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Correlation Of S&P 500 Performance With Fed Monetization Activities Since Start Of QE

Tyler Durden's picture




 

The chart below requires no substantial commentary suffice it to say that since the launch of the Fed's Quantitative Easing, aka Monetization, program, the value of the Total Securities Held Outright on the Fed's Balance Sheet has increased by $917 billion- from $584 billion to $1.5 trillion. This has been accompanied by an almost linear increase in the S&P 500 Index, from 721 at QE announcement on March 18 to 1033 yesterday. This $917 billion in extra liquidity, instead of igniting an inflationary spark, as the QE program was designed to do, is now (metaphorically) sloshing around bank basements. As a reminder: the most recent reading of Total Deposit Reserves was... $886 billion dollars: An almost dollar for dollar match with the increase in Securities Held Outright of $917 billion. And instead of this excess money hitting broader aggregates such as M2 or MZM, it is held by the banks, who proceed to buy securities outright on their own, either Treasuries or Equities. Apply the proper "money multiplier" to get the monetary impact on the S&P 500, as a result of the banks not lending these excess reserves, and instead simply speculating with it, and you will likely get the increase in the market cap of the S&P since the launch of QE.

QED.

Source: H.4.1

 

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Fri, 09/11/2009 - 02:11 | 65904 the fox
the fox's picture

Have you tried correlating the timing (intraday) of the MoMo's vs intraday spikes in the SPX? I have been unable to pull it with the Bloomie, but have the feeling the correlation will be almost as direct...
What is you data source, btw?

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loans's picture

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Fri, 09/11/2009 - 02:15 | 65905 Anonymous
Anonymous's picture

this confirms a theory which many here have held
regarding the direct relationship between
equities and qe....

some on another thread ($5.1 Billion In Outflows For Domestic Equity LT Mutual Funds Over Past Month) seemed to find another cause for the bull run...

for now, i am sticking with the qe theory....

as for the effects of qe about which everyone
wondered when the roost was going to come home to
roost: the usdx is in the 76.60 range as of now...
undoubtedly it will rebound later in the day but
overall this is part of a substantial downward spiral all
week....the decline is very large for what is
supposed to be a store of wealth (i say that
tongue in cheek and with contemptuous irony)

Fri, 09/11/2009 - 02:16 | 65906 Anonymous
Anonymous's picture

Isn't the QE supposed to end in October? Might we see a decline then....

Fri, 09/11/2009 - 05:19 | 65948 Gordon_Gekko
Gordon_Gekko's picture

Are you really sure it began when they "announced" it?

Fri, 09/11/2009 - 08:11 | 65998 Anonymous
Anonymous's picture

Looks like certain insiders were probably notified on or about March 4th.

As for QE ending in October? Hah! They need people out Christmas shopping & the banksters want their year end bonuses too.

One of two things will happen. Either QE will become more 'back door' - loudly shutting down a few minor programs and quietly increasing the lesser understood ones

- or -

There will be a sharp drop that will be enough to scare the gov't into providing a six-month extension but not a sharp enough drop to really shake confidence. And then the 'rally' will continue or at least bounce back.

Tue, 09/22/2009 - 07:54 | 76187 Anonymous
Anonymous's picture

Bonuses are dead. There will be bonuses anymore.

Fri, 09/11/2009 - 08:29 | 66008 glenlloyd
glenlloyd's picture

bingo!

Sat, 09/12/2009 - 06:27 | 67466 Anonymous
Anonymous's picture

Yes. I noted the announcement right after the march low, at the exact time we hit the bollenger band resistance when one whould have expected a bounce back, then come close to the low again then go up through. this happened at teh same time as a numbe rof strange things that came out of the governemtn every time restance levels got hit."greet shoots", etc. this happens over and over again. Bernake's little speach from jackson hole in the moring just happened while the s%P was at long term resistance trned from the market peak. that was followed through via a short squeeze on AIG which jumped the market up a few points to contine the climb. I pointed this out to the FT, but of course you can't have that kind of story in a respected papaer can you. to their credit, they did mention a week later that the market had been brought up via a short squeeze

Fri, 09/11/2009 - 09:16 | 66042 Sardonicus
Sardonicus's picture

Read about Moore and Schley in 1907.

The exit door will be too narrow whne they want out.  God only knows how this borrowed cash was leveraged.

March 2009 gave us the bounce everyone was looking for and it was much bigger than almost anyone could have dreamed.  However, everyone is looking for a correction and it too may surprise.  All we need is a reason for those banks to need that cash back.  So long as they can make 3-10% a month in equities they have no reason to lend it.

 

 

Fri, 09/11/2009 - 09:57 | 66079 Anonymous
Anonymous's picture

If it's between loaning money and getting $.50/$1.00 back or throwing it in the market, I'm not sure they've made the wrong move... And until regulators and rule makers stop the accounting shenanigans, they can continue to operate in a very "undead" manner.

Fri, 09/11/2009 - 11:00 | 66159 Anonymous
Anonymous's picture

When the Fed 'ends' Qe they/treasury are going to use PPIP to pump things. Of course the fed can still use their retail arms (GS, JPM, etc to 'control' things).

Fri, 09/11/2009 - 11:01 | 66161 Anonymous
Anonymous's picture

When the Fed 'ends' Qe they/treasury are going to use PPIP to pump things. Of course the fed can still use their retail arms (GS, JPM, etc to 'control' things).

Fri, 09/11/2009 - 11:09 | 66173 ghostfaceinvestah
ghostfaceinvestah's picture

Only the Treasury purchases, the MBS purchases will continue unabated.  I have said here before that I thought the S&P could easily reach 1200 by year's end, solely on the back of excess liquidity.  If the MBS purchases continued through 2011 like I think they will, the S&P could reach 2000.

However, this would come at great cost to the dollar.  So far there hasn't been any political backlash to Bernanke destroying the dollar, but ultimately it might come.  If that happens, and he is forced to stop his MBS purchases, look out below.

At 1050 on the S&P we are at the equivalent of October 1999 on the NASDAQ - just starting the really big liquidity ramp.

The sad thing is this sort of BS really leads to dislocations in the real economy, as bad business models are perpetuated and crowd out new, better ideas, but I am beyond caring about that.  At some point I will be turning my bets against the dollar into bets against the stock market, and will be able to retire early.

Watch the MBS purchases for your clues.  When those end, the time to go all-in short will be near.

Fri, 09/11/2009 - 13:02 | 66366 Anonymous
Anonymous's picture

Where is the best place to track MBS purchases?

Fri, 09/11/2009 - 14:11 | 66491 Gordon_Gekko
Gordon_Gekko's picture

I think you are spot on with this one ghostface (IMHO, you usually are). The New York Fed's site has this helpful factoid in it's MBS Purchase Program "FAQ":

http://www.newyorkfed.org/markets/mbs_FAQ.HTML

"Purchases began in early January, 2009and will continue until the end of 2009."

Also:

"How are holdings under the agency MBS program reported?"

