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Ben's in a Bind
If you were Ben Bernanke and wanted to prove to the world that the
policy of QE was working you would show this slide. This tracks the
change in the Fed balance sheet and the S&P.
What’s not to like about this? The total US stock market capitalization is up north of $4 trillion
in the past few years. A lot of folks got rich in the process. Millions
of 401k are fatter too. But it is also true that the vast majority of
American’s did not see much from this. Once again, the bulk of the $4T
is in the top 10%. The fellow who sent this to me said, “laying the S&P over the Fed Balance Sheet growth kind of turns one’s stomach”. That’s my reaction as well.
As much as he may like to, Bernanke can’t show this graph.
It will blow up in his face. He can’t show a positive correlation of QE
to higher stocks. If he does, somebody is going to show the next two
charts.
The first tracks the growth in the Fed Balance Sheet and the CRB. This
lines up even better than the stock chart. One look at this and you have
to conclude that QE = Inflation.
The state of housing is still the central issue today. It is much more
relevant to the health of the economy than high PE multiples. How did QE
do for this segment of the economy? Can you say "lousy"?
Case Shiller 20 City Home Price Index Seasonally Adjusted
For the vast majority of American’s QE has been a dismal failure. Stock
gains for the average guy were offset by losses in real estate. There
was no wealth affect there. For those with few stocks and a house it was
anther two-year loss in most cases. All savers lost as interest rates
were kept artificially low. At the same time the cost of everything
(except that IPad) is going up.
Sure the top 5% “fat-cats” got, well, fatter. I’ve always thought that the “trickle down” theory was, well, bullshit.
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"But it is also true that the vast majority of American’s did not see much from this. Once again, the bulk of the $4T is in the top 10%."
This reminds me of John Kenneth Galbraith's famous criticism of trickle-down economics: 'If you feed the horse enough oats, some will pass through to the road for the sparrows."
Bruce, I know I'm critical but your commentary is disingenuous. Let's talk about what you DON'T say to illustrate:
"For the vast majority of American’s QE has been a dismal failure. Stock gains for the average guy were offset by losses in real estate. There was no wealth affect there. For those with few stocks and a house it was anther two-year loss in most cases. All savers lost as interest rates were kept artificially low. At the same time the cost of everything (except that IPad) is going up"
The point of QE is not to prove anything to the world, nor to address any affliction that the lowly citizens at the bottom 99% are enduring (pick anything, real estate, food, energy, etc). SO WHO BENEFITS??
The point of QE is to conceal and facilitate the mass defrauding by an entire industry for decades, plundering risk averse using government as the hapless conduit of legal circumvention. Again, FOR WHO?
As I recall you were a big fan of TARP, even saying it was necessary (my guess is because you were a beneficiary of the S&L bailout). TARP FOR WHO?
Savers are indeed crucified to prop up big business and world corruption, that is the one and only plan of QE. One doesn't need any graph to show that as any trip to the grocery store, or electric bill will affirm. Funny that, it just happens that those measures are excluded from visibility as a red-herring so that no one can see it coming. FOR WHO?
Who is on team finance - the same team throwing the vast majority of people that did nothing wrong to the dogs. FOR WHO, BRUCE?!
Who are the arbitrary 'fat cats?' Name them, put names on the problems. By not doing so you are part of the problem, your fanciful criticism meaningless.
Protecting the 'who' is the heart of QE. Destroying the who is the solution, else "they" destroy you (through offspring, failure of government, etc). It is that simple.
I think that is why Americans are angry. All of the stimulus by the Fed has gone to Wall Street and the Banks and skipped over them entirely.
Yet, the stimulus has in effect cost them dearly with higher commodity costs, lower housing values and lost Jobs. Plus, they will have to pay higher taxes to pay this money stimulus money, in the form of debt off. Yet, they received no benefit from it.
I think the error in the Fed's decision on where to target the stimulus has a few flaws. He is sending the stimulus to people that will not pay very much in taxes on the money they receive. Many like GE (which showed it paid no US income taxes), Warren Buffet who complains (ha ha) that he does not pay enough taxes, all of the Money Managers that only pay 15% taxes, all capital gains on stocks at only 15% (assuming they are sold).
Where if the stimulus was directed at the people the Government would gain a lot more thru taxation on average at 35%.
Bruce, once again, brilliant, concise, irrefutable. Great way to start the day.
a Brucie troll ....nothing "concise, irrefutable" about a Brucie article, he's usually miles off target as are all his charts above (trend changes do not line up). And nothing "brilliant" about this article it's more of the same guff from the 'Fed is all-powerful' propaganda campaign that the central bank moves markets. Brucie is a pro-regulatory, pro-Fed crone
...and you're junked for starry eyed ass licking
Brucie baby Krasting
there's an important (and obvious) difference you missed between the "trickle down" of capitalism and the real economy and the tape-worm finance of Americas parasitical elite
what you are referring to is the expansion of the Feds balance sheet and low interest rate policy to bailout their bum-chums in Washington and Wall Street
that has nothing to do with the continuing trickle down of the real economy and real companies outside of the public sector. The membership of The Parasite Club and crony businessmen/bwankers will continue to be 'accomadated' by the Fed at the expense, distraction and mis-direction of the real economy
FED raises rates = dead housing sales
Except: the banks with all their "capital" and their negotiated MERS robbery of homes, who will have plenty of capital to buy at the bottom.
