Bullish side for equities in a default

I've heard a variety of stories about what is the take on securities if we default...... There is a strong correlation between the securities and commodity prices and bond prices...... The equation I use is..


S&P500 ~= Copper Price/ 20-year Bond price ( http://stockcharts.com/h-sc/ui?s=$COP...id=p52371445156 )

It has been said, that if we default the value of the dollar will go lower and bond yields will increase ==> cheaper dollar the higher price for $COPPER
==> lower bond prices....

With the correlation from above it should be noted that S&P should advance and not decline as mentioned by talking heads on TV...... For the experts on the board, what am I missing here?

Barry

maybe that the price of copper will decline as well? it is not just copper:dollar it is still a supply and demand market.

Bond prices will hardly drop much as long as the equities sell. I do not think the equities can compete with higher yields so they will sell and this will keep the bonds buoyant for now (low yields), so copper and stock prices should decline together... Nice formula.

I've heard a variety of stories about what is the take on securities if we default...... There is a strong correlation between the securities and commodity prices and bond prices...... The equation I use is..


S&P500 ~= Copper Price/ 20-year Bond price ( http://stockcharts.com/h-sc/ui?s=$COP...id=p52371445156 )

It has been said, that if we default the value of the dollar will go lower and bond yields will increase ==> cheaper dollar the higher price for $COPPER
==> lower bond prices....

With the correlation from above it should be noted that S&P should advance and not decline as mentioned by talking heads on TV...... For the experts on the board, what am I missing here?

Barry

Unless the world wants to go back to the stone age, the probability of a US default is less than zero. So is for europe apart its peripheral parts, economically talking, such as Greece or Portugal or Ireland that might be left to their destiny bailing out the banks that own their debts. A default of Spain is not probable, the probability of a default of italy.......is equal to zero. The more your economic weight is on the global scale, the less the possibility for you to default is. Because you would bring down with yourself half world in a domino effect. Hard times ahead, but not a revisitation of the stone age. Obviously the US theater will end when we get closer to the 2nd of august and they will declare a deal has been found by then. My one cent

Edited by andr99, 28 July 2011 - 12:10 PM.

Nobody will default but Eurozone will split. Give a couple of years. There is also some talk among the people that states will also split, but that will take 10 - 15 years, should the same conditions prevail.

There is also some talk among the people that states will also split, but that will take 10 - 15 years, should the same conditions prevail.

If that happens to us here..........I promise here and now to cross the channel from Calais to Dover, swimming


with regards to the talkings about the deal.............they're just negotiating, that's why they're taking all this time. The Republicans eventually will vote the raise of the deficit budget but will want to have something as a counterpart of their vote. The whole world works like this, the US are not different

Edited by andr99, 28 July 2011 - 12:39 PM.

There is also some talk among the people that states will also split, but that will take 10 - 15 years, should the same conditions prevail.

If that happens to us here..........I promise here and now to cross the channel from Calais to Dover, swimming


with regards to the talkings about the deal.............they're just negotiating, that's why they're taking all this time. The Republicans eventually will vote the raise of the deficit budget but will want to have something as a counterpart of their vote. The whole world works like this, the US are not different

I strongly believe (don't have proof) that backhand kick backs work for issues like this to Congressmen. The further they delay, the more they get.....you got the point?

If we default, the banking industry is essentially toast due to CDO obligations. This would essentially cause both equities and the dollar to crash.

If we default, the banking industry is essentially toast due to CDO obligations. This would essentially cause both equities and the dollar to crash.

The markets seemed again to be acknowledging that above the earlier news of the day starting around 11:30 today.

Fib