"Balance sheet items related to the agency MBS purchase program are reported after settlement occurs on the H.4.1. statistical release titled "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks." Securities acquired in dollar roll transactions are also included with other holdings of agency MBS.  Trade settlements may occur well after trade execution due to agency MBS settlement conventions.  This report also includes information on total outstanding commitments to buy and sell MBS in a supplemental table.  

In addition, the New York Fed publishes the most recent weekly SOMA agency MBS transaction activity in more detail on its external website on a weekly basis."

Is this the best way to follow this idiocy? Is it possible they do stealth monetization of MBS's like Treasuries (ala "indirect" and other nonsense)?

Fri, 09/11/2009 - 02:16 | 65907 Anonymous
Anonymous's picture

No wonder volume has fallen off the cliff, the FED has been buyer of last resort, and they don't have anybody else to sell to. As long as the large HFT / quant guys push 4-10 stocks around each day and it looks like something is happening, the FED's positions, and thus the market, look ok.

But when the music stops there will be a lot of people without chairs to sit in...and the market should fall flat on it's tuchus!

Fri, 09/11/2009 - 04:13 | 65934 Gordon_Gekko
Gordon_Gekko's picture

"...people without chairs to sit in..."

Golden chairs, my friend, Golden.

Fri, 09/11/2009 - 06:52 | 65961 Anonymous
Anonymous's picture

They wheeled out the silver boogieman again yesterday.

http://www.msnbc.msn.com/id/22536241/

Fri, 09/11/2009 - 02:24 | 65911 Atlas_mugged
Atlas_mugged's picture

Good stuff as always TD. Too bad that reality doesn't matter.....yet.

Fri, 09/11/2009 - 02:26 | 65912 Anonymous
Anonymous's picture

S&P only went to ~715?

Fri, 09/11/2009 - 05:22 | 65949 Anonymous
Anonymous's picture

weekly close sherlock

Fri, 09/11/2009 - 06:30 | 65957 Anonymous
Anonymous's picture

Looks to be closing price each Wednesday. March 4th @ 713, March 11 @ 721.

Fri, 09/11/2009 - 02:27 | 65913 chumbawamba
chumbawamba's picture

That graph looks like a representation of a cum shot, right into the eye of the American people.  Thanks, Banksters.  May I have another?

I am Chumbawamba.

Fri, 09/11/2009 - 02:39 | 65921 Anonymous
Anonymous's picture

you greedy little boy....just for that bend over
and sqeal like a pig...

Fri, 09/11/2009 - 07:37 | 65975 SWRichmond
SWRichmond's picture

Chumbawumba is a twenty-something, I take it?

Fri, 09/11/2009 - 07:48 | 65983 Anonymous
Anonymous's picture

What gave it away, the self-absorption? The self-importance? The 'crass is cool' thing? The mandatory lewdness? Or the Bark at the Moon insanity? Ah , today's twenty somethings...enjoying your Obamaian Paradise, kids?

Fri, 09/11/2009 - 08:16 | 66000 MinnesotaNice
MinnesotaNice's picture

Imho Chumbawama is a highly racist 'perhaps 20-something' individual... and personally my least favorite commentator on this site... we are lucky we didn't get the highly offensive word 'n.gg.r' thrown in with his comment... it is one of his favorites.

Fri, 09/11/2009 - 08:34 | 66010 deadhead
deadhead's picture

chumbawamba adds virtually nothing to zh.

his/her comment on al qaeda last nite was absolutely shameful and moronic.  

Fri, 09/11/2009 - 08:59 | 66029 Spartacus
Spartacus's picture

WHICH POST? MAY i KNOW?

Fri, 09/11/2009 - 09:45 | 66064 MinnesotaNice
MinnesotaNice's picture
I'll let DH post what he was referring to if he wants, but here is one of Chumbawamba's contributions (referring to Obama) and my response last week: by chumbawamba
on Sat, 09/05/2009 - 22:12
#60482 

He's a nigger, not a nigga.

I am Chumbawamba.

  

by MinnesotaNice
on Sun, 09/06/2009 - 09:45
#60802

You know what Chumbawamba... I think I might have to ask Heli-Ben on his next fly-over of South Central LA to drop you off in the northwest corner neighborhood near the 110 and 105 interchange wearing a blue bandanna... with that comment pinned proudly to your chest... and I would suggest immediately upon your arrival you begin discussing all of these types of thoughts with as many people as you can find... you are one of the most offensive people on this site... imho... you really ought to do a little historical reading and develop a more refined sense of empathy...

Fri, 09/11/2009 - 11:53 | 66258 chumbawamba
chumbawamba's picture

I add nothing to the site, except (apparently) for a chain of comments from a bunch of thin-skinned hippies with apparently little or no social life, other than what they find in online comments they share with the same.

Americans have many great qualities, but criticial thinking skills are not among the set.

I am Chumbawamba.

Fri, 09/11/2009 - 12:57 | 66357 Anonymous
Anonymous's picture

"I add nothing to the site, except (apparently) for a chain of comments from a bunch of thin-skinned hippies with apparently little or no social life, other than what they find in online comments they share with the same.

Americans have many great qualities, but criticial thinking skills are not among the set.

I am Chumbawamba."

You know, you shouldn't had made that post...you broke character.

I think he has a dopple too.

anon

Wed, 09/16/2009 - 18:43 | 71725 Anonymous
Anonymous's picture

...and I bet you call yourself a Christian right? You like fucking with people and calling them hippies and n*****s? Picture 1969, the so-called summer of love, picture Woodstock and all those hippies. Now picture them with NRA memberships. I bet you fascist right-winger types will feel kind of awkward when the Liberal Loonies start playing you at your own game and begin showing up at your stupid shooting ranges. Imagine a dread-locked caucasian in a "meat is murder" tree-hugging t-shirt practicing his 80 ft. shot with his 45 in the lane right next to yours. This is what's going to happen. And the Left Loons and the Righty Tighties will start another Old West in this country before too long. All calling themselves Christians no-less. So-called capitalists vs. so-called socialists. We don't need your fuckin' extremest views in this country, hypocrites.

Fri, 09/11/2009 - 10:32 | 66119 Anonymous
Anonymous's picture

If he gets your panties in a bunch, why do you troll his posts?

Fri, 09/11/2009 - 12:38 | 66330 TumblingDice
TumblingDice's picture

At first I was going to steer wide of this passionate conversation but some chemical imbalance in my brain has forced me to start pounding the keyboard.

Let's not make this personal. I am all for attacking chumbawamba for his racism. That has no place on this site. But his personal style, while hard to seperate from his racist viewpoint, should not be in question. And neither does it help to constantly bring up the previous racism.

And to the anonymous poster above, let me assure you that lewdness and crass is not as typical of twenty-somethings as you may think. So let us not make this about age either.

Ideas are the things that count and I hope we center our discussion around them. Intelligence is abundant in this forum and with it comes the ego. If we divert the conversation from ideas then all we are left with is the ego and that does nobody any good.

