housing starts and financing sub prime borrowers.

VOLATILITY drops because people PERCEIVE the direction will be one way, with very little resistance.

This leads to low volatility price run ups that just keep going up and up and up until the moment that the delusion (bubble) is popped...AND THEN ALL HELL BREAKS LOOSE.

The fundementals of this bubble are similar to the housing bubble. One way or another, Uncle Sam has said he will support prices. It will end in disaster.

That's volatility, not volume. Falling volatility is sometimes associated with a rising market, so the chart is implying that, with volatility at a low, the market has to top. That might happen, but isn't a foregone conclusion. If the chart went back further, you would see rising volatility with a rising market from 1995 to 2000.

 

[helmuth_hubener]

There is no commentary on these graphs, and I don't grasp the significance.

ZeroHedge got it from here:

http://www.investing.com/analysis/n...r;-spx-makes-new-all-time-closing-high-213965

You can read that page for more background.

In layman's terms: This is just two charts.

Top: Volatility. How fast and how much is the stock market fluctuating up or down.

Bottom: the S&P 500 index, an index of the 500 largest companies on the stock exchange. Shows, roughly, the performance of the stock market.

The actual meaning of the combination chart? None. No one knows what the future will hold.

The point the person is trying to make, based on what he circled? Volatility is low now, just as it was low prior to the 2007-8 crash. Thus, we're in for a crash soon. Any moment! Brace yourselves!

But actually? He has no idea. It's looking for meaning where there is none. You might as well look outside right now and try to find meaning in the cloud patterns.

 

[Seraphim]

Wrong.

Knowing precisely what will happen and when it will happen is not the same as having a good idea as to what will happen.

History rhymes. Ignoring the signs does no one any favors.

How many public statements did Peter Schiff make for about 3 years stating the housing market would crash?

He obviously knew something. This time is no different.

Just because I don't know the precise time and day the next crash will take hold, it doesn't mean the signs of the inevitable are not all around me.

If I see smoke coming from the top of Mount Vesuvius, I'm a fool for not vacating the area as I tell myself "I don't know the future! I don't know the future!"

Ya I've got a pretty damn good idea.

ZeroHedge got it from here:

http://www.investing.com/analysis/n...r;-spx-makes-new-all-time-closing-high-213965

You can read that page for more background.

In layman's terms: This is just two charts.

Top: Volatility. How fast and how much is the stock market fluctuating up or down.

Bottom: the S&P 500 index, an index of the 500 largest companies on the stock exchange. Shows, roughly, the performance of the stock market.

The actual meaning of the combination chart? None. No one knows what the future will hold.

The point the person is trying to make, based on what he circled? Volatility is low now, just as it was low prior to the 2007-8 crash. Thus, we're in for a crash soon. Any moment! Brace yourselves!

But actually? He has no idea. It's looking for meaning where there is none. You might as well look outside right now and try to find meaning in the cloud patterns.

 

[helmuth_hubener]

Wrong. ...

Ignoring the signs does no one any favors.

What is wrong? Apparently "ignoring the signs." But I am not "ignoring the signs." I contest the assertion that these charts show any signs at all. I contest that we have seen any "signs" whatsoever in this thread. I contest that there is any meaning or significance whatsoever in the charts posted by Tod, nor in any of the other charts posted on this thread.

If you think there is a meaning: explain it to me.

Explain to me Why. Why should there be a causal link between volatility and the S&P level? Why would low volatility mean that a crash is inevitable to come soon? Why would it even be more likely?

Why? Why? Why? Where's the hard causal link?

No, I'm sorry: there is none. This is just nonsensical superstition. If you can't explain it to me, explain the hard, rational link between volatility metrics and future stock trends, then it is nothing but superstition.

If I see smoke coming from the top of Mount Vesuvius, I'm a fool for not vacating the area as I tell myself "I don't know the future! I don't know the future!"

Can you explain to me the hard causal link between smoke coming from the top of a volcano and the volcano erupting?

You can?

Oh, well then maybe I might listen to what you have to say, be convinced by the rationality of the connection, and join with you in saying "We have good reason to believe that volcano could erupt soon".

So just do that same thing for "low Standardized Macro-Implied Vols" and "crashes in the S&P Index". Explain. Use Reason. Convince me.