The Central Bank intervention fiasco continues to unravel before our eyes.
Globally all Central Banks have kept an eye on the Bank of Japan, which announced the single largest QE program relative to its GDP in history. That one single QE program announced in April 2013 is equal to over 20% of Japan’s GDP.
Japan experienced two brief quarters of improved economic activity, before things turned south again. Turns out that printing trillions of dollars to buy bonds doesn’t create growth.
The latest example is Sony, the Japanese electronics giant which just announced a 70% COLLAPSE in its profit outlook. Sony’s CEO had stated previously that a weak Yen, caused by the Bank of Japan’s QE program was actually a “disadvantage.”
We now have concrete proof as Sony’s profits outlook evaporates.
This is the death knell of QE. We now know for a fact that the Fed and other Central Banks are aware that QE doesn’t create jobs nor does it improve the broader economy.
All that leaves is stocks… which have benefitted enormously from QE, with the S&P 500 rising to new record highs boosted by the Fed’s money printing.
However, ultimately stocks react to profits. And as Sony has proven, QE hurts rather than helps profits. Indeed, Sony’s stock is down over 1.5% on the earnings outlook drop. And it’s essentially breakeven since the Bank of Japan announced its massive QE program.
The writing is on the wall. QE is good for very little these days. If the Bank of Japan can spend over $1.4 TRILLION and corporate profits fall while stocks go nowhere, it’s the end of the line for Central Bank money printing.
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Phoenix Capital Research