This page has been archived and commenting is disabled.

On the Odds of an Ease

Bruce Krasting's picture




 

A friend sends me the following chart to support his conclusion that another round of QE is coming from the Fed sometime in June. The chart tracks the ten-year bond and the performance of the S&P since 2009.

.

.

Some thoughts on the info provided in this graph:

+ While both QE1 & 2 were ending, the S&P fell.

+ Operation Twist appears to have successfully restrained any increase in long-term interest rates.

+ The European Long Term Financing Operation (LTRO) liquidity operations had a significant positive impact on US equity prices.

+ As of today, the spread between LT interest rates and the S&P is the widest it has been in three and a half years.

+  The current level of the ten-year bond is the same as it was during the height of the recession/depression during the 1Q of 2009.

My observations:

- Tyler Durden at Zero Hedge (among others) has been pounding the table with the thesis that what drives markets today is not the size of the Central Bank balance sheets, it is the daily/weekly flow of additional monetary easing that matters. I think the chart confirms this.

- Twist and LTRO are finished for the time being. Bond yields are reacting to the economic slowdown that comes with the ending of these monetary jolts. Stock markets around the world have flattened out; there is good evidence that an equity market correction is underway.

- The huge gap in the current spread between bonds and stocks is scary. Notice that the orange and white lines have crossed numerous times in the past. If the lines were to cross again, it would imply that either interest rates have to shoot up, or the stock market is looking at a very sizable adjustment. I see little chance for interest rates to move higher in the current environment. This sets up the possibility for an out-sized down move in stocks.

- Everyone (most importantly Bernanke) is aware of the information that is contained in this chart. Bernanke is also aware of Durden’s point: you have to feed the beast every week, and you have to commit to weekly feedings far into the future, or markets will get grumpy.

- The expectation from all directions is that the Fed and the ECB will (once again) rise to the occasion (June is the popular time frame), and when they act, stocks will go “green” again.

- That the market is so convinced that the Fed will bail it out (or prevent any significant decline) allows for the very high spread between stock prices and interest rates that exists today. There is a high degree of complacency in the market. It believes the Fed is the backstop, and it will always be there when markets flutter.

The arguments and logic for additional Fed accommodation are compelling. The assumption is that the Fed will do the “logical” thing and repeat its past actions. I disagree.

The next opportunity for the Fed to act is June 21. That is 133 days before the election. Any new Fed program (sterilized QE) would take time to become operational. To be effective, it would have to have a time frame of at least six months. This leads to the conclusions that (1) the earliest the Fed could act is late August, and (2) if it were a six-month program, it would be in full gear for the first week of November.

The Fed can’t do that. It would (appropriately) be accused of supporting Obama and interfering with the political process in the US. An independent Fed can’t throw elections. If it tried, the result would be a loss of its independence.

The Fed's only support comes from the political right. I think this is because the Political Right = Money, and Money "believes" it is better off with an independent Fed. If the Fed takes action to support a liberal president in a key election, it will lose what support it has.

The folks at the Fed ain’t dumb. If they cared about their role in society and wanted to maintain their power, prestige and independence, the last thing they would do is start another round of QE in the 3rd quarter of 2012.

+

The situation is quite the opposite in Europe. I think the outcome will be the same.

Europe has had its critical elections this weekend. Now we know that a Socialist will lead France. The message from this election is very clear. The French people do not want austerity. Neither do the Dutch, Italians or Spaniards. The only country left that is pushing for austerity is Germany.

I think that there is a near zero chance that the German people will permit their leaders to write a check that supports growth programs in the EU. If France says, “To hell with austerity”, the politics in Germany will turn away from those that support pan European bailouts. Merkel will be D.O.A. if she tries to have Germany foot the bill for a French expansion program.

I will add that if France does turn its back on austerity (almost certain that it will), the German Bundesbank will just say, “Nein, danke”. Without "Bubba", no deals will happen.

.

