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Bernanke: Chumps!
I got a laugh out of the $600b number. The dealers were polled on their
expectations last week. The response was an even half trillion. So with
that as a bogie the Fed does 600 large. They wanted to do just a bit
more than was actually expected. So they added on an extra 100b. They
gave the market what it wanted and a little bit of extra cream on the
top.
It’s like we are in Disney Land. Everything is orchestrated. For six
weeks the Fed has been dishing out its intentions. Public speeches have
all been planned and edited to make it appear there was a robust debate
at the Fed on the merits and risks of QE. At least a half-dozen news
articles were planted in major newspapers.
There was no debate. This was scripted from the beginning. The only
issue was how much should be announced at this meeting. The choice of
$600b proves that they are managing expectations down to hourly market
reactions.
Cramer at the CNBC summed it up for me:
“Only a chump or an idiot would hold money in a bank CD or money market fund”
He went on to add:
“Bernanke will get the job done by any means necessary.”
When Cramer referred to, “getting the job done” he was referring to the Fed’s exclusive objective; raising the price of stocks.
That is Bernanke’s solution to our problem. Bernanke believes that the
wealth effect will drive consumption higher and spur the economy to
create jobs.
Bernanke is going to rig the stock market in order to sucker folks with
401k’s to put up every dime they have in high beta stocks. As the
markets rise they will borrow some money and spend it as they will feel
richer. But really they are just borrowing against unrealized gains.
When the music stops on Bernanke’s madness those same folks will get
trampled on their holdings. And they will be deeper in debt. That’s
Bernanke’s plan.
Any financial planner that was truly looking out for a client who was
saving for retirement and managing an unpredictable world would give the
following two pieces of advice:
A) Always have some cash available in case of emergency. Two
months of expenses at a minimum. If you have six months of your nut
covered outside of your equities you can sleep at night.
B) Take the number 100. Subtract your age from that. The result
is the percentage that you should have in growth oriented equities.
Bernanke just blew those guideline away. Anyone who followed that advice would be an idiot. Or even worse, a chump.
IMHO there is not much consequence from QE-1 Lite. This is just a top
off of the MBS book. As that goes down the Treasury book goes up. In the
massive Agency/Treasury swap market the changes in supply and demand
are netted out.
However, QE-2 does have significant impact on total liquidity. When I
say total liquidity I mean global liquidity. Not all of the beneficial
impacts of monetization in the US will be retained in the US. For
example, if one was cashed out of an investment in Agency bonds one
might very well reinvest the proceeds in a very nice bond of a very nice
steel company in Brazil. That would be an unintended consequence of QE,
but what the heck. What’s good for CVRD, is good for America, right?
I could go on for a bit about where the QE money could go. And on that
list would be equities. For myself, I would favor foreign equities.
After all, why not take advantage of the weak dollar that comes with QE?
Another of those unintended consequences. My point is that not all of
the QE money is going into the US equity market. I will leave it up to
the reader to estimate how much of QE-2 actually does go into US stocks.
My guess is that it is tops 200b. The Wilshire is at 12.6T so QE-2
might add about 1.5%. How much of that is in the print over the past six
weeks is anyone’s guess.
I think the Fed stuck its foot in the mouth with their plan. They
gave us a very clear deadline. QE-2 will be done in 241 days from
today. And you can bet the Fed will complete the mission on schedule.
Halfway (or so) through QE-2 the remaining residual impacts on pricing
will be on the wane. The markets are pretty efficient about these
things. "Halfway" happens to be the first week in March. “Sell in May” could take on some special meaning next year.
Bernanke’s plan is a short-term bet on the stock market. The bet can be
measured in months. The aggregate benefits (if any) will be felt more
outside our borders than within. In the final months of QE-2 the great
debate will be, “Will Bernanke do a QE-3?” The new Congress is going to say “No” to an expansion and we are in for a showdown.
Cramer is wrong on the outlook. While Bernanke will attempt to, "get the job done by any means necessary",
his hands will be tied. Bernanke blew his wad on this roll of the dice.
A four-six month bet on the S&P is all we are going to get.
Just who are the idiots and chumps?
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But, wait, we're saved! Tea Partiers and Republicans now control the House of Representatives, the most democratic organism in our government. They will take care of everything: cut spending, reduce the deficit, end illegal wars and torture, increase employment, shrink government, repair the health care system, repair the nation's infrastructure, and bring peace, harmony and prosperity to the land.
Just like Bush did before Obama ruined it.
Here here!
It is high time everyone realized that getting those liberal socialist DP weasels OUT of power is the key to our national salvation.
My shitty little opinion of wtf Ben & crew just did .
- Raised the price of commodities drastically .
-Majority of money invested in equities will be overseas
- Savers will become deadbeats
-Housing will continue to fall
- More vacant CRE
-Higher unemployment
- sales numbers will be greater due to inflation a little but units sold will be less
- Higher unemployment
- Banks still won't lend to small mid size businesses
-Dollar value is going to go thru the floor
-China dumps reserves
-1 or 2 countries in europe default to keep value of Euro down
- Japan will be announcing its own plans shortly on its own QE
-Russia -China- India - Brasil as well as oil rich nations demand commodity backed world currency, they will also demand some kind of "trade in" where dollars become new improved currency .This may be a scenario right before a collapse of the dollar ???