Fri, 09/11/2009 - 13:00 | 66358 MinnesotaNice
MinnesotaNice's picture

Those darn chemicals will get you every time.  I agree with your post... and I also agree Chumbawamba actually has good thoughts from time to time... however they are miniaturized by his racist rant that seems to come out of nowhere.  Now you and I have had some fun conversations in the past so I think I can go here with you (I hope I'm not wrong because I wouldn't want to offend you)... let's intellectualize this conversation to a different level... let's say every time you read a post from Chumbawamba he puts in the phrase "People Like Tumbling Dice are Asswipes" rather than 'n.gg.r'... what would you think... would you want the entire ZH community to remain silent and say nothing... I know you would likely personally sweep the floor up with him... but if the ZH community does not say that this is inappropriate then it can only be assumed that they are in tacit agreement... and then that becomes reflective of the ZH community.  There are black people on this website (however I am white) who love reading the material here... and how do you think they feel when they read Chumbawamba and his "n.gg.r rant".  I will tolerate just about any freedom of expression or idea... listen to any new thoughts that someone has... and step into someone's shoes that I haven't worn before... but I will always speak up against offensive, hurtful racist remarks.  You are right that ZH is a place of new, interesting, and different ideas... so we should try to stick with that as much as possible imho.

Fri, 09/11/2009 - 13:29 | 66406 TumblingDice
TumblingDice's picture

Minnesota, talking to you brings a smile to my face; so let me just say that I think you would have a hard hard time offending anyone, especially a thick skinned simpleton such as myself, even if you tried. This is a trait that is very undervalued nowadays and I appreciate it a lot.

We are on the same page: we will both speak against racist (and other egregiously wrong) remarks vehemently, no question about it, and hopefully the mettle of this forum will be determined by how we react to different remarks. But I think speaking against chumbawamba and bringing up his previous racist remarks is the wrong move here. It is sort of like forcing someone into a corner and eliminating all escape routes. Prejudice is infectious and hopefully we can keep it out of this forum.

Fri, 09/11/2009 - 13:32 | 66414 MinnesotaNice
MinnesotaNice's picture

I agree with you entirely... and I perhaps should not have thrown his remarks in his face... leaving him little ability to save face if he wanted.  And I love talking with you also :-)

Fri, 09/11/2009 - 11:27 | 66208 Rusty Shorts
Rusty Shorts's picture

 - actually he is 12 years old, and lives in a detention center located in Mississippi.

Fri, 09/11/2009 - 09:59 | 66081 Careless Whisper
Careless Whisper's picture

Chumbawamba is chill. Lighten up.

Fri, 09/11/2009 - 02:38 | 65920 Anonymous
Anonymous's picture

so let's take this a step further to trace the flow of funds...let's say that the relationship between qe and sp500 rise is causal....

in qe, the fed buys securities (bonds or mbs) from either
primary dealers in the case of the former or banks/freddie/fannie/others in the case of the latter....would pds turn around and buy stocks? i would think they would buy more bonds from the
treasury or open market....the banks i can see buying
equities....

with mbs being the largest part of qe at about 1.2t usd and with 800b being redeposited with the fed it seems that 400b usd is what is driving the equities run-up...which might explain the light volume because 400b usd is a very small amount of money compared to the equities market....

that's my theory for now....not sure if it stands the acid test of critical examination....i suspect that other ppt elements are purchasing stocks but in terms of visibility this seems to be all for which we can account.

Fri, 09/11/2009 - 03:37 | 65928 George the baby...
George the baby crusher's picture

Well blow me over with a feather.

Fri, 09/11/2009 - 03:42 | 65930 Anonymous
Anonymous's picture

This is very succinct and important analysis. Valuations , sentiment , technicals - none of it matters with the QE monster. Flight from dollar and stimulus measures are unsustainable and when either of those dynamics ends , look out below.

Fri, 09/11/2009 - 04:10 | 65933 Gordon_Gekko
Gordon_Gekko's picture

Is there any doubt in ANYONE'S mind at this point that the Fed is doing stealth monetization of the Treasuries way above and beyond what they have announced? If so, please go see a psychiatrist. In fact, I will not be surprised if the majority of "indirect" is the Fed itself. This is Benny boy's gift to the Dollar-Deflationists of the world. Also, I'm not sure if the Fed adheres to elliot wave "principles" while gunning the market...wait...did I just see Fed do 1-2-3 of an impulse a-b-c up? WTF? LOL.

Fri, 09/11/2009 - 04:52 | 65941 tontoe
tontoe's picture

I don't know why Leroy Smith was the first thing I thought of when I saw this graph.

And it compelled me to make this : http://i32.tinypic.com/143noyh.jpg

 

Fri, 09/11/2009 - 05:17 | 65947 Gordon_Gekko
Gordon_Gekko's picture

Hahaha...good job!

Fri, 09/11/2009 - 13:53 | 66460 Cheddar Bob
Cheddar Bob's picture

Nice.

Fri, 09/11/2009 - 14:55 | 66554 Hephasteus
Hephasteus's picture

Thank you for the laugh!!

Fri, 09/11/2009 - 05:00 | 65942 Anonymous
Anonymous's picture

Can't sleep so watching CNBC. How come CNBC has guests that actually make sense for a change? One actually questioned the validity of the numbers out of China. Maybe I should just watch CNBC Asia...

Fri, 09/11/2009 - 06:24 | 65956 George the baby...
George the baby crusher's picture

Dear Tim

I have a cunning plan.  We pump up the market by the power of 2, all the while increasing our debt burden.  Now I know what you're thinking Tim, but hear me out.

Then we deflate the dollar also by the power of 2.  We half our debt, and all the market players, well they've been well compensated by the artificial rally, so everyone's happy.

Think about it and get back to me.

Your's Ben

Fri, 09/11/2009 - 07:03 | 65964 Bob
Bob's picture

So you've been right all along, Tyler? 

And all us internet crazies are right as well?

Whuddya know. 

A picture is worth a trillion words. 

 

Fri, 09/11/2009 - 09:53 | 66078 Anonymous
Anonymous's picture

Fighting it the whole way but right? A new standard for trading.

This is a ridiculously superficial "analysis" that all of you are enthralled about simply because it reflects your view of the world. This is worse than lazy.

"Find the right multiplier and you can calculate the move in the S&P". What a Crock 'o Shite. Why didn't you just solve for the multiplier, Tyler?

Fri, 09/11/2009 - 06:59 | 65965 Anonymous
Anonymous's picture

There's no need to point out that this correlation has no sound statistical foundation. (This is not a criticism of the article or subject matter.) Hypothetically thousands of such experimental events would to be conducted under the exact same economic conditions over time. Of course, it is impossible to repeat the experiment again as economic conditions continually change through time.

However, this is not to say that the increase in Fed liquidilty is not having an affect on the S&P, especially in light of the lack of money multiplier effect and the build up of reserves. Rather than needing dollar for dollar correlation, the banks only need to add a marginal amount of newly minted dollars at opportune times to 'nudge' any asset market in an upward tragectory.

I'm sure there are some stat geeks out there who can provide some historical insight, and a methodology to create correlative analysis in finite market subsets, but I think the data provided and a topigraphical analysis is sufficient to allow us to use common sense instead of strict stat analysis in the circumstances.