The markets are going to hit a wall on Monday. There will be a cry from the pundits:

"Don't worry, QE is coming for sure! Buy the dip! The Fed is going to come to the rescue and bailout the global markets!"

 

I’m going to go against the consensus opinion.  

The Fed is on hold until December.  
 
We will not see another LTRO operation this year.
 

If I'm right, what does it mean for those lines on that chart? Nothing good.

.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 05/07/2012 - 18:09 | 2404884 moneymutt
moneymutt's picture

if someone was inclined to support one presidential candidate over another, the level of employment and the price of gas would likely be the most important things to manipulate, that means a lot more to vast majority of voters than level of stock market, interest rates. QE improves employment a tich, stock market and corporate profits a lot...QE hurts gas prices a lot....

Mon, 05/07/2012 - 14:16 | 2404165 dinastar2
dinastar2's picture

For each QE there is an immediate devaluation of the US $ and a subsequent jackup of the oil gallon.Oil producers are well aware of the ongoing US monetary devaluation and they will defend their share of the oil production by pumping less and selling at higher price.So the averag US citizen is paying more and more for traveling thanks to the ingenious QE mechanism that save the bonus of the Wall street fat cats.Politically QE is a loosing mechanism and it clearly alienates the voters.My guess is that until november Beranke will refrain from QE 3 for that very simple reason that he has to help BHO get reelected for one single reason: With BHO , Bernanke is totally sure of his job, wich is exactly the contrary with Romney.So until november no more QE 3.

 

Mon, 05/07/2012 - 12:29 | 2403698 judejin
judejin's picture

QE or not, commodities and precious metals have corrected much more than enough. it's time for them to resume their bull trend.

Mon, 05/07/2012 - 11:35 | 2403501 Augustus
Augustus's picture

Old feud appears to sink Obama's Fed nominees

http://www.reuters.com/article/2012/05/07/us-usa-fed-nominees-idUSBRE8460KD20120507?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28News+%2F+US+%2F+Business+News%29

 

Republican Senator David Vitter has demanded that the Senate hold a debate before any vote on the nominees, which would require Democratic leaders to muster a super majority to move forward - a hurdle that may be too high to clear.

 

As a result, the Senate may end up abandoning the nominees, Harvard economist Jeremy Stein and investment banker Jerome Powell, and leave a decision on filling out the normally seven-member Fed board until after this year's presidential election.

 

"I refuse to provide Chairman Bernanke with two more rubber stamps who approve of the Fed's activist policies," Vitter said when asked if he planned to lift his hold on the nominations.

<snip>

Republicans, including presidential contender Mitt Romney, have deplored the Fed's aggressive steps to stimulate the weak economy as a dangerous flirtation with inflation, while left-of-center voices have taken the central bank to task for not being even more aggressive.

 

Since officials on the Fed board are usually aligned with the chairman on matters of policy, thin staffing could weaken support for Bernanke as he tries to maintain consensus behind an ultra-easy monetary policy in the face of the criticism.

Mon, 05/07/2012 - 05:51 | 2402748 Augustus
Augustus's picture

The concept that the political Right is the primary supporter of the Fed seems pretty silly to me.  Ron Paul became a Fed supporter exactly when?

Now the Left has always been harping on the Fed to keep rates abnormally low, and has been accommodated.  The Fed has liquefied all of the paper Timmah has pumped out.

Mon, 05/07/2012 - 04:20 | 2402692 Steve in Greensboro
Steve in Greensboro's picture

The Fed is a creature of the Ruling class.  The Ruling Class is the party of big government and is composed of 100% of the Dems and roughly 50% of the Reps (which percentage is declining with the rise of the Tea Party libertarian Right--see the Indiana Senate primary).

To say the Fed's only support is from the political right is laughable.

The libertarian Rightist, Ron Paul, is actively arguing to end the Fed.  The center-Right Romney has said he will not reappoint Bernanke when his term expires in 2014 and that QE has failed.

