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QE3 Has Been Fully Priced In: Comparing QE1 vs QE2 vs Twist 1 vs Twist 2 vs QEternity

Tyler Durden's picture


In the weeks leading into QE3 we repeatedly stated that virtually the entire impact of the latest Fed market boosting quantiative easing program has already been priced in. Below, we present this visually, while also comparing the impact of all the other (four of them) easing programs launched previously by the Federal Reserve.

And here is Goldman's Kamakshya Triveri explaining just what we said all along:

Q. Have equity markets already “paid” for QE3?


In short, yes. In the past, equity returns have typically increased following QE announcements, with the S&P 500 rising by an average of around 5% in the 30 days after announcements. But the equity market performance since the QE3 announcement appears to be running short of that. Perhaps markets have learnt from history-a unique feature of the QE3 announcement was that equity markets already climbed sharply into the announcement day itself, despite tepid macro data. But history also suggests that equities could make further progress as long as the macro data surprise to the upside. There have been two prior instances when equity markets gained materially in the 30 days following the easing action after having already risen into the announcement itself (round 1 of QE1 and QE2), with the macro data beating expectations following the easing announcements in both cases. We likely need to see similar improvements in the cyclical data now as well to see another leg higher in markets.

Of course, we have yet to see any actual credible surprises. All eyes to tomorrow's NFP which even if a beat will likely be attributed mostly to pre-election propaganda in light of the European triple-dip recession.


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Thu, 10/04/2012 - 12:13 | 2856057 Meesohaawnee
Meesohaawnee's picture

algos must have heard ya.. weeeeee.. like the geico piggy.

Thu, 10/04/2012 - 12:21 | 2856083 redpill
redpill's picture

anyone have a puke bucket?  I'm feeling QEasy

Thu, 10/04/2012 - 12:48 | 2856164 Precious
Precious's picture

More crack, err, alpha.

Thu, 10/04/2012 - 12:59 | 2856203 krispkritter
krispkritter's picture

Ben's got the patent on the 'QEasy Button'. It looks like the Staples one but when you hit it, all the printers in the immediate vacinity start going off at once...

Now that I think about it, sounds like something WB7 should whip up.

Thu, 10/04/2012 - 12:21 | 2856087 CPL
CPL's picture


I wonder when the market prices in the nukes.

Thu, 10/04/2012 - 12:40 | 2856135 Squid Vicious
Squid Vicious's picture

CPL! what happened to the "america changing event"? was that sarcasm or are you just a nutjob? if sarc then my fullest apologies...i missed it

Thu, 10/04/2012 - 12:57 | 2856195 CPL
CPL's picture

The Drudge secret?  Sometime finding news can be a rat hole and hype/bait is fallen for.

October surprise indeed.

Last time anyone listens to the man again.  The video was not damning, nor was it inflamitory.  It is hardly the bomb shell of calling 48% of the population useless eaters and disposable in no simple words.


This though.  There are Syrian's and Turks getting photo threads going and a couple of Russians are snapping cell pictures of the preperation of the destruction of Istanbul, there are around 4000 missles in position to turn Turkey into rubble.  Couple of highlights from the past 24 hours.

This will not end well.  Each side is building a case to have a full out piece of shit war.

Thu, 10/04/2012 - 13:06 | 2856245 CPL
CPL's picture


The US is now in an Asymetric war.  This will turn into more locals killing Xe resources (don't have to report on the deaths there) and whatever is left of US command.

Thu, 10/04/2012 - 12:22 | 2856088 NotApplicable
NotApplicable's picture

In Summary: "Already Priced In" = "Fiat Accompli"

To infinity, and beyond!

Thu, 10/04/2012 - 12:44 | 2856150 Silver Bug
Silver Bug's picture

The can is getting mighty big.

Thu, 10/04/2012 - 12:16 | 2856065 stocktivity
stocktivity's picture

It's all Bullshit!

Thu, 10/04/2012 - 12:16 | 2856066 malikai
malikai's picture

Meanwhile, oil has just about re-converged. I wonder how much money was lost slamming crude ahead of the "debate" last night.

Thu, 10/04/2012 - 12:20 | 2856084 Alea Iactaest
Alea Iactaest's picture

No money was lost as no 'real' money was used. All just a pixelated entry on a couple of screens.

Same thing with people saying UST have to fall. Why? The same people can keep buying indefinitely, it's not like they are going to run out of money any time soon.


Thu, 10/04/2012 - 12:51 | 2856180 malikai
malikai's picture

You're right. I stand corrected.

Silly of me to apply the principle of profit and loss.

Anyway, even if it was real money - it's just taxpayer money.

Thu, 10/04/2012 - 12:18 | 2856074 mayhem_korner
mayhem_korner's picture



So the market is "borrowing" QE?  That is circular logic on 'roids, amigos.

