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McKinsey "Finds" QE Did Not "Boost Equity Markets"
Earlier today consulting company McKinsey, which has now become the new Moody's, released a 72 page report titled "QE and ultra-low interest rates: Distributional effects and risks" which contains the following pearls of wisdom: "The impact of ultra-low rate monetary policies on financial asset prices is ambiguous. We found little conclusive evidence that ultra-low interest rates have boosted equity markets. Although announcements about changes to ultra-low rate policies do spark short-term market movements in equity prices, these movements do not persist in the long term." Uhh, does McKinsey have an S&P chart that goes back to 2008? One would think whoever commissioned this report can at least pay for "bigger charts." Continuing: "Moreover, there is little evidence of a large-scale shift into equities as part of a search for yield. Price-earnings ratios and price-book ratios in stock markets are no higher than long-term averages."
We will spare any analysis, in-depth or otherwise, of the report: it merits none, and certainly not for those who watch the farce that the "market" has become.
Sadly, by issuing such drivel McKinsey has just tarnished what little reputation and credibility it may have had.
Instead we will just point out, visually, what McKinsey is saying: namely that the chart below from SocGen titled very confusingly "Liquidity has been the main driver of US equities since 2008" which shows the causation between the S&P and the Fed's balance sheet, doesn't exist and is purely a figment of overactive realists' imaginations.
Oh, and to the skeptics, we urge both you - and McMoody's - to speak to the US Treasury and the TBAC, which three months ago "finally admitted the truth: It's All POMO." To wit:
There, hidden on page 26, or slide 76 of 100, where the Treasury discusses "The Impact Of Monetary Policy", the biggest "conspiracy theory" of all becomes merely the latest conspiracy fact. First, for corporate bonds...
But just as importantly, for stocks.
But most importantly, and tying it all together, POMO. Only this time, finally, the US Treasury finally admits it.
So, thanks to the US Treasury, we know that between January 2009 and April 2013, on days in which the Fed POMO was more than $5 billion, the stock market rose a total of 570 points, on days in which the POMO was less than $5 billion, the cumulative stock market gain was "only" 141 points, and when there was no POMO, the S&P gained... -51 points.
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McKinsey integrity ambiguous; more at none.
Did they hire Mark Zandi?
McKinsey has become as irrelevant as John McCain.
Just a bunch of relics in their final death throws... they (all) just need to go drool on themselves somewhere out of sight.
Reminds me what Jules Winnfield said in Pulp Fiction:
"And I will strike down upon thee with great vengeance and furious anger those who would attempt to poison and destroy My brothers. And you will know My name is the Lord when I lay My vengeance upon thee."
Man... get busy God
By the way: It was the prophet Ezekiel who said that first. ;-)
McKinsey, sir you are an idiot.
Don't confuse complicity with stupidity.
Yep...that is pretty much it...
Hah...Yellen just through McKinsey's 72 page repeort out the window when she stated QE supports stock prices.
Phew, that settles that.
but the Bible tells me that those were the words of God, spoken to Ezekiel...
You are right. That is why it starts with the words: "Thus says the Lord God [...]." But it is Ezekiel who tells us.
Never bring up logic when discussing the Bible....
it reminds me of a childrens book we read to our kids whose main characters are a dinosaur and a boy named reginald who insists that dinosaurs are extinct therefore the dinosaur character cannot possibly exist, despite the fact that she is obviously standiing right there. umm yeah
Mark Zandi will fix all stats and make them look bullish.
Nah, more like clueless. They should stick to the meaningless consultant buzzwords and leave real analysis to the grownups.
They work for the powers that be
Look at the momos move this morning....breakout or top shorting?
Obama= If you like your 401k balance you can keep it!
If you like your gold bars..you can keep them .....so it is written so it shall be done ...
More Jedi Knight economics...
These are not the statistics you are looking for...
Bro of the Sorrowful Figure finds unprotected sex does not lead to STDs or babies, aggressive beer consumption improves driving skills, and gravity bongs do not lead to tasty waves.
who? mckinsey? those guys are fahgs!
http://www.youtube.com/watch?v=GPo2RMHgSKQ
And to think he gets more pay than those that serve a Big Mac
What's an Equity Market?
It's where you bring the sheep, take their money and ship them to the slaughterhouse... and than there happens some stuff and you get lasagna.
LET'S DO IT AGAIN ANYWAY!!!!!!
This company should be shut down. Amazing!
The fact that the two things correlate doesn’t matter one little bit.
Yeah sure just like the way price goes up and quantity demanded go down is a correlation.... Or the supply of money to an asset class increases and the price increases is a correlation....