Fri, 09/11/2009 - 21:01 | 67055 Anonymous
Anonymous's picture

at least through an 'r-squared' up on the chart to make it appear valid, even if it's fabricated...
the spoons on this site really start to froth.

Fri, 09/11/2009 - 07:18 | 65969 Anonymous
Anonymous's picture

And this is news how? The Fed, the largest market participant, is buying asset backed securities. What did you expect would happen? You usually have some good stuff on here but this one kinda fails....

Fri, 09/11/2009 - 11:23 | 66199 ghostfaceinvestah
ghostfaceinvestah's picture

It's news to a lot of the bears here.  I will admit I did not know how the stock market would react, but as soon as Bernanke stepped up QE on March 18th I went short the dollar by going long oil and CAD and AUD.  (I have since closed the CAD and AUD positions after nice gains and went long other commodities.)

Forget the Treasuries, they are nothing.  He is printing $25B of new dollars a week to buy MBS. (this past week a bit light because of the roll - basically there wasn't as much Sept supply as his buyers initially thought so that had to roll purchases forward to Oct  http://www.ny.frb.org/markets/mbs/index.html).  I find it funny all this agnst about $3B for Cash for Clunkes when Bernanke prints that much in half a day.  Think about that.

Shorting in the face of this liquidity flood is suicide.  Fundamentals don't matter.  Think about 1999.  Greenspan was flooding the system with cash in fears of Y2K, and the stock market went crazy.  We are basically in the same situation today.  AIG is the Pets.com of 1999 - there is zero justification for the stock price, but liquidity needs to find a home.

Fri, 09/11/2009 - 11:32 | 66222 Miles Kendig
Miles Kendig's picture

Excellent

Fri, 09/11/2009 - 15:38 | 66634 Anonymous
Anonymous's picture

Is Tyler D really GFI?

Excellent post, btw.

Fri, 09/11/2009 - 07:30 | 65972 Ned Zeppelin
Ned Zeppelin's picture

My assumption was that the S&P 500 was being dragged up by the pricing activity occurring within a fairly narrow bandwidth of volume, such that the vast majority of S&P 500 stocks are neither bought nor sold, but merely held.  Their "values" rise because the latest price for each of the stocks, due to HF or HAL 9000s or what have you, has been bid up, but the "support" for this value increase has not been broad.  As if there are 50,000 Chevy Cavaliers in a room, and we value all of them by the occasional bid and sale for one. I assumed that meant that the pricing support was thin, and could break at any moment, as all of the Cavalier owners watch the price and eventually decide they must cash in due to the fact that the price is, frankly, excessive.  But in the meantime, take the ride.  This explains why the car dealers in the room (the insiders) have been hitting a crescendo of insider selling (95:1 sell to buy). 

 

To the extent QE money is used to play within this thin bandwidth, I agree with you.  But if you are saying stockowners holding dollars produced by QE (and you know who THEY are) have steadily replaced other owners of those equities (who paid with "real," not freshly printed money), then the QE-owned shares are priced for good, and have no particular reason to cash out.  This would undermine the theory that at some point this market must return to "normal." It does not have to, if it is not built on a foundation of real money. and your analysis of the reserves sure looks like this is the case.  In that event, I think the notion that this must all end soon is completely without merit, as QE dollars are not real, and will not behave like real  money.  Makes me rethink this "go short soon" idea.  Better to buy into the rally and stay there.

There is probably a more precise way to say this.

Fri, 09/11/2009 - 07:40 | 65978 SWRichmond
SWRichmond's picture

Earnings?  You are suggesting another version of "new normal" a la tech bubble.

Fri, 09/11/2009 - 07:53 | 65986 Anonymous
Anonymous's picture

Yes the QE cash creates a new normal for the price of cash flow.

The hypothesis is the money supply has split into two pots. One pot circulates in the real economy and the other circulates among asset holders. If as it seems the QE cash is largely staying in the asset pot, then the customary valuation metrics have to adjust to a new normal.

While the idea does not match macro teachings, my lying eyes say this is evidently what is happening.

Fri, 09/11/2009 - 11:31 | 66220 ghostfaceinvestah
ghostfaceinvestah's picture

Did the tech bubble last?  Obviously not.

As I posted above, watch the MBS purchases for clues.  As long as new money is created this market will go higher.  Once the new money creation stops, a re-pricing to fundamental values will start to occur.  Not before.

Fri, 09/11/2009 - 07:50 | 65985 William Wallace
William Wallace's picture

It doesn't matter how much funny money is pumped in or how much stock is owned by the recipients of the funny money.  At some point, if there are no earnings, the owners of the Beanie Babies, being human beings, will try to sell them.  Then the price of Beanie Babies will come down--and stay down.

 

There is no historical example of worthless crap inflated by a bubble staying valuable forever.  If the QE stops, that will start letting the air out.  If it continues, then the values will drop after what Mises called the "crack-up boom."

 

 

Fri, 09/11/2009 - 11:29 | 66213 ghostfaceinvestah
ghostfaceinvestah's picture

Exactly, no need to overthink it.  Ultimately stocks do have a fundamental value, and will find that value.  Take the "big four": AIG, FNM, FRE, and C.  Of those, three of them surely have no value.  C is questionable.

To suggest AIG is going to maintain its value is foolish.  That situation will resolve itself at some point.

Those are extreme examples, but there are other examples.

In the short run, however, liquidity finds a home.  But that liquidity "burns off" eventually.

The best analogy we have to today's market is the 1999 NASDAQ bubble, another liquidity-driven event.

Fri, 09/11/2009 - 13:09 | 66378 Anonymous
Anonymous's picture

What if the Fed persists in buying MBS for, say, another 2 years? And what if the unabated liquidity continues to be used by bank trading desks to inflate their profits by driving up equities? We may have a two-tier market in one sense - traditional fundamental value vs. liquidity-driven (inflated) value. But in an OVERALL sense, where we see the market as a single traded entity, the one that matters when investing, could not this market be driven higher by banks REGARDLESS of fundamental value as long as the liquidity spigot is not shut? Technically, why must the spigot be stopped? Fortunes may be made as long as it remains open. And might not banks regain solvency in this way - by profiting fantastically from trading (at the expense of everyone else)??

Fri, 09/11/2009 - 13:32 | 66415 SWRichmond
SWRichmond's picture

The scenario you describe, where no one shouts "The Emperor Has No Clothes!" is possible, ONLY under the following conditions:

  1. ALL central banks agree to debase somewhat equally.
  2. The global man on the street never loses faith in paper currencies.

It's vital to understand that this is precisely what is aimed at and hoped for by central bankers, intellectually supported by mainstream economists and monetarist think-tankers, and incessantly regirgitated by B schoolers everywhere.

I am determined to not let them get away with it.

Fri, 09/11/2009 - 11:02 | 66163 Anonymous
Anonymous's picture

"buy into the rally and stay there"?

Uh, please keep in mind that more & more QE $$ will be required to keep pushing the Sisyphus market uphill.

Eventually, at some point, the well wil run dry.

