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Deutsche Bank Asks: "Are We Understanding More About How Addicted Markets Have Been To QE"
Two months ago, we warned that Deutsche Bank "raised the warning flag", when its strategist Jim Reid, referring to the infamous chart showing the correlation of the Fed's balance sheet and the S&P 500 said:
The risk sell-off we've seen in recent weeks frustrates us a little as the chart we've published most this year has pretty much predicted that tougher times would come around July. We've been paying it a lot of attention for over a year now but decided to wait until the autumn before we raised the warning flags. The chart in question (included in today's pdf) is the one showing the Fed balance sheet and the S&P 500 (as a proxy for risk generally). As you can see, since the Fed balance sheet was used as an aggressive policy tool post-GFC, the graph suggests that the S&P 500 is well correlated with the size of the Fed balance sheet with the former leading the latter by 3 months. Given that the Fed have recently signalled that they will likely be finishing expanding their balance sheet in October, 3 months before that was July. This is important as virtually all of the mega rally in the last 5 years has come in the Fed balance sheet expansion periods. The other periods have been more challenging for markets.
The chart he is referring to, of course, is this one.
And judging by the recent bout of volatility and risk weakness, we are now entering one of the "infamous" other periods.
So as it is finally dawning on even the most die-hard, and naive, pundits that it was all about the Fed for the past 6 years, here is Jim Reid's latest comment on this infamous "pair trade":
With the recent weakness in risk, are we understanding more about how addicted markets have been to the Fed's QE? Or is this just a temporary unrelated blip? The Fed will turn off the QE tap later this month and in our opinion volatility has been increasing as the market adjusts. We've long felt that the Fed pulling back from QE would be an issue for markets and it’s tempting to be bearish here.
That said, it is only stocks that are set for more weakness. As Reid notes, "credit markets have corrected a long way already", as we have shown repeatedly.
In fact, we will show it again, to show just how much further stocks have to plunge because, as always, credit is right and stocks are wrong.
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<---- Withdrawl is a Bitch
<---- Withdrawl is a warm kitten
Depends on her mood
QE is the Fed helping the Fed shareholders.
They'll bill your grandkids for it.
don't you mean "warm pussy"?
Just semantics, bro.
Deutsche Bank Asks: "We became addict ourselves to understand how the addictions works"
DB should also be asking how on Earth are they going to unwind the $72 trillion+ in derivatives they have heaped upon themselves.
http://www.zerohedge.com/news/2013-04-29/728-trillion-presenting-bank-bi...
Well DUH! Polish salute.
"Dr. Sauron can't get to the ribbon so he is trying to get the ribbon to come to him."
The addiction is to 1999...not all this other malarkey.
markets? what markets? it is just a suckle off the fed's zirple.
there is no market, there is only old yeller.
But everything is great.....the market is going up.
/OT
White House: "We will not stop people from Ebola-stricken countries from visiting the United States."
I know I'm sticking on the point....but how can ebola be patented again?
Better yet....who would profit from something like that?
Natural DNA vs synthetic DNA, might apply to RNA also?
"By making a distinction between “natural” DNA and a lab-created synthetic version called complementary DNA, however, Justice Clarence Thomas may have seized on a distinction that will be difficult to maintain over the long run."
http://www.forbes.com/sites/danielfisher/2013/06/13/supreme-court-reject...
What happens with the general dumbing down of society and its members
Thats because it will be racist.
That one was easy to predict. Here's Obama's decision tree:
If good for the USA, then NO
If bad for the USA, then YES
Try and see if it does not work 100% of the time.
Stock Market May Collapse 50%, Billionaire Investor Warren Bugget's Famous "Total Market Cap-to-GDP Ratio" Has Breached A Critical "Sell" Level.
http://investmentwatchblog.com/stock-market-may-collapse-50-billionaire-investor-warren-buggets-famous-total-market-cap-to-gdp-ratio-has-breached-a-critical-sell-level/
Warren Bugget?
