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False Alarm: Morgan Stanley Recants From Its Expectation Of A QE2 Event In One Week
Today's peculiar stock trading action was exclusively due to Morgan Stanley's previously highlighted expectation that the Fed would announce QE 2 in one week (and had nothing to do with Hatzius' announcement that there may or may not be a November event: Hatzius has been claiming this for two exactly months running now, for all those to whom this may be news). Which is why David Greenlaw's just released announcement which essentially eliminates MS' expectation of a hike may wreak some havoc on stock prices tomorrow (and potentially gold, although now that it has passed a new psychological level, we think the odds of that happening are modest). Quote David Greenlaw: "we now believe the likelihood of additional easing being announced at the Sept FOMC meeting is quite low (perhaps 10% to 20%)." Sorry, no QE2 for at least two months, and most likely not until January, but which point it will be too late to do any actual good to the economy (but not to surging gold prices).
The minutes from the August FOMC meeting indicated that "the Committee would need to consider steps it could take to provide additional policy stimulus if the outlook were to weaken appreciably further." Bernanke said pretty much the same thing in his Jackson Hole speech. Up until a couple of weeks ago, we believed the odds of additional monetary stimulus being implemented at the Sept meeting were relatively high (close to 50%). But, the probability declined in the wake of the latest employment report and continued to decline up through and including the retail sales report that was released this morning. So, we now believe the likelihood of additional easing being announced at the Sept FOMC meeting is quite low (perhaps 10% to 20%).
Nonetheless, those who have listened to MS and purchased rates vol insurance in the form of Variance Swaps are already modestly in the money.
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The Fed went to Costco last weekend and forgot to buy toilet paper. Oh well - we'll have to wait for QE2 after their next trip.
Wrong. The Fed makes toilet paper, then purchase it themselves, when they feel like doing so/need to do so. No need to go to costco for toilet paper for them.
What does it matter whether they officially announce it if the assumption that the fed increases the liquidity during options expiration week is true?
"Today's peculiar stock trading action was exclusively due to"
Nice, now all we have to do is figure out the exclusive cause of all the peculiar trading action going forward... and backward.
nice pic. and i'm not being sarcastic which i'm told i have to say now.
Go back to your home on whore island... !!
and the pomos are what? qe 1.999?
http://www.washingtontimes.com/news/2010/feb/25/bernanke-delivers-warning-on-us-debt/
"JKLOL", said da_Beard in a text message to t1ny_t1m later that same day.
Sept was too soon. It has to be closer to the elections. WTF, you think voters will remember 2 whole months later who gunned the stock market up way back in Sept?
October surprise, baked into the cake, just in time for Nov.
+1271
Politics trumps all in the election pre-season.
one reason is to "buy low sell high." for many i understand "the idea of the world's most powerful central bank making money" is anathema. "they should lose money so they can be more predictable" and i don't argue with the rightness of this point. my only point is "if you're a trillion in the hole you might want to fix that." one way is to "try your hand at the craps table and monetize the equity market." sound crazy? interstingly....it's been done before "by an expert DURING the Great Depression."
Doctors say that Nordberg has a 50/50 chance of living, though there's only a 10 percent chance of that.
FASB 666 for the MF'ing WIN!!! LOL.
Still, there's nothing like a good unsubstantiated rumour to shake up the markets. Let's see what the next two days of Pomo sales do now.
Dollah's been junked.
Yeah, when I heard that I was thinking op-ex week hijinks - looks like it was MS's turn at bat.
"Dollah's been junked"....
Dollar is about to park its "junk" deep up the tail end of all the Dollah Bears. Options Expiration asswhooping served on a golden platter.
you're an interesting one.
Okay, so when did MS officially announce there was a good chance of more monetary easing?
This is only a test of the "emergency QE2.0" system...I repeat...this was only a test...
They just wanted to see how all of those Keynesian aggregates would react. After all, they are an animated bunch.
And now, back to our original programming.
There will be no double-dip!
Whatever happens instead, we will muddle through!
We will not monetize the debt!
/any more?
Krugman is gonna flip a bitch...
From the article today on Zerohedge,
"We see considerable risk that the Fed may open the door to QE2 at this September 21 meeting despite the stronger-than-expected August payroll results and even if upcoming economic data stabilize."
Lastest,
"But, the probability declined in the wake of the latest employment report and continued to decline up through and including the retail sales report that was released this morning."