The far-left Obama reappointed Bernanke most recently and the Dem-controlled Senate confirmed him.

Bernanke likes his job, so QE3 is a racing certainty.

Mon, 05/07/2012 - 01:51 | 2402607 Elmer Fudd
Elmer Fudd's picture

To ease or not to ease, that is the question.  This is all total bullshit.  The world's reserve currency is being debased further daily, velocity or no.   

Mon, 05/07/2012 - 00:59 | 2402553 Psyman
Psyman's picture

What's amusing is that the debate is no longer about what they "can" do it's merely about what they "will" do.  We now acknowledge that their power is infinite, and that the entire global economic system moves on the whims of a few powerful men.

 

So, do they feel like conjuring up another few trillion dollars out of thin air, or do they not?  That's the only real question here.

Mon, 05/07/2012 - 01:08 | 2402551 Milton Waddams
Milton Waddams's picture

Federal debt held by the Federal Reserve was growing at roughly 7% per year.  During the depths of the crisis, the Fed started dumping / exchanging it's Treasury holdings for other (often dubious) assets; depleting the Fed of 'gilt edge' Treasuries (LSAP).  By the end of QE1, the Fed's holdings of Treasuries was back to pre-crisis levels.  QE2 served to move the holdings back into, and then well above, the long term trend growth (stock vs flow).

 

http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?&chart_type=lin...

 

Twist has served to tail off the rate of increase, and I anticipate this pattern to continue into the future until holdings growth rates fall back into historical patterns.  What's missing in the data above is the Fed's pegging of rates and monetization of the debt during WW2, and the later Treasury-Fed accord that ended the peg.  I wonder if holdings, prior to said pegging, also held a linear relationship that would later be  busted by WW2, but return to said trend after the accord.

Sun, 05/06/2012 - 23:54 | 2402498 Darth Silver
Darth Silver's picture

interesting piece bruce.  one small problem was overlooked.  the fed has been funding the deficit.  with no other party available to fund the trillion dollar hole, the fed will use any excuse and quickly to keep the game going.  twist was low lying fruit. turn your attention to who pays for the the deficit if there is no QE.

Sun, 05/06/2012 - 23:40 | 2402485 barliman
barliman's picture

 

Had a wonderful three days not thinking about any of this ...

... but the fun is over. Time to pay attention to the real world.

Let's see where to start?

  • Conspiracy monkeys - Pay attention, please (because I normally ignore you completely) - The very wealthy and the banks are not dependent upon the market always going up, or the market always going down, or the Fed doing something stimulative, or ... pretty much anything. If they have any financial skills whatsoever, they are diversified and hedged. They have trusts, they have physical PM's, they own land and have options on more than you can imagine, They come from all ethnic and religious groups. If you believe OWS or anything else causes them to lose a moment of sleep, Jon Corzine has some EU debt he would like to sell you.
  • ZH'ers in general - Forget about the Fed, QEn, ZIRP, Twist, etc.  The pie is baked. The timer has gone off. The euro as a currency is now spilt milk. Interestingly enough, this is worse news for the dollar which will appreciate in value for a little while ... until American businesses begin to realize 400 million upscale consumers in the EU can now only pay with Monopoly money. At that point, they will be campaigning for the Fed to slap a hold on foreign gold reserves in the FRBNY.  Before  that happens, some of the European countries are going to nationalize the European operations of companies "owned" by American companies (trivia question: will historians say Argentinia made the smart move before everyone else?) and the profits they have been holding offshore from the U.S.A..  This is the quiet time before some really nasty wars are started.
  • Everybody else - if you believe Obama is who you should vote for President in 2012, please stock up on grape kool-aid - you are going to need it. If you believe Romney will turn this all around when he is elected, please stock up on KY and AstroGlide - you are going to need it. If you are just depressed as hell and am tired of the unending shit - congratulations! You still have functioning cognitive skills and may be able to make some sort of 'apres le grand vie' way in the world. Best words of advice I can give, learn to do things the way your grandparents did - provide a REQUIRED skill people will still need. The Service Economy's Last Rites are about to be performed.