Just don't bet the farm that today is the day things start to reverse...

Fri, 09/11/2009 - 07:42 | 65979 SWRichmond
SWRichmond's picture

Tyler,

A picture is worth a thousand words.  At least the Japanese pretend to discuss the merits of central-bank purchases of stocks.

Fri, 09/11/2009 - 07:48 | 65984 Gestalt
Gestalt's picture

I guess this explains why Treasuries and stocks and gold and oil and coppper have all been rallying at the same time (at least since June 4th, when Treasury rates peaked). A classic liquidity shock. Certainly there is no economic explanation for a coordinated rally in gold, stocks AND long bonds...

Fri, 09/11/2009 - 12:04 | 66285 ghostfaceinvestah
ghostfaceinvestah's picture

Exactly.

The way to look at is the initial liquidity helped the banks with their liquidity problems, so the financial stocks rallied.

By now, it is all pouring into everything.  AIG at $55?  C'mon.

Fri, 09/11/2009 - 17:57 | 66889 Anonymous
Anonymous's picture

hold on to your horses....aig is not really at
55....i believe that there was a recent 1:20
reverse split....divide by 20 to get a feel for
where it really is...

Fri, 09/11/2009 - 08:11 | 65999 Anonymous
Anonymous's picture

If a gov't wants to steal the money of the people, do the following:

1. Allow the corrupt insiders to steal trillions by taking enormous long term risks and booking fictitious short-term gains against them. This requires coordination between the gov't (repeal Glass-Stegal, eliminate 12:1 leverage ratio), the ratings agencies, the Fed and the Treasury. [Check]

2. When the sh*t hits the fan, trot out an anti-Wall St rhetoric candidate to "punish Wall Street". In reality, he will be an even bigger Wall St. schill. What is the message you should actually listen to? "We are all in this together" (more on that in a few). [Check]

3. Have the gov't accept the losses being realized by those long-term liabilities (the profits are long gone, in the pockets of Mozilo & friends) [Check]

4. Destroy the currency. This greatly reduces all those long-term liabilities. Those who are "protected" in short USD instruments think they are safe, UNTIL the planned future financial coup de'tat strikes in 2010. Then, Barrack "We Are All In This Together" Obama raises taxes on income and capital gains over $500k to 90%. We saw a test preview during the AIG management bonus fiasco.

The wealth of the people has now been stolen. But, wisely, they stole the money first...now comes the collection.

- Zeta

Fri, 09/11/2009 - 08:17 | 66001 MinnesotaNice
MinnesotaNice's picture

Great graph... that is really telling in helping to 'follow the money'...

Fri, 09/11/2009 - 08:22 | 66004 blackebitda
blackebitda's picture

well now that the cat is out of the bag, is what everyone else

knows worth knowing? insider selling is now headline news. 

Fri, 09/11/2009 - 08:28 | 66007 JohnKing
JohnKing's picture

So the question is..when does Kamikaze Ben pop the thing?

 

Fri, 09/11/2009 - 08:44 | 66015 George the baby...
George the baby crusher's picture

 

It's such a simplistic and harsh word "POP".  Could you rephrase it with, ummm, let's say, "Monetary quantative restraint".  For gods sake man,  make something up already, everybody else is.

 

Fri, 09/11/2009 - 08:53 | 66025 JohnKing
JohnKing's picture

I'm not good at word games :)

 

Fri, 09/11/2009 - 12:04 | 66284 TumblingDice
TumblingDice's picture

When the Fed is audited.

Fri, 09/11/2009 - 08:56 | 66027 Anonymous
Anonymous's picture

And as this becomes clearer and clearer to all, the need to have Geitner openly describe the means he will take to bring an end it all becomes obvious.

The conflict? The real conflict and the "timing event" most important? Year end bonuses..

Fri, 09/11/2009 - 09:32 | 66050 Anonymous
Anonymous's picture

Funny...for a chart called 'Correlation of Fed Monetization With SP500 Performance'...I'm having a hard time finding a correlation coefficient.

What exactly is the correlation Tyler?

I get what you're trying to do, unfortunately the burden of proof is on you. As of now you've failed and this post is no different or better than those you mock.

Hypocritical might be appropriate in describing your actions.

Fri, 09/11/2009 - 10:13 | 66095 zeropointfield (not verified)
zeropointfield's picture

It's around 0.98.

Fri, 09/11/2009 - 10:19 | 66103 Anonymous
Anonymous's picture

Seriously? You can't see that the slopes of those two lines are the same? What institution of higher learning did you snooze your way through?

Fri, 09/11/2009 - 12:33 | 66322 Anonymous
Anonymous's picture

i don't think higher learning was involved...

Fri, 09/11/2009 - 10:20 | 66105 Anonymous
Anonymous's picture

Seriously? You can't see that the slopes of those two lines are the same? What institution of higher learning did you snooze your way through?

Fri, 09/11/2009 - 13:45 | 66446 Anonymous
Anonymous's picture

The slopes are not the same and you need a lesson in correlation and statistics.

Fri, 09/11/2009 - 17:55 | 66886 Anonymous
Anonymous's picture

the slopes of the linear regression curves of
each series looks identical or close...as such
i would suspect a very high correlation between
the two series...

but it is easy to settle - if tyler would either
calculate the correlation coefficient or give
us the data to do so the matter could be settled
quite simply....and yet that would be only a start...

i do agree that correlation does not supply
causality but under the circumstances i believe
that it provides a direction for further research
which is why i attempted to trace the money flows
in an earlier posting on this thread....

one will need to apply other knowledge to provide
a reasonable explanation for rising stock prices
in a shrinking economy with sp500 earnings at
very low levels and high p/e....

but i certainly am not willing to get my panties
tied in a wad over the statistical aspect because
i think there is a strong prima facie case to be
made for the theory....

in any event the hypothesis is somewhat testable
insofar as qe having a terminal point....

Fri, 09/11/2009 - 21:06 | 67064 long-shorty
long-shorty's picture

You have a good point, but please don't go there, because if they calculate the r-squared value, they might see that it isn't really that high, and worse yet they might stick a p-value on it that suggests some indeterminate, almost statistically significant finding, and then all the ZH staff would have to rally behind the notion that it means a lot even though the number is just a touch above 0.05.

Fri, 09/11/2009 - 21:15 | 67071 Anonymous
Anonymous's picture

indeed- claiming correlation w/o an r-squared is a bit misleading

Fri, 09/11/2009 - 10:33 | 66124 Anonymous
Anonymous's picture

Very astute of you. There IS one more correlation. The April 3rd suspension of FASB mark-to-market accounting rules....right in line with the takeoff of QE.

Releasing hundreds of billions of bad paper asset values into the Galaxy. That'll stoke up a lot of free cash flow.....no ?? Zombies lifted from the grave....no ??

Thus there are more clever ways to juice the QE monetization thing. Pretty soon the zombie banksters will value junk assets at 150% full value. S & P to 1500 !! P-E to the moon !! GO, BABY, GO !!

During the time of the T-Rex ( 6 months ago ) this expectant valuation practice was called "cooking the books".