The FED and Ben are getting to the point where they have more reasons to raise rates than not - but will wait for the politically expedient time.
Embarrassment of Riches-Andy Xie
Asset markets are more important in driving inequality than other factors.
Ones that see wealth or incomes rising rapidly usually participate in or are associated with asset markets.
Ones who get in and out at the right time become rich, the others, poor.
The allocation for income and wealth has mostly become a casino, unrelated to productivity.
funny how you point this stuff out to people and it doesn't get into the real press.
price the markets in gold and the results are worse than pathetic.
Mr. Krasting-
I read most contributors to this phenomenal site of sites, I ALWAYS read yours ASAP. I really appreciate your take on sentiment. It is very generous of you to share your perspectives and they are much valued and appreciated.
I view your thoughts in general to be a great measure of how the average high end investor, real market participant (beyond retail) thinks. I believe (for now) that you offer a marvelous insight to what is really going on in the minds of an important demographic within the money class.
Thank you.
You're most welcome. Tks to you for reading.
bk
Bruce,
You've suddenly become like the neighbourhood pool on a hot summer day.
Got any bikini graffiti to show?
Not to rub it in or anything, but what about the short GBP/USD from 1.6355 and short EUR/CAD at 1.3905. Didn't you call that something like a losing proposition?
This is Zero Hedge with all due respect where being dissed offhand is not so cool. I do respect and expect the same in return.
Always appreciate informed opinion and especially yours.
You asked me what I thought. I said I did not like it. I think I said that what you were doing was net-net a long dollar play. If you have been making money with these cross set ups I am happy for you.
The fx market is not 'talking' to me of late. The dollar should be strong now (relatively). MENA, Japan, Portugal, maybe Spain. Who knows? But the dollar can't catch a bid.
I wonder what happens when all of these "plusses" ebb and the dollar stands open to scrutiny again. It's tough for me to be a dollar bull right now.
Now way I was dissing you. If you saw it that way I apologize.
No apology required. Get your point about the market 'talking' or not.
I like putting out time-stamped trade calls with brief technical/fundamental rationale for a lot of reasons, of which I know you also get......
Thanks for consistently writing insightful articles which provide myself and others the opportunity to cross reference, comment and synthesize information to make calls in the first place.
About the GBP/USD short from 1.6355; it was closed out and reversed to long on reduced size at 1.6120 with a stop under the wicks of recent support lows of 1.60.
Spain's ESP35 closed soft Friday which I thought was odd given the price action for other indexes. The 'fix' number being touted for Spain is in the order of 650 billion Euros to give the Portugal bailout of 70-90 billion some meaning.
And, I wonder if the Pound may signal broader direction for the dollar if it breaks decisively below that recent support or bounces and turns back higher, maybe towards 1.7000 again.......the UK economy is so govt spending dependant that seems irrational.
It feels as if all of the tusnami, MENA, sovereign debt and whatever disaster/nuclear/catastrohe/civil war/destabilization has been almost already so quickly erased from the markets' collective memory simply by collective intervention as if none of it really matters.
Is it a double top and reversal for the Dow next week? Don't know. The other question is if it is not resistance at 12,400 Dow/1340 S&P highs setting up possible range trades then what kind of catalyst will push equities much higher?
In the END The fed will be happy to just roll up the carpet, board up the windows and get on their plane.
Once the smoke clears on this smoldering rock, after the world gets done throwing a collective temper tantrum they will waltz back in with a sack of new fiat seeds with pictures of chocolate covered bunnies and say, "honey I'm home like what ya did with the curtains" and it starts over.
"Lousy?" What do think how that SPCS20SA would have looked without QEs? </sarc>
Just wait and see how our next QE lifts home prices too! (Just not sure which next one... maybe QE37?)
Has anyone checked Bear Stearns, err, Maiden Lane I lately? What amount of the drop can be attributable to principal repayment?
Ben has been feeding America rotgut booze laced with morphine. It sure feels better than paying down debt, but when the party is over, the hangover is going to be murder. Printing money is what banana republics do when they're in trouble, and Uncle Ben has taken a page from their playbook. What a fuck up.
There might be a #3. It's even possible there could be a #4. But we won't get to #5. The system would blow up before Ben could get number 5 out the door.
I think that QE2 has put us at significant risk. "We" just don't know it yet.
Well, Uncle Ben Zimbabwe is going to face more resistance this time: Fisher is a voting member, and he has to consider congressional opinion in a way he formerly did not. The balance has changed on the house side. Those guys could put him in the hot seat, and vote for unpleasant investigations. How much equity has Ben been buying? Informed readers want to know! What are those guys in the basement really doing with ES every day?
The stock market is like an addict hooked on crack...take it away and the patient can get very sick or even die...how can they not keep QE going...
I think most everyone on this site knows what is coming down the pipe ... and none of it is pretty.
Bruce, very well summarized. QE 11 will be the last one. I promise. he he.