-Market trades sideways until dollar is in a death spiral (personally I believe this will be the best indicator game on for the dollars demise being the value of the dollar will be dropping at a rate faster than equities can climb)
Rejoice robots!
if they only could. there is no joy in cyberspace,
only speed. no velocity.
hmmmm...
commodities. inflation or bust.
jobs and re are baked and burned.
http://www.youtube.com/watch?v=5UIfCpq1gWU&feature=related
this next is too dramatic?
http://www.youtube.com/watch?v=-8reJvRWXKI&feature=related
.
stripped to the bone. commodities.
or end the fed ...... and figure out a way to live
.
and the fed becomes the easy, low hanging, fruit as beezle beezles off.
don't fall for that but eat it and enjoy it.
Yes but, this doesn't help anything - like before - printing doesn't raise confidence, goods inflation will feed thru, and when that penny drops- this piece that Bernanke has written will be shown wrong on every single count. It will come back to bite the party quite hard, there's been a lot of vocal opposition - and what bernanke hasn't made clear is, what happens if he doesn't inject cash?
I can't see how it is helpful to say up front that the Fed will monetize the US budget plus prop up the equity market. And if it does turn out that congress is working at cross-purposes to Fed policy...
Ben has his blank check Bruce. Targeted rates of inflation is it and it matters not what the congress says. Both parties will lap this concept up because it relieves them of any responsibility for hard votes & supervision while it permits them to play at "austerity" while the fed prints away to support the economy and create jobs. Most of all it handles that potential inconvience of roll risk and its impact on the fiscal side.
Very well said Miles.
sad but true.
And this is what passes for the reasonable, prudent middle in governing. wow As consideration moves along the decision curve to the 3T or so implied under the Taylor Rule, how that will get deployed and what rules need to be relaxed, or fragrant grease spread to make it happen. Simply epic.
http://www.youtube.com/watch?v=P-cje17OGnQ
how did he know? it is an old story...
.
http://www.youtube.com/watch?v=SbWg-mozGsU&NR=1
That would explain why Citi has been sitting out.
Listen, listen carefully;
Everyone is backstopped except the individual and individual household.
It may be true:
That is true, however, the markets can remain irrational longer than the swing of the political winds. With this move, I think the FDE RES will be investigated. The politicos needed a scapegoat, and the FED RES serves itself as the sacrifical lamb, and everybody understands that the corruption and elitism of the FED RES and it is an EASY TARGET.
So yue markest can be irrationa longer than one can remain solvent, but also longer than a statute of limitations and a congressional investigations.
My bet is that is the first thing on all GOPs minds.
hope your right, but I have this feeling that the FED has become an Eron entity, but the FED owners will receive their claims in full
if you control the world's armies and multinational food corps, most banks can be jettisoned as a show of faith to the world's "citizens" but the control mechanisms can be made even more sever
Enron was bankrupted, but it's energy trading platform was shipped off to Switzerland-UBS_Marc Rich
the repackaging of distressed assets is not a transparent occurance at non-transparent institutions
I hope you are right about the 'easy target' shit, but did you factor in public stupidity?
if markets can remain irrational longer than most can remain solvent
so too can the Benron Cartel junkies keep their ponzi floating as if this paper was ordained as some kind of angelic host
I remember about 4 years ago Target had an ad campaign on television that proclaimed boldly "don't stop living in the red"; it only aired for about a week in my market, apparently focus groups didn't understand what the fuck that could mean
if they only knew
This was a nice piece today. Ron Paul on Fox Business News.
A year ago you would have never seen anything like this on TV. Paul calls for subpoenaing the FED and their records and if they refuse, send it to a federal judge. Last resort is eliminate the fed.
http://video.foxbusiness.com/v/4402240/ron-paul-on-midterms-fed-securities-purchase/
honestly his balance sheet looks like a petri dish at the bottom of the stream, in the time of cholera. someone will take him out, like the wild west, which gunslinger will take out the drunken sheriff?
You are looking way to deep.
QE 2 and 27.5 Billion per week of POMO is a lot more like an overdose of Viagra and a permanent hard on for the stock market for the next 6 months.
It will feel and look nice at first but it will hurt. A lot. (Not known from personal experience)
LOL
silver just blew thru 25 doolars like a hot knife thru butter
if there really is smart money, the metals keep climbing towards heaven
you've been Benroned bitchez!!!!!!!
the Fed is history. They'll never survive this - mainly because they are now useless. They've killed the goose. No more reason to have a "Fed"
BERNAKE NEEDS TO BE REMOVED FROM OFFICE BY ANY MEANS NECESSARY!!!
The extra $100 billion covers next year's bonuses for Wall Street.
If that's insufficient, Ben will have it covered.