Thu, 10/04/2012 - 12:23 | 2856090 NotApplicable
NotApplicable's picture

Well, since it's impossible to extinguish debt in this system, what else is left?

Thu, 10/04/2012 - 12:18 | 2856075 semperfi
semperfi's picture

Dear Ben,

If the object of QE3 was to raise employment, which it now seems it won't do, perhaps for QE4 you should hire the unemployed to break every window on every car and every building in every country.  Is there any better plan?

Thu, 10/04/2012 - 12:29 | 2856104 malikai
malikai's picture

Gangs are mostly in the private sector.

For now..

Thu, 10/04/2012 - 12:47 | 2856172 rlouis
rlouis's picture

You might read "War is a Racket" by Smedley Butler - he suggests otherwise.

Thu, 10/04/2012 - 13:00 | 2856207 malikai
malikai's picture

Excellent book.

I was going more along the lines of brown shirts.

Obama's a community organizer at heart, after all.

Thu, 10/04/2012 - 12:18 | 2856078 Shizzmoney
Shizzmoney's picture

The real point of QE3....was that it confirmed there will be a QE4.

Thu, 10/04/2012 - 12:40 | 2856139 LongSoupLine
LongSoupLine's picture

I disagree.  You don't need a QE4 when QE3 is "open ended".  It's the everlasting gobstopper of printing hell.


Bernanke can't fucking fall off the face of the fucking planet fast enough at this point.

Thu, 10/04/2012 - 13:01 | 2856215 krispkritter
krispkritter's picture

His view "Bernanke can't print us all off the face of the fucking planet fast enough at this point."

Thu, 10/04/2012 - 12:20 | 2856080 mayhem_korner
mayhem_korner's picture



Of course, everyone that needs things like food and energy is getting poorer by the minute.  Crude is pulling a +2% chubby today, and retail gasoline even more.  But..."hey Becky, let's talk equities!!!"

Thu, 10/04/2012 - 12:21 | 2856081 Meesohaawnee
Meesohaawnee's picture

if it were all about jobs. CME could just do a 20% margin hike on crude. but hey that doesnt help bonuses and bail out banks now does it?

Thu, 10/04/2012 - 12:29 | 2856105 Alea Iactaest
Alea Iactaest's picture

Of course it's about jobs, just not your job...



Hedge fund money in commods at 1-year high
(Reuters) - The money held by hedge funds and other big speculators in commodities has hit a one-year high, with markets rallying in anticipation of U.S. and European economic stimulus efforts, trade data showed on Friday.

Carlyle Buys Control of a Commodities Trader
The private equity firm said on Wednesday that it had taken a 55 percent stake in Vermillion Asset Management, a commodities hedge fund with about $2.2 billion in assets. Carlyle, which paid a mix of stock and cash, will make Vermillion its main commodities trading platform.

Franklin Resources buys prominent hedge fund firm K2
(Reuters) - Mutual fund giant Franklin Resources said on Wednesday it will buy a majority stake in K2 Associates, one of the biggest so-called funds of hedge funds, to beef up its offerings of alternative investments.

Thu, 10/04/2012 - 12:23 | 2856089 SWCroaker
SWCroaker's picture

Um.  Fed will be buying (they claim) $40B of marked-to-myth MBS on an ongoing basis; no nasty expiration date to deal with.  They are buying them from banks, (and fund managers?) who want them off their balance sheets.  Fed takes garbage, hands over liquid electronic money.  Banks and funds have hot money burning a hole in their pockets. Each month, every month, going forward; at least until the Fed essentially owns every MBS related piece of paper in existence.

Q: What do you think the banks and funds will do with that money? 

Q: Are they in any position to spend their money now, or do they actually have to queue up in line and wait until the Fed gets around to each of them in turn?


I'm not seeing how a perpetual hole in space time that spews money can become "all priced in", at least not until the amount of new spew is negligible to the amount sloshing around at any point in time.  There will be monthly infusions of new money, chasing yield/return and fleeing inflation, for the foreseeable future.

Thu, 10/04/2012 - 12:27 | 2856098 Au
Au's picture

Ya, what he said. Given enough wind, turkeys can fly

Thu, 10/04/2012 - 12:27 | 2856097 Meesohaawnee
Meesohaawnee's picture

ring ring.. "yea ben its skanky meg whitman".. ben. "whats up".. meg."yea i have lots of dirty laundry to air out".. ben. "dont worry the more bad news the more we(the taxpayers) got ya covered. let it rip". click

Thu, 10/04/2012 - 12:29 | 2856102 fadgadget
fadgadget's picture

i'm curious on the math, so help out a newb:  how do you price in infinite, open-ended easing?

seems weird to me...

