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Where We Are and Where We’re Going (Week of September 17 2012)
Swing by www.gainspainscapital.com for more market commentary, investment strategies, and several FREE reports devoted to help you navigate the coming economic and capital market changes safely.
On Thursday last week, the US Federal Reserve announced QE 3: a program through which it will purchase $40 billion in Mortgage Backed Securities (MBS) every month going forward.
Given the close proximity of this move to the European Central Bank’s (ECB) “unlimited” bond purchasing program announced the week before, the Fed’s move should be taken as a coordinated Central Bank intervention. Thus, we have both the ECB and the Fed going “all in” on their efforts to support the Global Financial System.
This decision will not be without its consequences. Inflationary pressures were already high in the US and around the world. They will be going higher as a direct consequence of the Fed’s move.
Indeed, Oil is back at $100 per barrel. Gold has broken out of its wedge pattern and will likely hit new highs before year-end. And Agricultural Commodities are approaching records due to both severe droughts in the US combined with the Fed and ECB’s announcements.
The Fed has never been good at anticipating the consequences of its actions (see the Arab Spring that resulted from QE 2’s impact on food prices). So we have to ask ourselves, “has the Fed gone too far this time in its efforts to boost stock prices?”
Our initial view is “yes.” Stocks were already at four-year highs before QE 3 sent them soaring. Our primary concern now is that by announcing QE 3 at this time, the Fed has removed the primary driver of stock prices: the anticipation of more Fed intervention.
Remember, the NY Fed has admitted publicly that without the investor anticipation of Fed action, the S&P 500 would be at 600 today. Thus, by making QE 3 an “open” or “unlimited” program, the Fed has removed this anticipatory effect as going forward investors already know what the Fed will be doing in the future.
Moreover, this open-ended intervention has dramatically raised the bar for any future potential Fed action. Barring a systemic crisis or the collapse of a major bank, the Fed’s hands are now tied due to it having an ongoing intervention in place.
Which leads us to the multi-trillion Dollar question: what if this QE program proves to be a dud? What if the Fed, by announcing such a program, has not only removed the anticipation of future Fed action, but has in fact played its hand too far?
After all, stocks are now extremely overbought and due for a correction. What would a correction do to investor perception of the Fed’s abilities coming so soon after a new large program such as this?
These are the issues to consider going forward. Our view is that it is quite possible the Fed has played its hand too strongly and thereby damaged its future efforts to maintain market stability via intervention. Given that stocks were already decoupled from the underlying economic realities, this has made the market highly vulnerable to a sharp correction.
And then of course, there is the coming inflationary storm to consider.
Swing by www.gainspainscapital.com for more market commentary, investment strategies, and several FREE reports devoted to help you navigate the coming economic and capital market changes safely.
Phoenix Capital Research
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I'm sorry, I can't believe Tyler lets this guy contnue to post
his article - while reiterating his sales pitch for his premium content service - doesnt even have the honesty or humility to even mention that he TOTALLY FUCKED UP for months and months on end, emphatically exhorting every day, day in day out, that there would absolutely uncategorically be no further QE
I wasnt dumb enough to believe him, thats not my greivance - and my issue isnt that he got it wrong - folks are allowed to get things wrong. But when you make judgement calls so utterly black and white, with unmitigated conviction, you have no credibility - especially when you then gloss over it. Conviction is directly proportional to your credibility. Give your subscribers a refund, dude.
Tyler, this guy discredits your website. Next.
The answer is, "No." They need to go much further. As long as you are hedged with oil and PMs why should any CBs balance sheet expansion bother you?
For the people who do not protect themselves, they need to educate themselves & read ZH more often and pick up a copy of the Jekyll Island book, Peter Shiff's books, etc.
A really good beginner's book is:
The Secret World of Money [Paperback] Andrew M. Gause (Author)http://www.amazon.com/Secret-World-Money-Andrew-Gause/dp/0965658902
Read it in one night may save your wealth forever. There are so many good reads ZH should have an open thread every once and awhile so readers can share their best reads.
Live long and prosper my friends and much thanks to all writers at ZH!