Be careful folks.

barliman

Mon, 05/07/2012 - 06:24 | 2402774 Non Passaran
Non Passaran's picture

Ok, I don't mean to be disrespectful but that's a lot of big predictions for one comment and if you normally just 60% right these could make you millions, which means you probably wouldn't be commenting here.

Some six months ago I said I believed ere will be some sort of simulation by summer, just in time for the US prez election. The biggest argument of this article seems to be that the Fed wouldn't like to be seen as biased. I don't think they give a shit. If the shit hits the fan, they'll do what it takes to kick that can further.

On Barliman's conspiracy theory of European nationalization (who's a conspiracy monkey, indeed?): I find it highly unlikely. The US is holding most of Euro gold. Euro countries wouldn't expropriate US assets unless they found out that gold was gone (and there's the issue of Russia and European security as well). So that's what needs to happen first.
I'm not saying any of my thoughts are right, but they look just as likely ad Barliman's. It's pointless to make fairly long term predictions when we're all fairly clueless about what will happen. I only am fairly sure that holding less paper money than before now seems like a prudent policy.

Sun, 05/06/2012 - 23:55 | 2402499 Tao 4 the Show
Tao 4 the Show's picture

Good thoughts, Barliman, thanks.

Story on the Euro not so simple, though, IMO. Value will find a way to be represented, and if you compare Europe and the U.S., you will find far more actual productive activity in Europe.

Agree the USD may find support here, but all the pots are bubbling. Just a question of what the kitchen looks like when they start boiling over.

Sun, 05/06/2012 - 23:41 | 2402483 booboo
booboo's picture

even if the fed does not goose the administration will by forcing congress to spend like a motherfucker on another extension of ue benefits, free rent check and other freebies. Gas will plummet along with food prices and the fed can sit back and allow "free" elections to choose one or the other of their handpicked lackeys. Then it's back to your regularly scheduled liquidity fest. Americans love their cheap gas and free shit so my money is on the dark horse from kenya in this race, not that it matters but the Chicago machine will roll over the Mormon. Otard  has been briefed that he needs to stay off the golf course.

 

Sun, 05/06/2012 - 23:45 | 2402490 barliman
barliman's picture

 

booboo,

The administration HAS BEEN spending like a motherfucker while ignoring Congress. That is why there has been no budget for over three years. There are things coming down the pike where that approach won't work anymore.

barliman

Sun, 05/06/2012 - 23:37 | 2402478 Dingleberry
Dingleberry's picture

Seems like Ben may print in order to generate even more inflation (despite falling yields) and force grannies, widows and orphans to go into the stock market to make a buck, or else go broke trying to eat and drive. Plus this euro shit may get out of hand, and reach out and seriously touch the TBTF banksters with losses.  Ben's always been there for them.  I bet he prints.......

Sun, 05/06/2012 - 23:35 | 2402475 Tao 4 the Show
Tao 4 the Show's picture

Anyone remember who Goldman supported in the last presidential election?

It was the big "O".

Hard to say what the Fed will do next, but the left-right logic Bruce relies on here is simply a remnant of an outdated illusion. Like arguing that the magician is more beholden to the legs he seemingly sawed off his assistant than to her upper body.

The irony thickens in that the Q's were themselves con jobs. Sure, the money helped, but it was the perception of "help" that helped more. Now, the money still comes through all sorts of avenues, but with the perception of "no help", which, through double illusion feedback, makes the Fed look even more powerful.

Were the Bard writing today, I can imagine something like,

"We are but whispers in their secret tongue, Krastogio. Ye think thy thoughts are thy own, but alas, we art naught but their thought itself, only strengthened by our conceit."