Thu, 10/04/2012 - 12:42 | 2856115 Lost Wages
Lost Wages's picture

It seems like stocks are going to go up every day forever. Despite all the knowledge, fundamentals and expertise on this site, I'm beginning to believe Zerohedge is 100% wrong about stocks. They can and will go up forever. Fundamentals and technicals don't matter. Even as mathematics and reality catch up to the paper games, anything can and will be done to continue to raise markets to higher and higher proportions. Logic no longer carries any weight. Only myth and management of perception are reality in a post-modern world. If you can write the words and believe them, they become truth regardless of physical reality. The numbers game is an infinite lie which can be manufactured infinitely. Only the mind can decide what has value and the mind can be rewritten infinitely as well.

Thu, 10/04/2012 - 12:46 | 2856161 azengrcat
azengrcat's picture

ZHr's rolling over.  I see a top forming.

Thu, 10/04/2012 - 12:52 | 2856183 Alea Iactaest
Alea Iactaest's picture

The greater fool is at the door.

Thu, 10/04/2012 - 13:07 | 2856249 SemperFord
SemperFord's picture

But ZH has many times said that as soon as we get deflation that's when the printing presses go full retard. Like you said, stocks will be going up, we should have a crash(probably after the elections) That is when they scare us with deflation and Control P to Infinity which means stocks up and gold up and paper money not so much up.

Thu, 10/04/2012 - 14:24 | 2856551 Lost Wages
Lost Wages's picture

During the crash, what will happen to bonds?

Thu, 10/04/2012 - 17:55 | 2857487 LooseLee
LooseLee's picture

The Mind of the Universe says, "FUCK YOU AND DIE" Communist Fascist SFB...

Thu, 10/04/2012 - 12:36 | 2856121 BlandJoe24
BlandJoe24's picture

Tyler, what do you think of the suggestion that QE3 is primarily aimed at relieving the banks of the liabilities associated with pervasive mortgage fraud by "disappearing" them into the Fed?  Banks would thus rid themselves of a bunch of toxic paper and be all freed up to do some more pillaging....  Would appreciate your thoughts on this.

Thu, 10/04/2012 - 12:37 | 2856125 slaughterer
slaughterer's picture

It is too bad that Q3 earnings seasons starts next Tuesday: it will erode all positive effect of QE3 with companies missing expectations one after another.  

Thu, 10/04/2012 - 12:40 | 2856137 Lost Wages
Lost Wages's picture

The earnings reports will not matter. They could be negative. Positive. Whatever. Stocks will go up and only up.

Thu, 10/04/2012 - 12:42 | 2856145 Squid Vicious
Squid Vicious's picture

bro, what happened to the HORROR? lol...  

Thu, 10/04/2012 - 12:58 | 2856199 slaughterer
slaughterer's picture

The Horror was reported by ZH promptly in AH yesterday: the NATO statement about Turkish-Syrian hostilities basically will result in Turkey declaring war on Syria.  Matter of days now.  

Thu, 10/04/2012 - 13:06 | 2856242 Mark Carney
Mark Carney's picture

you did not hear?


Too bad, move along.

Thu, 10/04/2012 - 12:42 | 2856141 slaughterer
slaughterer's picture

To the guy who writes "stocks only go up", there are noticeable large hedge fund stocks that are just not performing whatsoever lately, and some popular institutional stocks that have actually plunged.   I am actualy intrigued by the spin that will be applied to missed earning estimates to get that Tom Lee ES 1495 rushed in before the election.  

Last word: those who complain about PM manipulation should take heed of the large manipulative moves in WTI/Brent: PMs have been spared those kind of moves, but we all know they are coming.  

Thu, 10/04/2012 - 13:00 | 2856206 Quinvarius
Quinvarius's picture

All these threat screaming bears.  Stocks require just one thing to rise.  Easy money.  You should have learned that after QE1 if you didn't already know it.

Thu, 10/04/2012 - 13:36 | 2856351 Meesohaawnee
Meesohaawnee's picture

no. two . easy money. no volume

Thu, 10/04/2012 - 12:49 | 2856177 orangegeek
orangegeek's picture

US Dollar is taking a bath today - and as a result, the Euro, Yen and Pound are way up - the three biggest skid mark economies - and their currencies rise.


Oh well - who gives a shit anymore.

Thu, 10/04/2012 - 12:55 | 2856190 Alea Iactaest
Alea Iactaest's picture

Of course they show strength today. The central bankers for each country met today (and tomorrow for Japan).

Thu, 10/04/2012 - 12:57 | 2856197 woggie
woggie's picture

candy knows no barrier.

Thu, 10/04/2012 - 12:58 | 2856198 ThisIsBob
ThisIsBob's picture

I don't get it.  The markets rose (priced in) QE money hitting the markets, so here we are at current levels.  Now what happens when the money actually does hit the markets - we trade flat to down?



