Let’s end the debate, POMO causation or correlation?

One of the most intensely debated topics is how much has POMO changed the price in the S&P500.  Below are a few charts. (h/t @ZH_CB)

 

 

Source: http://seekingalpha.com/article/234037-pomo-strategies-have-not-outperformed-the-s-p-500-so-far-in-2010

There are things wrong with the first two charts, mainly that charts record and never tell the complete story.  The last chart would make a strong case for correlation but I cannot confirm or deny the accuracy and the data is not complete.

I am not here to argue either way but as time passes I would like to declare a winner.  So lets agree on an amount of time and price action that would once and for all end the debate.  If it is in fact causation the market should be drifting down but when? For those in that camp lets determine when a good date for it to move down by is.  For those in the correlation group name your price.  Where is this market heading before there is a significant pull back?

These are just a few suggestions off the top of my head, if you can think of something better leave a comment.

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  • yo

    Money supply aggregates have shown that money supply did not drop that much from the 08 financial crisis and have grown from then on out.

    From a purely accounting standpoint that tells me that if trillions of money came out of real estate, and the money supply stayed steady, then fed efforts to keep the money supply stable caused litterally trillions to go into stocks and commodities.  Private debt out of real estate, public debt into stocks and commodities.  

    It was a bubble in real estate. Is this new debt a bubble in stocks and commodities?

One Response to Let’s end the debate, POMO causation or correlation?

  1. yo says:

    Money supply aggregates have shown that money supply did not drop that much from the 08 financial crisis and have grown from then on out.

    From a purely accounting standpoint that tells me that if trillions of money came out of real estate, and the money supply stayed steady, then fed efforts to keep the money supply stable caused litterally trillions to go into stocks and commodities.  Private debt out of real estate, public debt into stocks and commodities.  

    It was a bubble in real estate. Is this new debt a bubble in stocks and commodities?

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