You are reasoning with a box of rocks.
You are giving the paperbear a little bit too much credit.
Hahahahahahaha
PaperBear: Nows a good time to say you forgot the sarc tag...
More correctly, and definitely more sad, is that equity markets are now just a reflection of hand-holding central bankster policy....completely illegal and unimaginable 20 years ago.
But 20 years ago Sheepdog, banks were still mostly banks, not cranking out financial weapons of mass destruction and front-running the market every morning.
All planned, 2008 was just the fear and panic event to fearmonger everyone into accepting the FED's plans to completely take over markets.
Is there an #AskMcKinsey later today? This report raises some questions!
Ask away!
From the paper:
"We welcome your feedback on this discussion paper. Please send your
comments to QE@mckinsey.com."
And yet strangely , Gold continues to go down this year.
Wow, I have heard some ridiculous claims in this business, but this one has to take the cake. Even the most out of tune broker "investor" is aware of the fact that the Bernank and his printing press is elevating this market.
I have two questions for McIdiots:
1) Why is the best market performance on POMO days?
2) If the Bernank isn't elevating this market why is wallstreet so afraid of him turning off the presses?
If you don't look you won't find
What is that expression again? "It is difficult to see something when your paycheck depends on not seeing it".
"It is difficult to get a man to understand something, when his salary depends on his not understanding it."
Upton Sinclair
The "white paper world" strikes again.
Step one: enact an idea that supports your agenda (makes you money)
Step two: go to the universities/consulting companies and pay them to create a report that supports your agenda
Step three: spread the results amongst the lamestream media
Step four: pay for some advertising in the lamestream media so they are bribed well enough to write about your bullshit
Step five: sit back and watch the lemmings lap up your garbage and make your bank account much bigger
Step six: lather rinse repeat
http://www.dilbert.com/2007-02-22/
Smoking does not cause cancer and global warming is a hoax...
your illegitimate logic is nauseating you feckin idjit....
Illegitimate??
You clearly have a very different dictionary than the rest of us....
Edit: Anyone else want to give it a try?
Let me just ask, Flak, who said 'global warming' is a hoax? Are you talking shit about critics of the theory of AGW again??? (anthropogenic global warming, stating, not only is the globe's temperature increasing, but as a direct and sole result of human activities)
You should really start by learning your opponent's position, instead of this straw man bullshit.
Given the title of this article, "... QE did not boost Equity Markets", I thought I would use the rhetorical device of making two equally absurd statements....
By the way you commited a strawman fallacy, proponents of AGW do not claim the warming is the sole result of our activities...
Oh, but I do know the positions of the "skeptics", learning them made my head hurt mightily....
For example, once you have seen one cherry pick of the data you have seen them all...
Seems more like the McKinsey report is paid and ordered by someone with huge political interest in raising the reputation of FED......
These are not the comparisons you are looking for...old FEDI mind-trick.
McFlimsy.
"Sadly, by issuing such drivel McKinsey has just tarnished what little reputation and credibility it may have had."
Indeed it did.
McKinsey has now become the 'Baghdad Bob' of the moment.
The media should stop reporting on the index values and the change of index values since they have no meaning anymore. Instead they should just report the ratio between those index's market cap and the Fed's balance sheet.
I know you had a chart up a while ago that showed the NYSE market cap divided by the Fed's balance sheet. Did whoever put that together update that chart?
I like how the SocGen chart shows the S&P 500 front-running the anticipated continuation of QE. Probably front-running leveraged to the hilt. Small wonder that upon any hint of tapering the plunge protection team springs into action. I envision Bernanke in a trench coat, up on the roof of the Fed, activating a searchlight to project a "$" into the night sky.
Yes I see no correlation between the market making all time highs and trillions of dollars being pumped in. However I think I need to be commissioned by the government for 200 million to confirm my findings. Duuuuuuh
Great....then stopping QE immediately is no big deal....
+1
Bingo, nail hit squarely on the head!!!
DaddyO
Unlike Moody's this company immediately skips to the zero-credibility stage without painstakingly building a valuable reputation to destroy. Saves time. McKinsey = tool for rent.
That's fine then. Lets stop QE right now and put interest rates at 4%.
Hilarity ensues.
Keep digging. Eventually a blind squirel will find an acorn. Or a 1000 monkeys beating on a typewriter will create shakespear...Until then, we have to read this guys reports. In fact, is this a "status report" on the monkey's progress?
McKinsey is poop, we want Goldman!
Over.
"Ignorance is strength"
"Freedom is slavery"
"War is peace"
The Bible according to McKinsey.
I think his much earlier work on sex had a touch more validity.