Marking to myth is the Viagara of the financial world.....despite its very undesirable long term side effects.

Fri, 09/11/2009 - 09:38 | 66057 Anonymous
Anonymous's picture

There is one simple explanation as to why equities, gold and long bonds are all going up at once, investors need a place to retain wealth during the destruction of the USD.

Fri, 09/11/2009 - 10:06 | 66086 Anonymous
Anonymous's picture

this is the dumbest sh!t in the world. yay, two things trended the same way. one of which was guaranteed to trend that way, because the government announced the entire program ahead of time... and the market rallied over that time period. there's no evidence to support such a wild conclusion. there's no reason to go into the reasons that it doesn't make sense, until there is something resembles observations to support such an aggressive hypothesis.

this is almost worse than the "3:30 ramping" tin hat brigade (which doesn't even win in a back test).

and the data in this graph could be completely contained in way less than 1000 "words". maybe a table of 100 numbers would do the trick.

Fri, 09/11/2009 - 16:37 | 66767 Anonymous
Anonymous's picture

Fully agree.
Correlation is not causality.
This is a stats 101 lesson that the TDs should understand.

Without money flow evidence to support the theory the conclusion is bogus

QED indeed

Fri, 09/11/2009 - 18:07 | 66902 Anonymous
Anonymous's picture

didn't you read the headline? are you that inept
to miss the point?

the headline says correlation.....it didn't
say causality...it is an open question to consider
the merits of a hypothesis suggesting a
relationship stronger than correlation.....

and as i described the money flows above there
is plenty of material to work with....

i honestly can not explain a rising stock
market with p/e's as they are in a shrinking
economy.....i agree that the idea of mark to
model may influence some companies' stocks but
not all....

you all are making a mountain out of a molehole
by preening over a gnat's pubic hair....

this is a starting point - not the end...

Fri, 09/11/2009 - 21:12 | 67068 Anonymous
Anonymous's picture

sorry, but the headline says QE is the reason for
Equity market performance.

Seems pretty clear to me,

I think that's simply incorrect.+

Sat, 09/12/2009 - 03:28 | 67419 Anonymous
Anonymous's picture

wrong....let me cut and paste the headline
for you since you didn't take the time to
read it at the start of the article...

"Correlation Of S&P 500 Performance With Fed Monetization Activities Since Start Of QE"

the word was correlation....if you read into
it causality it is because you do not understand
understand the distinction....

Fri, 09/11/2009 - 10:09 | 66088 Bearish Spirits
Bearish Spirits's picture

So anyone else see this ridiculous ramping and shanking of the dollar to drive the markets?  DXY was too low this morning to provide real upside for the market, so it's driven up .3 in 5 minutes to a new intraday high right after making a new low. 

Just more fuel to pump the market as the day goes on.  Virtually identical to what happened before the open yesterday.

Fri, 09/11/2009 - 10:32 | 66121 reading
reading's picture

Where/when does the dollar/market correlation end?  When will the dollars weakness become an uncomfortable level for those invested in US equities?  Does it ever?  If not, I guess I should just go invest in some place like Zimbabwe -- I mean if strength of the currency doesn't translate into anything actionable then I guess I shouldn't care.  I personally have a hard time feeling very good about anything if the value of what I use to buy things is going down the you know what on a the fast track.

Fri, 09/11/2009 - 10:45 | 66139 Bearish Spirits
Bearish Spirits's picture

It probably won't matter to equity buyers until DXY breaks below 71.  Until then, buy everything.  After that, buy commodities.  You can't lose!

Not to mention the "mystery" of much more extreme upward reactions to a slide in the dollar as opposed to the moderate downward reactions in response to a spike.

Fri, 09/11/2009 - 11:13 | 66178 JohnKing
JohnKing's picture

The green shoot theory is that inflation is good for stock prices, as the dollar goes lower it takes more of them to buy into equities. We are sooo screwed.

Fri, 09/11/2009 - 11:34 | 66227 Assetman
Assetman's picture

It ends when QE comes to a total halt and funny money isn't used to by questionably valued assets anymore.  Or it comes to a halt when inflation arrives with a Grim Reaper suit on.

The Fed now is playing a game of chicken with the USD.  If the decline is as slow and controlled as we're seeing now-- then the manipulation is working and there is no need to reverse the QE effects.  As the other commenter astutely pointed out, the DXY breaking 71 is going to be an interesting test, because instability in the currency markets may well be "re-introduced" after such an event.  That 71 level represents some very long term support on the DXY, and braking it may cause some panic.

Stepping back, my hope here is that the Fed/Treasury knows that the monetization strategy can't work long term.  My hope is that, perhaps, they have had the training wheels on this economy since last November-- and are slowly pulling back the training wheels as GDP pops above zero-- to see if the induced recovery can be self sustaining.  I see some evidence of that, but certainly not enough.

What's most disturbing, though, is that while the Fed is monetizing and the dollar is weak, Treasury yields are rallying strongly independent of Fed action.  It's almost as if the monetization strategy has worked so well, market participants are now almost urging it to continue.  That is a pretty scary thought.

Fri, 09/11/2009 - 20:20 | 67008 Anonymous
Anonymous's picture

The Fed's been playing a game of chicken with the dollar since 08. The fact is deflating the dollar is going to pretty much cause the deflating of every other currency, at least if you want to export. The dollar after all is the global reserve currency, so it will bring all down with it, and nothing is going to change that in the next few years.

And that goes for exporting too, nothing in the next few years is going to change the fact that the US eats the greatest share of global imports.

Welcome to deflation folks, and the destruction of the monetarists who are going to bring us with them, deflation is not primarily a monetary problem.

Fri, 09/11/2009 - 10:25 | 66109 Anonymous
Anonymous's picture

People, after QE, there might be negative fund rate to pop up the market. The deflation force is so great, the Fed has no choice. The other nations will follow too.

Fri, 09/11/2009 - 10:59 | 66155 Obnoxio
Obnoxio's picture

David Goldman wrote a good piece about this on his blog:

http://blog.atimes.net/?p=1136

Fri, 09/11/2009 - 13:42 | 66438 ghostfaceinvestah
ghostfaceinvestah's picture

I love his comments.  He was right on about the dollar/equity correlation long before others were.  check out his comments from yesterday.  someone's post above about Zimbabwe was right on.

 

"

I just spent two weeks in the Far East talking to a variety of financial types (although the main purpose of my trip was unrelated to finance). Everyone is sick of the dollar as a reserve currency; everyone foresees a diminution of American power under the Obama administration; and no-one has a clue what alternative might present itself to the dollar.

As I indicated in my last post before leaving, the desirability of American assets depends on their price in a basket of other currencies. A cheaper dollar reprices domestic tradeable assets, e.g., equities, to a world level which no longer is measured in dollars. There is a nearly one-for-one relationship between the value of the dollar index and the price of the US equities index. That, as I observed earlier, is how a banana republic equity market trades."

