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Will QE2 Impact Equity Market Fundamentals: Consensus And Fringe Views

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Sat, 10/30/2010 - 13:06 | 688007 BeerGoggles
BeerGoggles's picture

Our year-end 2010 price target for the S&P 500 remains 1200.

Sell signal?

Sat, 10/30/2010 - 13:37 | 688026 Caviar Emptor
Caviar Emptor's picture

The vicious cycle continues. 

Spending valuable remaining resources so that we can continue to buy more iPads and crap we don't need from China (and send them our offshored jobs). Maintaining corporate welfare for US firms doing business overseas. Supporting US buyers of Korean flat screens, Italian suits, German cars and Saudi oil. Supporting TBTF financial institutions that keep raising their executive pay packages but charge 18% for consumer credit and keep raising fees. And best of all, providing capital that spends 0 time finding its way to emerging markets. 

Somehow, supporting this reckless pattern is the Fed's vision of a vibrant economy. 

That's what's keeping the biflationary vicious cycle alive and well. GS agrees with me that rising input costs can't be passed on to constrained consumers in this economy, eroding margins as we're seeing already with Apple, Proctor and Gamble and 3M this week. Look for further margin erosion. And I think (domestic) sales will disappoint as biflation reduces discretionary income.

Sat, 10/30/2010 - 14:08 | 688058 snowball777
snowball777's picture

Imagine what could have happened to the demand side if we'd taken say $1.6T and used it to give everyone in the US $500,000 each instead of these 5 banks and their sycophants.

The banks would get most of it anyway, but they'd be whole and have better reserve levels.

The only real losers would be the servicing industry who would have to find real jobs where they like read the documents they sign and stuff.


Sat, 10/30/2010 - 15:05 | 688128 buchesky
buchesky's picture

Except that you would only be able to give each person in the U.S. $5,000 not $500,000 if you had a pot of $1.6T.  Plus, I'm not sure why a massive transfer of wealth from the most productive to the least productive would create growth.  Better to give back the expropriated wealth to the original owners who know how to invest it...

Sat, 10/30/2010 - 15:24 | 688150 snowball777
snowball777's picture

investment == productivity. hahahahahahahahaha.

Sat, 10/30/2010 - 14:53 | 688114 Careless Whisper
Careless Whisper's picture

since zerohedge has been silent on this topic (could it be those ad revenues from goldman?), here goes;

Feds File 65 Page Motion To Keep Goldman Trial Secret; Need To Protect "Victim's" Trade Secrets That Admittedly "Can Manipulate Markets In Unfair Ways"


and the feds seek to exclude lots of evidence:

In particular, the Government moves to preclude
evidence of the following topics: (1) the financial crisis and
recession; (2) the mortgage market and mortgage securities; (3)
Goldman Sachs’s receipt of funds from the Troubled Asset Relief
Program (“TARP”), or “bailout” funds; (4) the Goldman Sachs bonus
pool, and bonuses and salaries paid to Goldman Sachs employees
generally (as opposed to salaries of programmers or comparable
employees relevant to this case); (5) public statements by
Goldman Sachs executives other than any referring to the subject
matters in this case; (6) civil and regulatory proceedings and
dispositions of matters involving Goldman Sachs, including the
litigation, settlement, and underlying issues in Securities and
Exchange Commission v. Goldman Sachs & Co., no. 10-cv-3229 (BSJ)
(S.D.N.Y. 2010); and (7) investigations of and proposed
regulation of high-frequency trading by the Securities and
Exchange Commission, the Commodities Futures Trading Commission,
and/or any self-regulatory organizations.

and they want to outlaw any evidence of alleged criminal frontrunning using highfrequency trading:

In addition, the legality of highfrequency
trading is not an issue here, and investigations of
high-frequency trading and proposed government regulation is not
probative of the charges in the Indictment.


Sat, 10/30/2010 - 18:59 | 688346 tom a taxpayer
tom a taxpayer's picture

Thanks, Careless Whisper, for exposing this outrageous example of the govt's misplaced priorities in prosecution, and the govt doing Goldman Sachs dirty work. Instead of prosecuting  Goldman Sachs the most powerful mafia in America, the DOJ is prosecuting a lowly soldier who may have taken one of the mob's secrets to screwing investors. 


What is Kafkaesque is the DOJ is vehemently defending Goldman Sachs secret program to manipulate markets.

Sat, 10/30/2010 - 17:24 | 688244 RobotTrader
RobotTrader's picture

Yet another piece of worthless research from Goldman.

Who much does this Kostin guy get paid?

How many on his staff?

Really, the only thing that matters is price and momentum.

I'm amazed that these guys get paid all this money to come up with these fancy Powerpoint presentations, graphs, charts, data, etc.

None of this crap is going to give him a clue as to where stocks are going.

He doesn't know where stocks are going beyond next week.

I don't either.