Mon, 05/07/2012 - 05:47 | 2402746 Augustus
Augustus's picture

Goldman supported OBummer for the same reason that binLaden wanted Joe Biden to become President.  Both are unprepared idiots - Biden is just much worse and unelectible for the top spot himself.  The game was to elect the controllable idiot elected and to that extend Goldman succeeded.  It is yet to be seen whether it will be a successful long term strategy for them.

Sun, 05/06/2012 - 23:19 | 2402448 DeadFred
DeadFred's picture

Bruce, I always like your posts. Sometimes like today I love them. Right, wrong or indifferent you made me happy.

Sun, 05/06/2012 - 23:09 | 2402441 the grateful un...
the grateful unemployed's picture

your assumption that POTUS is liberal vs whateverthehell Romney is (or is not) is specious logic. they're the same, like Bush and Obama, Obama and Romney, shut up and deal. Bernanke might ease back a bit, and let the european flight to safety keep the NYSE market higher, and interest rates lower. jeez the man is living large, one white one black the same man really, and europe taking a crap and all that money coming home to roost. this is the summer of BEN!! (see summer of George, Seinfeld). market may pullback an iddy biddy bit, but in the end they swam and swam all over the dam.. hahahaha

Mon, 05/07/2012 - 04:25 | 2402693 joe6px
joe6px's picture

You know that, I know that, but the true believers still hold that there are two different parties.  BK is just pointing out that the faithful:

The Fed's only support comes from the political right. I think this is because the Political Right = Money, and Money "believes" it is better off with an independent Fed. If the Fed takes action to support a liberal president in a key election, it will lose what support it has.

will follow dogma and vote for the same/different/same candidate.  He is just forcasting the movement of the herd....and we can't do anything but watch.

Sun, 05/06/2012 - 23:07 | 2402437 lolmao500
lolmao500's picture

Yields are already at all time lows. No way they do QE.

Sun, 05/06/2012 - 23:07 | 2402433 Escapeclaws
Escapeclaws's picture

The French have the right idea about austerity. Why should the whole population allow itself to be victimized by greedy bankers.  Unlike the US, the French don't have liar loans and subprime borrowers. Let the big banks undergo austerity. Maybe Hollande will do the right thing and nationalize them. Austerity is for idiots. Clawbacks and prosecutions are what is needed rather than the ordinary citizen saying, in effect, "Yeah, I'm the guilty party here." There's no justice in austerity. It's just the fllip side of the coin of speculative leverage by the masters of the universe.

Mon, 05/07/2012 - 18:06 | 2404856 moneymutt
moneymutt's picture

To me, austerity for a nationl government is the equivalent taking all the factories of a nation, that overleregaed before a downturn, cutting the pay of all those businesses employees in half, never spending any money on maintenance of the machines, nor on marketing, training, nor research etc and just squeezing out the most revenue possible for a few quarters until the business produces less and less revenue, and keep this limping carcass paying all its debts, never able to bubecause machines are seisxzing up, workers are slow, they cant buy new technology, but they just keep it paying ever spare dime to the bankers.... There is a reason we dont do the latter in business world and we allow bankruptcy and if company can produce revenue "in protection" we let it live, we let it spend what it needs to keep revenues up and the lenders take their hit and courts manage process between all the parties.

But what is good and sensible for businesses, is thrown out as even a discussion point when it come to national economies, the factories of common wealth.

Lenders want their money back, no doubt, but we still let people and business bankrupt for good reason, even when there are moral hazards. We are better off with defaults, our economy does not seize up.

Cut the bankers riches and the economy hardly notices except for Manhattan real estate prices and some sad prostitutes in the zip code....cut day to day govt spending, pensions, govt jobs, govt contracts to construction companies, schools/teachers, defense contractor spending etc and the whole economy tanks.

Hmmmm...should we do what bankers want: lay-off a bunch of $40k/yr,shave elderly pensions, and let our infrastructure and schools watch and suffer the consequent riplle effects on our private economy, or should ask the banks to take pennies on the dollar? Hmmmm, such a hard choice. And yet democracies keep picking the latter...