I particularly enjoyed his research on women's rape fantasies.
So McKinsey is telling us that lower interest rates do not cause higher asset prices all else held equal? Maybe in their next paper they can debate the existence of math?
"1 + 1=3"
McKinsey: "Sir, you need a space between he equal sign"
The interesting thing about the chart is the market seems to dictate where the Fed's balance sheet should be, i.e. forcing the Fed to maintain the unstable price of the market. Considering that one of the Fed's mandates is price stability, seems to me the market is forcing the Fed "buy or else".
Have hired this crap company as consultant at my last two companies. Bunch of kids in a back room customize boilerplate presentations and spreadsheets they have from the last client, dump it off and walk away $5M richer...junk
Yeah, the boost in equities is due to stagnante income and more people on food stamps. Give me a break. What are Moody's smokin? Mark Zandi is the same way.
It's unicorn land over at Moody's.
This would be the same McKinsey that spawned Jeff Skilling?
OK, so just take away the punch bowl for 1 year and see what'll happen.
Arrest McKinsey for heresy on behalf of a witch.
http://hussmanfunds.com/wmc/wmc131028.htm
these guys may not be guilty of plagarism, but they are borrowing heavily . If the above seems interesting, then read Hussman its better. correlation is not causation (we know this from 50 years of anti-smoking studies they still can't prove cigarettes cause cancer) Hussman says the cause for market overexuberance is (not QE) the change in FASB mark to myth accounting rule changes, which is the tail wagging the dog. first you murder someone, then you get the laws changed so thats it not a crime. (lack of forsight on your part)
and no kidding if i decide to pay your mortgage for you, its seems likely you'll have money for other things. if the american people had to live within their means the empire would stop right now.
You lost any crediblity with your smoking claim.. You are clearly incapable of performing an objective appraisal of information...
Hell, the tobacco cos. internal studies showed the link with cancer back in the 50's...
See for example:
http://cebp.aacrjournals.org/content/16/6/1070.long
And if the above article was libelious, I can assure you that the authors would have had their asses sued to the hilt...
as for libel, in hollywood they call it borrowing. you are still missing the distinction between correlation and causation. much like convicting someone on circumstantial evidence, (we do it all the time, and there is nothing fundamentally wrong with the process - the least reliable testimony is eye witness testimony) all statisticians know this problem, and they tend to error on the side of caution.
Yep, ok, whatever....
If you were spinning any harder you would drill yourself into the ground...
"See? I told you so! Thank you McKinsey!"
- The 0.0001%
I didn't realize the Fed hired McKinsey as a consultant.
Exactly. The .0001% didn’t even have to pay for the study. McKinsey primarily consults for the government, so it’s likely your money being spent to produce this crap. Apparently their rate structure also correlates with the importance of the answer their client wants the study to find.
In other nooz…
Yellen Hires Particle Physicist To Detect Wealth Effect.
In the latest example of top scientific minds being channeled into the financial sector, Janet Yellen, newly appointed Chair of the Federal Reserve has hired Nobel Prize winning particle physicist Naveen Gupta to prove the Wealth Effect actually does exist in the economy. Frustrated by naysayers who claim the Wealth Effect is only theory, Ms. Yellen has asked Mr. Gupta to help produce empirical evidence of its existence once and for all.
In our exclusive interview Naveen explained how his basic approach will be analogous to his prior work at the Hadron Collider. “In particle physics, you deal with very low probability events occurring on an incredibly small scale”, said Naveen. “You often must bombard matter trillions of times with high energy particles before you produce one measurable event or effect of the kind you’re looking for.”
“It’s the same with the Wealth Effect.”, says Gupta, “You have to bombard the economy with huge amounts of stimulus dollars to produce even one more dollar of marginal spending by wealthy people. In fact, we estimate the probability of that happening to be even lower than rare subatomic particle reactions; like one in a Google to the power of Avogadro’s Number or something. At the current pace of stimulus printing at the Federal Reserve it could take 100 years before we record a single example of the Wealth Effect. But, we’re confident the phenomenon does exist, and that Ms. Yellen will step up the pace of printing to produce a measurable event by the end of her first term. Considering the importance of this finding to defend the Feds stimulus programs, the $2 billion allocated to this special project is not just a great investment by Ms. Yellen, but a necessary one.”
Naveen Gupta has never even touched a Nobel Prize in physics let along win one...
http://physics.stackexchange.com/users/31861/naveen-gupta
He appears to be a 23 year old grad student
OR
the co-founder of an IT startup in India:
http://www.linkedin.com/pub/naveen-gupta/11/4b5/944
In other words, the above appears to be a complete fabrication....