To sume it up. If you're not stocked up with bullion, bullits, weapons and food, fuel and water and have a bug out location you are pretty ,much screwed.
To sume it up. If you're not stocked up with bullion, bullits, weapons and food, fuel and water and have a bug out location you are pretty ,much screwed.
To sume it up. If you're not stocked up with bullion, bullits, weapons and food, fuel and water and have a bug out location you are pretty ,much screwed.
Oh I'm sorry he got a new crystal ball -- carry on
I thought this phoenix was dead and buried with the no qe3 chant?? Maybe he figures he was right since it is qe to infinity and not qe3???? This punk has shutzpah I'll give him that much but he aint getting my subscription money!!!!!
WTF? Two posts from Phoenix within 24 hours all with the same message (that has been dead wrong for 4 years) ? Tyler you're fucking with us now aren't you? There is no "Graham Summers" now is there? It is you in a disguise trying to change into Jamie Dimon in a phone booth. Come clean, Tyler.
Another worthless article from another worthless "analyst".
QE is about keeping the bond market from crashing. It has nothing to do with stocks. Stocks are an "aftermarket" consideration by those receiving QE dollars for their increasingly worthless bonds.
Bennie's job is to keep a 100 trillion dollar bond market inflated when the underlying economy is sliding into the toilet. Only way he can do that is print currency and buy the shit, creating artificial demand, keeping prices up (and yields down).
That's it, plain and simple. His job in a nutshell.
And with everybody issuing debt fast as they can run their bond printing press, that 100 trillion dollar bond market gets bigger way faster than Bennie can run his dollar printing press.
So yea, it's all gonna crash one day, nobody knows when exactly
...but the dollar's crash might be the trigger.
on another note, i was hoping gs and phoenix capital had put together a free phamplet outling the steps i could take...
No problem; Benny can just bail out the FED with an inside round of QED. Quanny-Ease-Direct.
now that draghi drag puts Eurobashing in limbo; now that QE-3 has come; now that CHina rivals with Libya-Sudan in churning up hate froth; we have Summer, fall and winter who tells us that after no QE we will have DUD qe.
There is no correction coming in this non-market. They will print as much money as it takes, and intervene where ever needed, to keep the pension systems and the banks solvent. This guy didn't see more QE coming. He can't see the next round coming after this. If Japan could not stop after 20 years, are we going to stop after 4 years with a much bigger problem? This is just the begining.
FED is buying toxic waste from the banks (MBS). Thus attempts to prevent a bank collapse by taking the shit on its balance sheet. As long as the masses are in the red as they are, it is unlikely that the money will find its way out of the books of the banks. This round of QE may not be inflationnary, not before a while at least, as long as it stays focused on MBS. So, it could lead to severe corrections in every asset classes, including PMs, for having removed the anticipation effect, until it is known that the Fed is also massively buying Treasuries or bailing out Europe.
I'm really puzzled right now.
Next big move may be the debt ceiling, if debt gets downgraded again during the circus.
The power elite knows something I don't.
Here's an idea. Whenever ZH posts one of these Article-tisments, we should ignore it. Don't click through to the full "article" and certainly, do not comment. If you're curious you can always go to www.gainspainscapital.com.
Let me add: GS is a self promoting hack on par with Martin Weiss.
But the comments sections to the Graham Summers - Phoenix Capital articles, have long been among my favourite humour sections on ZeroHedge!
Graham Summers has topped himself today ... Two posts of the exact same article, but with different titles ... Never saw that one before on ZH
It's fun to vent, but it doesn't seem to discourage ZH from posting this drivel.
practicing for a paper for 5th grade .. Advanced numbers , above 10..
I typically resist commenting on the (relatively few) ZH articles that don't have much to offer, but this one doesn't even restate the obvious very well. This article would be better suited for TV....perhpas the QVC channel for those looking to shop for investing advice.
I follow gold and the dollar very closely. My most recent thoughts:
http://wp.me/p2CT0a-5O
No exit strategy designed..
Options:
Dollar debasement
Trade war
You choose!
GS is still short - before QE and after QE....
Spare us.
"And the hits just keep on coming..."
Thanks for the big bag of NOTHING.