Thu, 10/04/2012 - 13:01 | 2856208 slaughterer
slaughterer's picture

QE3 money can be used to margin up shorts as much as go long certain equities.  The Federal Reserve has no control over how the Primary Dealers will use these funds.  Indeed, both the ECB and the Fed show a remarkable laissez-faire attitude towards their money once it is released (unlike BOE and to a certain extent BOJ).  

Thu, 10/04/2012 - 13:08 | 2856256 Brother Sebastian
Brother Sebastian's picture

It doesn't matter that QE3 has been priced in.  Don't you see, the Fed has the ability to manipulate the futures vis-a-vis its own trading desk and that of its main colleague, JPM.  So they can take the market where they want.  And thus create enormous profits for member banks. 

Thu, 10/04/2012 - 13:38 | 2856354 Meesohaawnee
Meesohaawnee's picture

and you saw it last night. as soon as the handshake was done. up 45 points on dow futures. all pre programmed theatre

Thu, 10/04/2012 - 15:04 | 2856767 DowTheorist
DowTheorist's picture

What I see is that the post QE pullback doesn’t negate the existence of a primary bull market in stocks. Personally, I'm praying for such a pullback to occur since it would offer a good risk reward ratio for latecomers and for those already "in" it would provide higher trailing stops (being the new stop the secondary reaction lows).

Technically, the primary bull market in stocks and gold and silver continues fully in force, in spite of a welcome post QE pullback.

Here are 5 reasons why the primary trend for stocks (and also applicable to gold ) is bullish:

The post QE pullback may turn to be a good opportunity for latecomers to stocks and gold to finally "get in". Here are the details as to how to "time" it and place technically effective stops:

Thu, 10/04/2012 - 17:49 | 2857466 LooseLee
LooseLee's picture

Fully Priced-In X 2!!!!!!!

Thu, 10/04/2012 - 20:56 | 2857761 cnmcdee
cnmcdee's picture

What I see coming the worst possible scenario possibly soon.. or really soon..  Bernake is deliberately deflating the currency by the purchasing of bonds - and is using these purchases to pay government debt. In effect the US Federal Reserve is paying a large sector of the US Population to do *nothing* This is in effect a direct currency devaluation.  Thus the US dollar is being diluted - but at what rate?

Once this devaluation is coupled with a tanking stock market (any week now) international investors will be double hit - A. Their loosing money on the currency exchange, and B. Their loosing money on the stock market.  Since nobody can make money on T-Bills versus inflation nobody will buy these either.

Finally people, and institutions world wide - will begin to exit the US dollar. Once this exit strategy starts to accelerate it will trigger a flight from the US dollar  and possibly overnight it will loose it's reserve status.

Once the status of the US dollar is destroyed people will begin to further panic around the world triggering a VIX not seen in decades.  Markets will start to lurch, will there be anywhere to put their digits of digital currency and not have the computers zero them out?

Finally all out panic will ensue as the stupid public finally catches on, triggering mass sell-offs in markets around the world.  Brokerage firms going bankrupt will seize their account holders balances and simply withdraw it with their executive simply flat out stealing the money and possibly leaving the country.  In the ensuing chaos the governments will be too busy to bother chasing them.

And we can finally have the depression that is long overdue. 

After this point the politicians will be faced with a seething public.  They can either resign, or somehow start a distraction.  Since their corrupt as total f*ck they'll do the later, and the US will be in a depression and  the seeds of a fresh war with Iran will be sown via false flag, or just plain interference until Iran is forced to react.

Thu, 10/04/2012 - 19:16 | 2857765 cnmcdee
cnmcdee's picture

We have to realize that QE (n) is already priced in.  The market will run out of reasons to rally, as QE has already occured. In otherwords we are literally sitting a week?  Or a short time longer before a massive correction occurs.



Thu, 10/04/2012 - 19:23 | 2857780 cnmcdee
cnmcdee's picture

The only thing preventing it is possibly a plunge protection team, holding up the stock market with offshore buying of the markets themselves.  The question I have for Tyler then is.. If the bonds are aritificially held up, the market is artifically held up, but the entire world is exiting the US market, what happens next?

Thu, 10/04/2012 - 19:27 | 2857792 cnmcdee
cnmcdee's picture

The other giant elephant in the room that isn't being looked at is the Baltic Dry Index - its at freaking 700 right now!  In 2007 it was at 7000 roughly.. The entire world economy is shut down already, nobody is ordering or buying anything other than grain and food transports because the corn crops were wiped out and if they don't the governments will literally starve their own populations.

It's sinking in how serious this is getting...  and nothing has even started yet, but it sure looks like the seeds for a market crash this fall.

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