Fri, 09/11/2009 - 18:19 | 66920 Anonymous
Anonymous's picture

shifting pricing to a basket of currencies is
merely more of the same old bullshit - just a
different set of asses shitting....

us equities should be priced in dollars and
placing them at the mercies of a mongrel basket
of other currencies is no help to anyone....

the same problems with the usa currency as a reserve
currency would accompany a synthetic currency....

the dollar must go as a reserve currency but not
in the way most commonly discussed...

if you haven't guessed that i am a hard money
advocate by now then move along - there is nothing
to see....

Fri, 09/11/2009 - 11:38 | 66238 Anonymous
Anonymous's picture

Can you provide a QE flowchart? It makes my pea brain hurt trying to follow the money flow. Alas, it is hard to imagine who has been buying stocks. This sounds as good as any idea.

Has the fed invented a perpetual prosperity machine?

Why does it ever have to stop?

Fri, 09/11/2009 - 11:45 | 66250 Anonymous
Anonymous's picture

I would be curious to see if this seems cointegrated or spurious? I mean, other increasing stuff, e.g. probably the air temperature from March to August, also correlate well with the S&P500.

Fri, 09/11/2009 - 11:51 | 66257 Miles Kendig
Miles Kendig's picture

Too bad John D. MacDonald is not around to spin another great Travis McGee pulp.  Perhaps the Green Cotton Helicopter..

Fri, 09/11/2009 - 12:00 | 66274 Anonymous
Anonymous's picture

Will they ever be able to pull the QE funds back out, or does it not matter if they stay in indefinitely? Is there anybody out there who really understands where all this might lead? Would the Great Enlightener please step forward.

Fri, 09/11/2009 - 19:24 | 66962 Anonymous
Anonymous's picture

They cant pull them out because they bought magic dissolving invisible crap with them. It's like magic beans but you dont get the giant and the beanstalk, just gas.

Fri, 09/11/2009 - 12:07 | 66291 Anonymous
Anonymous's picture

Your argument is interesting but I'm not completely following the logic based on the facts offered.

You say "As a reminder: the most recent reading of Total Deposit Reserves was... $886 billion dollars: An almost dollar for dollar match with the increase in Securities Held Outright of $917 billion."

But isn't what matters for this argument whether there has been an INCREASE in Total Deposit Reserves matching the increase in Securities Held Outright? If TDR are roughly equal now to what they were prior to QE, how does you argument hold?

Fri, 09/11/2009 - 12:23 | 66306 Anonymous
Anonymous's picture

That graph looks like it could star in its own porn flick.

Mon, 05/23/2011 - 06:30 | 1301314 jackiboa
jackiboa's picture

I will forward this article to him. Pretty sure he will have a good read. Thanks for sharing!
Buy Assignment
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Fri, 09/11/2009 - 12:53 | 66352 SWRichmond
SWRichmond's picture

Will they ever be able to pull the QE funds back out, or does it not matter if they stay in indefinitely?

I'm no great enlightener, but I have a beer with him every few weeks so I'll give it a shot.  Your observation above IMO is key to the future.  The simple answer is: No, they will never be able to pull the QE funds out.  Here's why: in this case, the QE funds were used to buy a small portion of two asset classes that have both a dim future and a significant political importance, namely: Treasuries and MBS.  The only reason these securities have value is because of Fed support.  Unless the Fed owns all of these, any move by them to sell them will, absent a significant economic recovery providing real price support, crash the value of the remaining pool of non Fed-owned securites.  In other words, the Fed's balance sheet is too highly leveraged, both economically and politically.  I believe this combination wil prove fatal.

Fri, 09/11/2009 - 13:34 | 66422 Anonymous
Anonymous's picture

Thank you for that. So if I understand you correctly, the Fed is using QE to put a floor in the market for securities that nobody wants and the price of which would otherwise spiral into the abyss. To do this the Fed prints money up at effectively no cost and buys a load of worthless junk that nobody else wants from erstwhile insolvent banks.

The banks receive the loot, and buy government paper which keeps bond prices high and yields low and, since the entire planet is apparently run by bookies, punts some of it on the market, thus pushing up stock prices. The job seems to be a closed loop, with apparently benign consequences so why should it prove fatal?

Fri, 09/11/2009 - 14:48 | 66549 SWRichmond
SWRichmond's picture

Because it is a lie, and an economic system cannot survive long term on lies.  Questions are already arising; evidence is building that our ability to fund our deficits by borrowing and printing is coming to an end.

If you read about Argentina, their system devolved into similar lies accompanied by incredible systemic corruption.  Americans already are providing indications they're not going to stand for it.  Authorities are ramping up their goon squads in response; the stage is set.

Unlike Argentina, however, the USD is the world's reserve currency.  Our lenders are no longer willing to support our habit. 

Are you the same anonymous ( http://www.zerohedge.com/article/correlation-sp-500-performance-fed-mone... ) I replied to above with this?:

"The scenario you describe, where no one shouts "The Emperor Has No Clothes!" is possible, ONLY under the following conditions:

  1. ALL central banks agree to debase somewhat equally.
  2. The global man on the street never loses faith in paper currencies.

It's vital to understand that this is precisely what is aimed at and hoped for by central bankers, intellectually supported by mainstream economists and monetarist think-tankers, and incessantly regirgitated by B schoolers everywhere.

I am determined to not let them get away with it."

Printing currency is theft, and everyone knows it.  Americans are indicating their willingnesss to do something about it.

Fri, 09/11/2009 - 15:47 | 66651 Anonymous
Anonymous's picture

No I am not. I am a first time anonymous. Maybe I should register - do I still have to solve those pesky maths questions? What you write makes a lot of sense to me, and it correlates with what common sense would suggest.If all we had to do was to print and borrow money, life would be quite acceptable.

However, it is amazing how markets stubbornly deny one the "I told you so" moment. How right Mr Keynes was when he remarked that they can remain irrational far longer than you can stay solvent. Have you any thoughts on timescales?

Fri, 09/11/2009 - 23:11 | 67242 SWRichmond
SWRichmond's picture

Re: timescales.  I wish I knew.  The thing is this: I believe this government will stop at nothing to stay on top.  I believe they will change laws more aggressively than they already have.  IMO we are already living de facto economic martial law.  A long time ago on another blog (Mish) I speculated that "they will do everything we can think of and lots of things we can't".  They will do them until we MAKE them stop.

If you've read any of my other comments you know I see this as a political crisis much moreso than an economic crisis.  Honest money is a political issue.  The Fed and its actions are a political issue.  Borrowing trillions of dollars and signing citizens' names on the loan forms is a political issue.  Borrowing $787 Billion and giving it to Wall Sreet over 100:1 popular objection is a political issue.  Dems and repubs both voting for the bailout(s) reveals the magnitude of the political issue we face.

How long can they keep it up?  I still expect a long (18-24 month) period of deep and painful deflation that will seem never-ending.  I expect a currency crisis to follow that, triggered either by a default due to deflation-induced tax revenue collapse or one too many helicopter drops onto the banks.  It would be the worst possible scenario: deep deflation to rob you of your livelihood, savings and hope, then a hyperinflationary explosion of ~40% devaluation of USD in a short period, perhaps hours, followed by an extended, steady additional devaluation as the USD loses once and forever its place as reserve currency.  The net effect is to make everything you need cost more than you have.  This period will be defined by loss of lifestyle.