How's your thumb doing? Two eyeballs in one day.
Better than the eyeballs it would seem...
I presume that accountability means nothing to you?
Or you prefer a world where made up shit goes unchallenged?
Kumbaya baby....
Hey sport, I'm on your side! You have not paid attention. I understand the reaction but truely I aprove of thumbs in the eyeballs of the shitforbrains here.
\hattip
Much appreciated...
This is the most amazing expectations management game the Fed and its supporters have played yet.
If they can convince people that QE was worthless and was of no benefit then people will believe that withdrawal of QE will have no consequences.
Just watch. There will be more pronouncements and studies that QE should not be given credit for saving the economy. Then taper.
This is how the Fed is trying to solve the "end game" problem.
Honestly I hope they succeed.
I dont have enough gold yet.
hahaha, Mckinsey like Booz Allen, and probably ADL and Boston Consulting, ALL had to suck the Oligarchy teat to be spear carriers of NWO gone global during the last 40 years.
"I keep getting these Apocalyptic nightmares... every time I tell a lie to protect status quo. Is it me or is it the system? I'll have to ask the head Druid Yellen!"
He is right. QE is just two letters on the screen. The markets move from zero interest, free money.
"McMoodys" LMAO! Fuckin priceless. The Tylers continue to point out ultimate truths about these total fucking corrupt scumbags. Love it.
This lunacy qualifies for jail time.
unfortunately for you, the McKinsey boys are much smarter than zerohedge contributors and readers.
mother mckinsey?
oh dem golden slippers, oh dem golden slippers...
http://freepages.music.rootsweb.ancestry.com/~edgmon/stgoldenslippers.htm
Obviously QE does not boost equity markets, just because POMO and stock indices' correlation coefficient = 1.0, and the word 'taper' causes them to instantly nosedive.
It's just science people.
Ah yes, McKinsey. Brings back memories of one career segment where the best and brightest newly minted McKinsey MBAs took over the C-level floor of a struggling tech company. Surely with enough consulting money and moar MBAs the company could be saved....
...if you guessed that (within six months) it was not saved then you are smarter than those newly minted McKinsey MBAs.
Deficits don't matter. Liquidity doesn't matter. Interest rates don't matter.
Don't quit your day job guys. You know, the one where you write research to support a clients' objectives.
Its so hard to understand something when you salary depends on not understanding it.
This guy is a real conspiracy theoriest. He cooks up his own half assed theory which DOES NOT explain the reality on the ground. Then is quick to sell his lies to the sheep.
I am amazed how fucking stupid americans are, espically the slick corporate crowd. They rather be spoon fed bullshit for a medicore income while working in what are basically jail cells in glass towers. But as soon as you challenge their perfect little word their ego losses its shit.
Guess what people?(preaching to choir here)the fed is the greatest wealth syphon ever conceived by the banks. It has no real puprose. It creates money OUT OF NOTHING to buy loans from the goooberMINT, which WE the SLAVES have to pay through income tax with ever decreasing value. O and that money that is created ALWAYS has debt attached to it. So for every dollar that is created there needs to be 2 to pay it back. Which it is impossible. In our current system it is impossible to be debt free as a country, otherwise there would be no money supply. And if that doesnt make you happy, the very banks that own the FED take your money and trade with it on the open market!!
Why doesnt this cheap prophet write a report about that? O because its an inaccurate conspiracy theory? Go fuck yourself.
Next thing they'll say is that eating junk food doesn't make you fat.
If those consultants were really that smart, they'd be bankers :).
"Is that true?"
"Yes, it is true. The man has no dick".....
McKinsey
McKinsey just destroyed ALL their credibility!
Seems that you don't have to be that smart to work at McKinsey
SO, did they forget to print the last page of the report which said-
if the faucet is connected to the hose, and it ain't watering your lawn, then why not just turn off the faucet.
Chance the Gardener -winter 19something
...and who contracted with them for this report?
hahahaha...oh wait..its not funny at all really is it...can we correlate this to the politicians and central banks shareholdings too? i am guessing another 3.5 trillion so that they can boost the S&P to 3600 in the next four years....SMOKINGGGGGGGGGGG!
distinction has to be made (as opposed to datstinkshun above).
qe has no impact on economic activity...period....it has a direct impact on the price of conducting economic activity..something that is not even touched on by any economic dogma except for monetary economists via the very narrow price of money measure. the price of assets is a determining factor in future economic activity...qe = zero growth for as long as qe exists, (see japan)...profit growth = transaction growth = capital formation = long term economic growth, measured with a lag of five years