But it is not that hard, just follow the meatball on the 15-min. and daily chart, analyze the sentiment readings and that is really all you need to know.


Sun, 10/31/2010 - 10:30 | 688847 RockyRacoon
RockyRacoon's picture

At least they generate their own charts -- not posting charts from other sources.

Know anyone like that?

Sat, 10/30/2010 - 17:42 | 688263 deadhead
deadhead's picture

How come no "bearish" case for equities from GS.....


Let's see...


USA broke, bankrupt.

states too.

the TBTF banks are near insolvent (read historical info on major bank crises, start with Rogoff and Reinhart's "This Time It's Different".  The MBS fiasco and foreclosurefraudgate are going to strip away many billions in profits/loan loss reserves.

structural unemployment in the u.s.a.

Housing in the USA is dead.

did someone say something about overleveraged consumers


this mess will take years to sort out.  it's a secular bear and, as is usual, the cheat street crowd needs more players to keep the ponzi going.  this movie has played before.

Sat, 10/30/2010 - 18:25 | 688296 PBRmeASAP
PBRmeASAP's picture

I am Financial Advisor in Upstate NY and all I can tell you is that Smart Retail (You know "the Millionaire Next Door" Types) are re-allocating out of Bonds into Stocks & Real Estate (albeit slowly). 

A typical small business owner with a million bucks in his/her account (50/50 Stock Bond Allocation) is sitting on 50 grand in cap gains in their $500K bond portfolio.... When they take into account that those Bond Cap Gains are going to dis-appear as the Bonds mature at par... they KNOW that their actual YTM based on the current price of the bonds (1-3 %) is in fact lower than the Dividend Yield in their Stock Portfolio...

No Brainer- Dump Bonds into the next round of QE and swap into higher yielding equities. Common Sense and it'll happen.  Slowly dump bonds and buy stocks over the next year or so. Hey ZH friends... Maybe, just Maybe, thinigs will be okay....

Of course all the schmucks in 401(k) land will keep pouring money into bond funds and get creamed... But Upper-Middle Class and above will get the ball rolling again even as rates rise after QE2 ends.

Which is why Goldman is wrong about QE- It will push lots and lots of dough into Equities.


Sat, 10/30/2010 - 18:57 | 688340 DR
DR's picture

Well this 401k schmuck is pulling out of equities next week. I'll leave it to you and your rich friends to play against the algos....

Sat, 10/30/2010 - 19:12 | 688362 PBRmeASAP
PBRmeASAP's picture

Well I guess it depends on what your rich definition of rich is!

I'm talking about the local pool-cleaning business owner who works 90 hours a week and lives in a middle class neighborhood, makes 150k a year and has saved some dough over the last 35 years... I don't take Leveraged-McMansion-Owners as clients.

If you pull out of equities in your 401(k), I hope you don't buy long-term bonds!

Sat, 10/30/2010 - 19:18 | 688365 PBRmeASAP
PBRmeASAP's picture

As to the Algos... well i'm just as pissed of about them as you are... but Great Companies trading at around 11x Earnings, Yielding more than Govt Bonds, with Good balance Sheets?  No Brainer Buys... The Algos will eventually inplode themselves and Sanity will prevail. May take 20 years, I admit! 

Sat, 10/30/2010 - 18:40 | 688311 mynhair
mynhair's picture

No gold, bitchez?

Sun, 10/31/2010 - 11:17 | 688874 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Triple post?!

Sun, 10/31/2010 - 11:18 | 688876 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Triple post?!

Sun, 10/31/2010 - 11:16 | 688877 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

As far as I can see,current market sentiment has precious little to do with fundamentals such as earnings or P/E's it has however, everything to do with the prospect of QE11 and how first quarter earnings in 2011 turn out and then the prospect for further QE.No it isn't going to end,because Mr Market knows it has the Fed now,it will want QE for perpetuity now just like it has got ZIRP stretching into the horizon.Any sign that QE is going to end or even be curtailed would result in a flash crash of such magnitude that the Fed would be forced to support the market and immediately announce the next stimulus package.SO what would be the point?It may as well just do it upfront and avoid the inevitable "tantrum" the market would throw.It will give the market,like the proverbial spoilt child, exactly what it wants.It has this last week even sent out a "wish list" to the PD's as to how much money they would like them to print up in the forthcoming QE1.The shear fraud and brazen corruption is now entering a phase where they no longer pretend that the government is deciding economic policy any more and don't even try to cover up the transfers to Wall St banks.

If you think QE will end when the Fed sees a pick up in the economy,ask yourself this one question - "when do you think the US economy and the US Govt could afford the interest payments if interest rates rise to just 5%?"

Sun, 10/31/2010 - 11:58 | 688907 mclee
mclee's picture

Can you upload the whole report like you used to be ? Anyways, thank you so much it is useful.

Sun, 10/31/2010 - 16:18 | 689308 urrterrible
urrterrible's picture

Gold Bitchez!

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