Simple math says the LIFELINE and prop in all of this is 3X POMO; $27.5 Billion POMO per week vs the $10 in the runnup.
http://www.zerohedge.com/article/fomc-announcement-600-billion-75-billio...
What grinds of course is that there will be no reckoning, no punishment, no consequences.
Unless they hang from a lamppost, what will the judgement be?
“Will Bernanke do a QE-3?” The new Congress is going to say “No”...."
Look, helicopter Ben ain't gonna ask Congress. he's waaaaayyyy above that. Remember, it was The Congress that abdicated its Constitutional responsibily to coin money. Ron Paul can bark all he wants, but his fellow T-Parts won't bite. The freshly elected congressmen/women know full well who gave them largest campaign contributions. They knwo full well that shutting off the flood of the fresh from the printer cash will choke the banks. Not to mention their own brokerage accounts.
QE3 happens, but unlike the "unfortunate" gap between QE1 and QU2, when stocks went south, the QE3 will be "telegraphed" long before QE2 is over.
One thing Ben doesn't see from his Ivory Tower (and Cramer from his bullet-proof 7-series long wheelbased BMW) is that 50% of the country do not own any material amount of stocks to begin with. Most of the fianncial wealth is concentrated in top 10%, who are already spending like it's 2006 again. When gas goes to 4 bucks, and then 5, when food prices rise another 30% - then we'll see how many tickets Priceline will sell, how many F150s ford will sell, and how many people will go to Chipotle.
No, Ben is not going to ask anyone for permission. He lives above all laws and rules in this country. He reports to nobody. But don't think that congress and the will of the people do not play into this. Give it a few months and we may see. Until 1/11/11 Bernanke is the king of the world.
ben runs this place for his financier masters.
QE is basically the transfer of wealth from society to his financier masters. they get the cash, society gets the debt.
it appears to me that bernanke will loot society for as much money as he can and then, when the market shuts his theft down via rising interest rats, the whole kit and kaboodle collapses and the financiers buy up american for pennies on the dollar.
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. The one aim of these financiers is world control by the creation of inextinguishable debt.” Henry Ford
Agreed, this is all part of the plan, a controlled collapse of the US economy.
Bruce, the fact that "he reports to nobody" may be his achilles heel. All it would take is one AG or sovereign entity to to directly link the MBS fraud to the FRBNY who had oversight responsibility. The fact that they are not federal at all might be enough for someone to give it a try. I just can't believe that all these other countries are going to let Ben do his thing without a response.
Not anymore......tide has turned. That's my call. Ben may be a big fucker but has a small dick, and the world knows it.
So does America.
Time to own up. Everyone knows it.
anyone know if Bernanke can be removed by the Senate or House?
By the President who appointed him with congressional approval. As The Fed. is not actually Federally part of the government he can't be impeached (I guess-never thought about it)
Hell a .223 could figure it out. Milestones
He can certainly be removed with some lead between the ears.
Remember how the Swiss intervened, twice? Then the Japanese?
Remember how the ramping effect of POMO wilted just two weeks ago?
This is oversaturation galore. I really wouldn't expect anything "positive" to come of this. Blew their wad, alright- a long time ago.
Something tells me all this isn't going to sit well with equity markets, or 4X markets, for that matter.
Well said...just as POMOs have been bringing diminishing rewards each time - less bang for the buck - this infusion of more play money will not entice too many more fools into the markets at all. Keep an eye on mutual fund withdrawals...and gold prices...
...and continued insider selling.
Maybe that is why POMO was raised from 10 to $27.5 billion per week.......$600B QE?
And, the math also says that bullshit baffles brains.
It is all on the credit card.........yours.
There wont be much upside effect on stocks at all, I dont see it, everyone will be siphoning it all off the top as the endgame is already known.
Same as POMO guaranteed up days quickly became lucky to end in the green.
Anyone with any sense is now headed to the exits, skimming what they can on the way.
In my opinion anyway.
I recommend you study hyperinflation in other economies, cause that is where we are heading. Equities will rise, but not as much as commodities and PMs.
If foreign economies and their central banks flee the dollar en masse, that is exactly where we're heading. We do know that excess dollars will some of their way offshore, just maybe not with open arms.
Right now, we are likely to see accelerating commodity inflation with low resource utilization and persistently high unemployment and stagnant wages for those who are working--- you know, the stagflationary cocktail.
When crude hits over $140 a barrel and gasoline is $5 a gallon, underlying demand for goods and services will likely head even lower. And that's when it becomes a major political problem.
The combination of higher input costs and lower demand probably isn't going to make business-- or their investors-- very happy, either. I don't think that stock prices will support either decelerating revnues or lower margins. Though stranger things have happened.
With the $USD now having no support, how long will it take our trade partners (i.e. rest of the world) to holler rodeo f*ck?
Imo, the IMF steps in with SDR's to put things in perspective, and global trade resumes. Best to be holding physical PM's as a hedge against a devaluating fiat POS.
So long as it is only bernake that goes to the rodeo!! LOL!
The lifespan of FED policy now has nothing to do with the FED, outside forces will let it continue, or stop it suddenly in its tracks.