Sun, 05/06/2012 - 22:58 | 2402418 The Alarmist
The Alarmist's picture

The Fed is going to support the party least likely to bring them down. In a normal year they would stick with the devil they know, but Big O has stepped on the accelerator, and the Fed is filled with enough bright people who can see that Big O is taking all of us over the cliff.

Sun, 05/06/2012 - 23:18 | 2402447 andrewp111
andrewp111's picture

Mr. Mittens has already promised not to reappoint Bernanke, so the Fed has no choice but to reelect the Big O if Bernanke wants to stay in power - and believe me, Bernanke does want to stay in power. The Fed may not have thrown elections before, but there is always a first time. If they do it, they have to go big. To the max, pedal to the metal and  balls to the wall. They can't afford to try and fail. The best way to do this is for Bernanke to do a super-duper-QE where he pegs FHA mortgages at 0% interest rates, for a limited time only.

Mon, 05/07/2012 - 00:07 | 2402513 Body of Lies
Body of Lies's picture

I agree with your point. I think Bernanke will do whatever it takes to maintain the status quo and this means ... keep the money flowing. Based upon the donation flows, I believe that the big banks are going to continue to flood the Obama campaign with dough while complaining all the time about how DC is treating them poorly. I further believe that a second term Obama may usher in a real serious move toward a NewWorldOrder to help a collapsing Europe and ailing Japan ... and this has got to have the banksters salivating.

I disagree with Bruce that a June QE would not be seen until late fall. With the proper telegraphing and advertising by the FED an anticipatory environment will be created and a new QE round would have a very rapid and immediate pulse. If it were large enough it might just carry into early November, but then Beware the Angel of Death in mid December, regardless of who takes the Presidency. 

Mon, 05/07/2012 - 01:59 | 2402614 lewy14
lewy14's picture

Agreed - "perception" and "independence" issues are not going to delay Bernanke from stepping on the gas - not for a New York minute.

Bruce, sorry, but your political analysis doesn't hold. It's not wrong per se, your cynical heart is in the right place, but things have changed.

Power is the new money, and Populism is the new Power.

Not "Leftism", really, but more like a global Peronist consensus.

Witness the latest deal with China - Beijing  lets Goldman and the rest of the TBTF banks a longer leash to operate in China, and we call it "liberalization" and "reform"... while shutting up about the whole currency manipulation thing. 

It's more like I'll let you feed on our people if we can feed on yours... This is what "global consensus" looks like.

The "repeated game" has been played enough rounds over the last few years among the national and global elite that the players are starting to see what the new Nash equilibrium is going to look like... and the usual "Left/Right" stuff is sooo last decade...

Concrete prediction: If Bernanke sees the need, he'll buy MBS, Twist II, QEIII, whatever it takes. He will signal that he will stand ready to supply the market with 1's and 0's in unlimited quantities. If it helps Obama, it won't be a bug, it'll be a feature, and the media, most of the popular press, most of the financial press, the celebrity elite, will all be onboard and cheer loudly.

Of course, once that new Nash equilibrium is established and all the players that matter have a seat... well then, the playbook will change once again. But that won't be until afte the election, at the earliest.

I'm wondering if they didn't make that 2012 movie as a metaphorical, stigmergetic signal... a hidden-in-plain-sight explanation of what's about to go down...

Sun, 05/06/2012 - 22:52 | 2402406 lamont cranston
lamont cranston's picture

It has been a good weekend. The Braves rallied from 5-0 & 6-0 deficits at Coors. And won again today, 7-2. Who the hell gives a rat's ass about da Fed??? 

The sheeple don't give a shit. Much less, they have no friggin idea of what is what. 

I just think back to 87, when I ran a small ($7MM) biz. The mkt fell 20% that Oct day and no one gave a shit. 1000 down would do the same. The PPT would engineer a ded cat bounce, and the public would say ho hum. 