Yes he is and its a bind of his own making. You see we are seeing Stagflation rearing it's ugly head. You see Stagflation is where inflation is high and economic growth rate is low. Nobody likes stagflation because actions designed to lower inflation may worsen economic stagnation and vice versa. In essence the cure for one is the poison for the other. The insidiousness of the trap and the proverbial cheese in the trap is the idea at first look it's not a trap. You think that you or your nation can handle it at first and then months/years go buy and you find out that your deep under that you can't get out and so you continue down the path hopeing that by sticking with it you will prevail and it never does.
Biflation as Caviar likes to call it ...
+ 2 decades.... see Japan.
The market turns a little ugly in May, they start to usher in some form of extension to QE2's June expiry. The pols are nothing but whores and they know how their bread is buttered.. An escalation of the grave issues in Japan could provide the perfect cover.. Fear in the mix and just general level of distraction amongst all the commoners..
Nice superimpose and amazing correlation. So when does the market start to discount the end of QE2? Or Do we go right to JUNE with a renewed thirst for QE2.5....
If you recognized what a farce the system was before 2008 then you pulled out your investments and got into cash. Eliot Spitzer was shooting off flares before the 2008 melt down so I pulled out everything. Then at the bottom of the double dips I've reinvested in real estate and commodities and am showing a great return on investment. If you fall asleep and let some investment bank clown handle your investments then you deserve what you get.
Great post!
Cuts right to the essentials... and proves them!
You can argue motives til your blue in the face but the facts are clear:
The Establisment Govt/FED/Banking/Mega-Corporate clusterf**k economic paradigm is one very big engine dedicated to the economic betterment and guaranteed financial and social security of a ruling class.
(You know an interesting sidenote which shouldn't be neglected is the funny nature of human progress... while we haven't gotten past oligarchy, cronyism, major corruption and the ready willingness of elites to betray their own citizens... we do have a much more diverse group of oligarchs!)
Interesting that the fed's bloating appears to be tracing out a 5 wave affair.
It's official....the drop in new home sales topples the record for the biggest drop posted in GD #1 . Excellent charts at:
www.doctorhousingbubble.com
What's the issue? Stock Market is up!
Who Ever cared about the 90%?? Move on
The owners of the FED are merely 1/2 way to the end game. Trillions stolen during dot.com, far more trillions in the housing crisis (don't forget MERS was established in the 1990s for just this purpose, awaiting Greenspan's ZIRP).
The next step will be the destruction of market wealth through an engineered crash.
The owners of the FED have enough houses, cars, planes, vaults etc. The ultimate goal is to literally rule the world. The NWO will be upon us because the sheeple will beg for it.
Agreed, I have believed for awhile that this was all engineered.
This is a good read on that subject.
http://www.itulip.com/forums/showthread.php/966-New-Road-to-Serfdom
Agreed, the housing and equity "wealth" was all fake to begin with, so nothing really changed. Any mass redemption attempts crash the system as we've observed.
The money wasn't stolen, it never really existed!
Why are we concerned over/about fiat when we're pretty much clear that it's shit?
If TPTB want all the worthless fiat, then give it to them! Actually, I think it's a nice service of them to be sucking it all up; if it's currently not going down the big fiat-death-hole, it eventually will!
Unfortunately, i think you are right. But there is a small community of people (like ZHers, except for the faggot trolls) that will not put up with it. I believe in the Jefferson quote of "the tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." Time is fast approaching
I was hoping to short on this bounce off the lows, but with the XRT pinned at 52-week highs, I said forget it.
I went to Whole Foods in El Segundo today, Friday they offer $2 off all fresh sandwiches.
The place was mobbed, I stood in line for 15 minutes just to get a sandwich, and then another 15 minutes to check out.
Never seen the place so busy, as overpriced as it is. And I've never seen so many boob jobs either, the store was buzzing with Manhattan Beach Moms with stick arms and giant breasts.
LOL...
Gal damn, welcome back.
That is some fine pung-tang!
XRT 3x pinned against the highs.
My best guess is to watch the ESP35 as a leading indicator for a break higher or lower. It closed today at yesterday's price 10,725 which is soft and below where the Dow OR FTSE100 indicated price direction.
If Spain/ECB is thinking forward to buy time to a Spanish bailout it will be xxx times Portugal.
then why didnt you take a picture of the girls w/ the big tits and post that instead of these assinine charts?
much appreciated!
I saw a Leprechaun riding a Unicorn in town today. Ha ha.
You were in Hobbiton, too? Now, that's cool.
I still believe in free markets and trickle down. But what is happening is neither. The boys on Wall Street are playing a criminally rigged crony game where everything is trickling up.
I don't think the Fed needs to do a QE 3. They have enough cash flow off their balance sheet to fund $750 billion per year of monetization. If they withdraw it, the market and economy will collapse by design to let the Wall Street wolf pack make another run at the sheeple.
I still believe in free markets and trickle down.
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I never said I didn't believe in trickle down. It works very well for those it is intended to help.
Yeah, like this should even be remotely seen as a surprise from something that's referred to as a "Representative" "Democracy"... Two wolves and a sheep deciding on dinner...