So....buy the f___ing meltdown?
We have not yet begun to pay the price for the ill effects of QE.
QE was used to borrow demand and pull wealth from the future at levels we have never seen before, and bring it into the current economy.
Payback will be a bitch.
That will come in two flavors:
Destruction of real net worth.
Less demand in the future.
And both of those were exactly what the Fed had been trying to stimulate. The crime is that those that have proffited will not be the ones that suffer the consequences.
The perpetrators need to be jailed.
Unfortunately they will get raises and ice-cream.... and the blood of young boys from a chicken ranch
Old uncle grandpa Warren Buffet is working hard trying to sell the hope today..... Buy stawks, I did!
I enjoyed the "Breaking News" of "We actually bought some stocks yesterday" that flashed across the screen.
Such a sad group.
We will have a 5-10% correction, and the fed will back out of QE easing and instead of cutting to zero on Oct. 28, an increase back to $25 billion will be initiated. Plus, plans for possible more increases to be determined on how the "economy is doing".
Talk of the Fed tapering QE ishould be taken about as seriously as Obama swearing to uphold the Constitution. You can't taper a Ponzi!
The Fed will turn off the QE tap later this month and in our opinion volatility has been increasing as the market adjusts. We've long felt that the Fed pulling back from QE would be an issue for markets and it’s tempting to be bearish here.
What the read will not be telling you? More than likely you can expect a major "life changing event" right before the Fed turns off the spigot.
Should it be an Ebola quarantine for a region of the U.S., Europe and Africa?... Or perhaps something catastrophic in Eastern Europe that will force the NATO contingent into emergency response mode?...
Middle East?... Took 8 years longer than anticipated but it's already just about done -done to perfection!
They will just take down Facebook and Twitter servers for a day.
The Fed will turn back QE with even larger doses.
It's all they can do now.
They have to spook the country first. One of these days could be a nice day to crash the market and then grab more power....because you know if we don't the world will end.
Can we just start this already? I'm over it.
Lol Projected path of Fed "BS"
That correlation works great until it doesn't.
It was 100% the same with Gold, the more they pumped the more Gold went up. Then as they continued to pump Gold got smashed and even as they pumped some more, Gold has gone nowhere.
Therefore, there might come a time when the pumping continues and stocks move significantly lower (for whatever reason).
Then what are the Central Planners going to do?
As someone said here - Never forget that Central Planners are masters at backing themselves into a corner...
It has been said that an addicted patient cannot get well until the patient admits he or she has a problem. America is addicted to debt and she is in denial. America cannot get well until the problem of debt is acknowledged.
What is really unsettling is that America has to borrow 8+ Trillion per year. Where does the 8 Trillion come from you might ask? Well, redemptions plus new debt. GOD help America if interest rates ever rise ... life will change over night.
Everyone who was predicting that the new system would result in skyrocketing inflation has been wrong, although there will be continuous asset price & commodity inflation. The reasons why there will not be skyrocketing inflation are:
1. There are far too many humans, and especially incompetent humans, for the amount of economic activity (jobs), and even more humans coming at an increased rate, while technology reduces the amount of labor required per unit of output, so wages will be suppressed by excess labor supply, domestically and especially internationally.
2. The explosion in spending by the socialist parasite politicians to buy votes with the exploding entitlement programs, and the resulting full-range of taxes, is strangling the people who do have jobs into mere paycheck-to-paycheck subsistence, so those who are working do not have the disposable income that is required to create consumer-spending-fueled economic growth.
3. The number of people who leave the workforce due to aging AND parasites living off the expansive entitlement programs has surpassed the people working and whose confiscated earnings are paying for the entitlement state, so there will be even less productive activity & earnings, and even less contribution to economic activity & growth. The new monetary-financial-economic system REQUIRES a continuous supply of CREATED-money to make up for the declining amount of EARNED-money AND keep the entitlement programs growing in number and cost.
All the trends are in the direction of worse, not better.