"money comes in on slippers, not tank treads." to announce is to defeat the purpose...or worse.
What if they have already agreed to do the stimulating through even more aggressively supporting the equity markets? Of course, they can't openly admit it, but a nod and a wink here and there. The problem is, even though they are trying to keep people in the markets through phony positive numbers, retail investors continue to sell and get out. So, the banks keep suggesting the QE2 is on the way (it isn't, as the Chinese and the oil rich nations have told the Fed that it is not allowed) in order to further convince people to stay in the game?
It could get quite messy from here on in, as the number fudging is getting more blatant and the banks are getting nervous. Retail investors are increasingly drawn to PMs, which is a clear sign of the failure of the plan to stimulate anything.
The movement in prices suggests that the Dollar is looking ugly. A sharp rise in gold does not mean that the deflation argument has been beaten, but rather that we could be going from deflation to hyper inflation
"in order to further convince people to stay in the game?"
WTF ? ...70% of the volume is program and HFT, there are few "people" left to keep in the game. The Federallies are defending DOW 10,000 along with their legal right to create the allusion of recovery and an "orderly" market... at any cost.
"the banks are getting nervous." YA THINK!!! Back in the day it was "A Man" who bought you. Now they just "put his name on a bank." Needless to say "HSBC is still interested in shareholder return" so "they don't just buy everybody to solve the problem." Unlike say Bear Stearns or Northern Trust "you have to be solvent first before we'll take a look."
OT: Anyone see the close in Nucor? After a flash crash during the day, the dumped the stock on the close...
"Anyone see the close in Nucor?"
Yeah, and CLF, AU, USO... Option expiration blood bath anyone?
"Anyone see the close in Nucor?"
Yeah, and CLF, AU, USO... Option expiration blood bath anyone?
Everyone is using Trade The News' pump and dump business plan: Load up on a position, disseminate lie in various stages, sell position into lie, short position, recant lie. This is beyond fucking horrible and cannot possibly end well at all.
As REITs puked into the close I went long some SRS calls @ $22 strike for Oct 16th.
Too close to the elections for anything as big as QE2. Too close to bonus time.
it ain't easy being a politician. try being a corrupt one while we're at war....
What was today really about?
Two companies, MS and GS, both had comments about significant QE coming in the near future, but both turned out not to be true. One by error of the company and the other by a reporter.
So, in terms of Morgan Stanley, why did they recant?
A.) As they explained above
B.) It was all a setup to sell current gold shares or open shorts.
C.) It was to bump up gold to new highs to create a technical breakout.
D.) MS truely believed the fed was going to do another QE program, but the Fed called them and said no to clarify.
E.) MS was right and the fed was going to do another QE program, but the fed called it off after seeing what happened.
F.) The fed was testing the waters. Fail.
G.) Just trying to inflict pain on JP Morgan.
H.) Other
Regarding the GS BS. I would like to know where the WSJ reporter got his details and how they were transcribed.
This market is full of baloney.
Probably thought that since there was no Pomo sale today, they could ramp retails enthusiasm and sucker in some for the sales over the next two days. No holds barred fight (or fraud) to bring cash back into equities.
Poor hedgies are starving to death, as the 800 pound gorillas (HFT's) are skimming all the peanuts.
"What was today really about?"
Another failure at resistance on weak volume.
maybe the Fed is buying their stock, too?
Or something simpler: the investment banks desperately need help to make their quarter and possibly their year, forex, FI and commodities are the easiest assets to gun given the sensitivity to QE. And its triple witching day this week. Don't think the WSJ reporter made a mistake, it was calculated (by someone). The Fed is famous for intervening just before opex too. Get use to this state of hyper volatility (and rumors) - its characteristic of a looming crash, a la August 2007 when groups of stocks move up and down 20% a day and quants make a billion one day, lose 2 billion the next. After the mid term, we will start hearing of blow-ups a la Jerome Kerviel. That would be signal of the end.
indeed it would. the only thing left to add would be a "who da tiff?" comment like out of some dime store police novel.
Geithner must've called
Try to ask ms about the piece they sent out few weeks ago on the possibility of government defaults. They deny it pointed to the risks of sovereign defaults and said it was only a broad speculation and that they view sovereign defaults as highly unlikely - although the headline of the piece was Ask not when governments will default - but how.
Guess being a primary dealer restricts what views you can hold.
I found lots of interesting information here. I love zerohedge.
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