And not care until it hits 6000 or so.

Mon, 05/07/2012 - 00:12 | 2402520 Body of Lies
Body of Lies's picture

How many of the "public" are left in this market? If 80% of the volume is HFT and the volume is still low that leaves only 20% of the volume for the public and if true this would be an amazing low figure.

Sun, 05/06/2012 - 22:51 | 2402403 luna_man
luna_man's picture

 

 

Contrary,  to popular belief here, I think, your thinking is sound Bruce!

 

Try not to be the last one out!

Sun, 05/06/2012 - 22:49 | 2402400 Ted K
Ted K's picture

I like this post by Bruce, and my first inclination is to agree with it.  But then I think about how shitty Bruce has been predicting inflation for the last 3 and 1/2 years, still waiting for the eventual time he will be correct (screaming "I told you so!!!" in the year 2025).  Too bad for Bruce he put a time stamp on this prediction, so it leaves Bruce little "weasel out" room.  

Sun, 05/06/2012 - 22:48 | 2402397 Everybodys All ...
Everybodys All American's picture

Inflation kills all middle and low income people. Anymore QE runs the risk of having oil trade around $120 a barrel.  That by itself renders any QE as worthless for the economy. No way can Bernanke justify QE unless the stock market drops well below a Dow 10,000 and even then I think it's political suicide for Bernanke.

Sun, 05/06/2012 - 23:36 | 2402477 AurorusBorealus
AurorusBorealus's picture

I agree.  What prevents QE3 is the price of gasoline, not the election.  For the moment, baby boomers moving into bonds and capital flight from Europe are substitutes for Fed intervention.  The results of the U.S. election are irrelevant to just about everyone- Fed included.

Sun, 05/06/2012 - 22:37 | 2402370 Whatta
Whatta's picture

yeah, I agree with some of the others thoughts here. the FED is much bigger than President zerO. do they really care which party is in power? my vote is no.

my real vote is Ron Paul. But he has the same chance of being the next president of the USA as a balanced US budget has of occurring in my lifetime.

Sun, 05/06/2012 - 23:22 | 2402457 andrewp111
andrewp111's picture

They do care, because Mr. Mittens promised not to reappoint Bernanke.

Mon, 05/07/2012 - 00:09 | 2402514 malek
malek's picture

Don't carol before knowing which wacko he will appoint.

Sun, 05/06/2012 - 22:35 | 2402369 devo
devo's picture

The Fed's only support comes from the political right. I think this is because the Political Right = Money, and Money "believes" it is better off with an independent Fed. If the Fed takes action to support a liberal president in a key election, it will lose what support it has.

This is wrong, too. The FED supports (and thus gets support from) whichever party is in power. This is because the FED gets parties elected/reelected.

Sun, 05/06/2012 - 22:36 | 2402368 q99x2
q99x2's picture

FED's got a backdoor into the market. Doesn't need QE. BTFD. The banksters have declared war. They will take it all down according to their timing.

Sun, 05/06/2012 - 22:30 | 2402355 bobbydelgreco
bobbydelgreco's picture

bruce is very smart but i think he is wrong qe3 comes before the election what bruce doesn"t get is the fed doesn't decide ben does ben cares about ben & sans qe3 ben has to take the bus back jersey

Sun, 05/06/2012 - 22:29 | 2402351 devo
devo's picture

I'm so sick of hearing about QE3. They're already on QE9.

Sun, 05/06/2012 - 22:42 | 2402382 Everybodys All ...
Everybodys All American's picture

+1

Sun, 05/06/2012 - 22:26 | 2402347 sleepingbeauty
sleepingbeauty's picture

Well Bruce, you have been right so far. I'll not bet against ya, but then again I won't bet for ya either. I think either way, it will be done with the consent of TPTB.