Why am I so gloomy?  We have been living in a credit bubble for the past 25 years.  Credit bubbles make everything easier than it should have been.  Now we're going to make up for it through everything being harder than they should be.  It's a very simplistic view, I'll admit.  Someone convince me I'm wrong, without idiotic monetarist theory.

Sat, 09/12/2009 - 03:58 | 67430 Anonymous
Anonymous's picture

No hope then. I shall reach for the revolver and the whisky bottle shortly. In the meantime, where can I buy a printing press? Good luck.

Fri, 09/11/2009 - 14:15 | 66495 Mazarin
Mazarin's picture

Current Total Market Value of the S&P 500 is ~10 trilion.

So figure $1 trillion per 100 pts.

QE of nearly a Trillion + other Fed lending programs X leverage is plenty to float Naz/S&P/Dow rally from March.

Fri, 09/11/2009 - 14:20 | 66509 mannfm11
mannfm11's picture

The SPX is worth roughly $8 billion a point. 

Fri, 09/11/2009 - 14:19 | 66506 mannfm11
mannfm11's picture

This is bunk. According to Fed Statistics coming into this week, Federal reserve credit had declined $183 billion year to date. The Fed started monetizing in 2007, but really in 1913 when it was started.  You might note the Dow was down 3500 points from its close on 9/8/07 and well over 4000 points from its peak and nearly 2000 points year over year.  There was TARP, TALC, TALF, XYZ, ABC and every other imaginable program along with the Fed floating the entire bear portfolio and the GSE's. 

Fri, 09/11/2009 - 14:39 | 66538 Ducky
Ducky's picture

They threw the book at this one. Relaxation of mark to market when Barney Frank publicly threatened FASB was also a big cause in my book.

Fri, 09/11/2009 - 15:48 | 66656 Anonymous
Anonymous's picture

So if this is Fed liquidity flowing through the banks, does it follow that if the market tanks, the banks will be eating it a lot of the losses? And the bank crisis will become much more acute again?

Fri, 09/11/2009 - 22:09 | 67158 Anonymous
Anonymous's picture

Can you post the data. I'm analyst and I want to run with thesem theme?

Fri, 09/11/2009 - 23:53 | 67298 Anonymous
Anonymous's picture

It will all stop when Geitner says sell-take the profit
and then pay us back----but the banks will keep the profits and ask for more money to trade with!!

Then Geitner must say "no mas"---or will he?

Fri, 09/11/2009 - 23:56 | 67303 Anonymous
Anonymous's picture

It will all stop when Geitner says sell-take the profit
and then pay us back----but the banks will keep the profits and ask for more money to trade with!!

Then Geitner must say "no mas"---or will he?

Sat, 09/12/2009 - 06:20 | 67465 Anonymous
Anonymous's picture

Go to Previous message | Go to Next message | Back to MessagesMark as Unread | Print ReplyReply AllMove...airbuscds jerseycvkarenrisk management, may...screen saving intern...winnebago
Flag this messageCorrelation Of S&P 500 Performance With Fed Monetization Activities Since Start Of QESaturday, September 12, 2009 6:12 AM
From: This sender is DomainKeys verified"David Blumenthal" View contact detailsTo: aberock@optonline.net, chrispalikuca@mac.com, dblumenthal@yahoo.com, eileensc@optonline.net, "Sharon Gazley" , "Ramesh Nuti" , onestein@fnguide.com, "Ishtmeet Sahni" , "Jerry Salerno" , "Sanjay Sukhrani" , "Randall Thomas" , "lisa weintraub"
... moreCc: letters.editor@ft.com, martin.wolf@ft.comcould QE just be a back door subsidy for wall street. don't forget the additional trillions the fed is going to spend on their worthless mbs and cmbs ensuring them a profit with your tax dollar. Of course if the assets have problems you'll be on the hook. the funny thing is that there are actually people who still believe the Fed isn't held captive by wall street and is actually working for the interests of the American people. Or they just have no problem spouting lies. Of course the fed is going to pay fair value for these assets (not). already in England it has been revealed that the government is overpaying for the crap. You think it is going to be any different here. Esp with the revolving door between govt and wall street. You think the guy at fed (Dudley/Goldman) is not going to overpay his old friends give me a break.

As multiple sources have pointed out insiders are selling in mass, but the market keeps rising and citizens have actually been pulling money out recently. Of course our government can't be seen as "buying stocks" to help out wall street. so they do it via a back door Fed policy you don't know about, that has no oversight. Most likely this is happening via the prime dealers. Of course if they bought directly wall street would be getting as much as a bonus, so we can't have that now can we. Now all of that free money is killing the dollar and destroying the savings of hundreds of millions of americans. remember ony 49% of americans own stocks and the vast majority only a tiny amount. so while you get no interest and your currency is gutted the Fed is spending trillions (of your money )restoring the wealth of the top few percent of the country.

As I have shown before credit continues to tighten to this policy isn't getting passed on to the real economy. Some folks like to call it a stimulus, but that really isn't the word. More like an under the table hand out with tax payer money, no oversight, with a huge percent diverted into the bonus pool. while real incomes drop, uncle SAM is giving them all Free money for their pockets. Note they are doing almost nothing to to help you. If they lend you a hand it is always in a manner that wall street gets its cut. they don't give you money to lower your debts, they actually pay banks to modify your mortgage. Note if they don't alter it anyway and they have to foreclose they loose tens of thousands of dollars.

This is why a growing number of people are actually starting to realize they only way to enact change is going to be via civil unrest. For those who are students of history I suggest you read about the french revolution. They decided to cut off their heads and overthrow the government for events that are disturbingly similar to what is happening now. Nial Ferguson (Sp) has a piece called the history of money on PBS. that's how I know this and I don't think even the FT would have problems with that source

Sat, 09/12/2009 - 06:57 | 67471 irongate
irongate's picture

so if QE lifted the ess-n-pee 50%...........   what happens when they exit QE??

Sat, 09/12/2009 - 09:50 | 67539 Anonymous
Anonymous's picture

Ghostfaceinvestah,

Can you please explain more about the MBS purchases and how one would track them? Thanks in advance.

Justin Here

Sat, 09/12/2009 - 10:15 | 67552 rapier
rapier's picture

One minor quibble. The money is inflating financial assets. The greatest cognitive blind spot in our 22 year adventure in monetary and credit ease is that asset price increases are not inflation.  Rather always refered to as increasing value.

Financial asset price increases about GDP increases are inflation. One little considered fact is that financial asset price increases and the mechanisms supporting that increase have become embedded in the GDP number itself. Creating a beautiful virtuous circle,for the beneficiaries. Meanwhile the parasites are driven into poverty.

 

Sat, 09/12/2009 - 11:51 | 67621 Translational Lift
Translational Lift's picture

There ain'r no there there........

Wed, 11/03/2010 - 04:32 | 695266 Susancai
Susancai's picture

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