Sun, 05/06/2012 - 22:18 | 2402336 Tuffmug
Tuffmug's picture

To believe the FED won't act because they will piss off the Koch brothers and the political right is stupid. The FED is a crack whore who will blow anyone for money. Money is their GOD and the banks are their masters. They have never  been politically independant and they know it. Truman proved that by castrating Eccles in the Fifties. The FED knows that if they stop the pumps that the banks will sink. They can't stop pumping and they won't until they have transferred the accumulated wealth of the 99% to the 1%.

Sun, 05/06/2012 - 21:59 | 2402312 sumo
sumo's picture

Bruce, I respectfully disagree.

Like most of Congress, the Fed is owned and controlled by Wall St banks. The Fed will do WHATEVER IT TAKES to protect its owners. Lots of traders have blown up their accounts by not taking that to heart.

If the Eurozone debacle threatens the Fed's owners, e.g. via margin calls on OTC derivative positions, the Fed will bail out its owners, election or no election.

 

Mon, 05/07/2012 - 00:12 | 2402519 God Bless The V...
God Bless The Virtuous's picture

Sumo

I have to disagree with you, if the fed dares do anything with regard to QE the dollar will come under pressure and gasoline will sky rocket, along with everything else these fools have manipulated!

The working man / woman can not take another round of dollar destruction and any more loss of standard of living.

Bernanke is supposed to be so smart, well his smarts have boxed him into the mother of all corners and he has no good options! He may try and talk up the prospect of QE and enlist the help of bubble T.V. and Steve Leisman in particular. But his hands are tied and if the markets look to retest the 2009 lows in a few months, the dollar will be so much higher and interest rates so low, Bernanke will be the scape goat and this will finally lead to the outcome Greenspan first tried to avoid back in 2000. The markets WILL clear, come hell or high water!

Deleveraging must start, the union scumbags who are rallying O.W.S. and the socialist anarchists will get the rank and file 100% of nothing! Pension funds are not healthy and under funded, their collapse will be guaranteed . The sheer folly of all this has been that for the better part of 3 years the stock markets have been trading with themselves,(the bots and H.F.T.) and the retail investor has said "FUCK YOU" to Bernanke and Geithner and this communist in the white house!

We are out of bullets and when the markets sense the jig is up, we will finally trip some of those program trading halts that I have never seen tripped. Flash crashes on a daily basis? I wouldn't rule it out!

And all that is coming is to be laid right at the feet of Alan,"I wasn't wrong, my models were", and Ben "I learned nothing from the depression" Bernanke! History will not be kind to these two fools!

Tar and feathers anyone?

Jerry

Mon, 05/07/2012 - 06:34 | 2402780 Non Passaran
Non Passaran's picture

I disagree with the cost of gasoline argument.
Look, oil is cheap right now!
What do you think, would oil go to 120/barrel if new QE measures were announced today? I don't see how.
It's getting increasingly clear that several years of Japan style muddling through is more likely than any ShadowStats-style hyperinflation (which may happen 5-10 years from now).

Sun, 05/06/2012 - 23:52 | 2402493 shuckster
shuckster's picture

Good point - the Fed cost me $50,000 with its fuckery this past year. I know to watch them closely, and to stick to fed-free stocks - aka stocks that garner no national attention

Sun, 05/06/2012 - 22:55 | 2402410 zorba THE GREEK
zorba THE GREEK's picture

Like Sumo I also think the Fed will ease when the market crashes, not only to

protect the assets of those who control it, but if the markets and the economy

crash, and suddenly the Fed changes it policy to support them, that will be seen

as a political move to get the Republicans elected and cause the Fed to lose its independence. To appear politically impartial, the Fed has to react to shifts in

the economy just as they did in prior non-election years. If the Fed drags their

feet now, Democrats will accuse them publicly of causing unneccessary suffering

to help Republicans get re-elected. The Fed cannot appear to change policy in

an election year without drawing accusations of impropriety.

Do NOT follow this link or you will be banned from the site!