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ECB's Asset Monetization Advisor Says There Will Be No Full-Blown QE
When two months ago, the ECB announced it would hire Blackrock as an advisor for its "Private QE" ABS and Covered Bond purchase program, many eyebrows were raised, mostly out of cynical curiosity whether the ABS purchased would be those structured by the "advisor" itself. Well, according to today's detailed fresh off the printer, pardon the pun, term sheets on the program, it appears that the eligible securities will be almost exclusively of European origin, so one can probably exclude Blackrock advising the ECB on buying ABS structured by Blackrock itself.
However, what one can not exclude is that Blackrock, having worked with the ECB for an indefinite period of time, is intimately familiar with the long-term strategy of the biggest jawboning back in the world: Mario Draghi's ECB. Because while Draghi will say anything, as he started two years ago with his infamous "Whatever it takes" speech, his actual policy options are painfully limited. It is in this context that all those betting that public, US-style, QE will inevitably follow the private QE which is set to last at least two years, may want to sit down and read the following note from Reuters, which warns "investors loading up on some of the euro zone's riskiest government bonds on expectations that the European Central Bank will buy them are making a mistake" according to none other than BlackRock's head of European and global bonds said on Wednesday.
Trust us, if anyone knows, he does. From Reuters:
Market expectations that the ECB will be forced to resort to sovereign bond-buying as part of a broad-based quantitative easing (QE) scheme have shot up in recent months as the bloc tips towards deflation.
"The market is very much taking for granted that quantitative easing through a government bond purchase programme is coming and I think there are many, many obstacles to that still to come," Scott Thiel, who oversees assets worth around $100 billion for BlackRock, told Reuters.
"If people are buying Spanish and Italian bonds because they think the ECB is going to buy them from them, I think that is a mistake."
It doesn't get any clearer than that, muppets:
Many bank analysts predict a full-blown QE programme in the next six months, while some see it as early as November, as the ECB's efforts to ensure the recovery appear to be falling short.
Economists polled by Reuters saw a 40 percent probability of the ECB purchasing sovereign bonds, up from 25 percent at the start of the month.
It will be further ironic if as part of his depature, Bill Gross knew all of this, and upon his departure left Pimco, which remains overweight on Italian government debt, left the Newport beach fund with the biggest easter egg yet. Because the last thing the Total Return Fund can afford is to not only be pillaged by redemptions but also to see a substantial plunge in the market value of its holdings.
At the start of the year, Pimco, which manages $2 trillion (1.58 trillion euros) worth of assets globally, said its position in high-yielding government bonds of the euro zone periphery, such as Italy's and Spain's, was the largest ever.
BlackRock, the world's biggest asset manager, said in May that one of its main bond funds - which Thiel oversees - had cut its holdings of peripheral euro zone government debt to their lowest since the height of the crisis.
So who will be right: Pimco, which is in disarray, and deserpately scrambling for any yield anywhere in the world, or the company which the ECB has hired to advise it on what increasingly appears will be the ECB's only foray into monetization?
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. . . . "There Will Be No Full-Blown QE"
It will be 99.99% blown, then. (rounded down)
No, everything blows, including Draghi.
Keep this in mind, it goes back a long ways.
Mario is Italian not German.
where's the nearest bathroom............
Yeah, that's what he sez this week, but ask him again next week. We all know how the word "never" works in politics. Usually means, "Not until I finish talking and doesn't apply to what my staff are planning right now".
I guess the Full Monty is off the table?
Of course the ECB will not do a QE program. The ECB is owned by the Germans.
ECB is FED. FED is Goldman Sachs and friends. Don't confuse German banksters with Germans.
Banking in Germany is the marriage between Jewish money and impoverished royalty stripped of their status. Same as everywhere if you dare to look.
http://en.wikipedia.org/wiki/Hjalmar_Schacht
Rotes Schild started their financial warfare in Frankfurt to first oppress Europe then later the US.
Sort of agree
But think Germany would agree to QE IF they had stronger say in fiscal policy of members. As it stands now, members are missing deficit targets and TPTB are letting them slide.
Germany would want something concrete before agreeing to QE dead beat countries (if not, then Germany enablers of deadbeat to do no real reform ... blow up only delayed ... AND made bigger)
they will just not call it that...it will still happen...have to keep the Bankers whole....
The redneck's view from NW Montana is that it's up to the Germans.
If Germany caves and supports an "ECB style QE program"---the music will play on for a while longer
If Germany says "nein", I dunno what will happen, but it will be fun to watch :)
probably a dose of Shock Doctrine
countries/markets would have to endure PAIN first, of course
and then they'll see the "wisdom" of Germany (and sign whatever the f&ck put in front of them to make pain go away)
On this whole issue of QE and trying to inflate via money pumping the deflated economy. I know what ZH says and I know it was reflected in the Bill Gross approach to QE2's fall out which was supposed to make interest rates surge in its wake. (Gross is apparently an avid reader since inception of ZH).
Here is the rationale on that KEY ISSUE debate about the bond market, the big market in the world.
http://www.businessinsider.com/this-was-the-bill-gross-blunder-that-led-...
It would be nice to hear ZH comment SPECIFICALLY on the issues highlighted in this MSM post.
After all its Krugman's epitaph on Gross's whole strategy since 3 years or more.
I would appreciate, and I am sure others would also, if the ZH forum would keep its comments away from the usual knee-jerks and we have a response from a Tyler who answers the issues from the ZH perspective.
PS : In case this issue has already been addressed in the terms stated, I'd love to have the link to that ZH posting.
too bad QE/ZIRP is DISINFLATIONARY
(DEFLATIONARY when asset bubbles burst)
textbooks might figure this out in 20 or 30 years
sure, but will textbooks in 20 or 30 years even mention that the elite got off scot free with their wealth largely intact after the bottom was about to fall out in 2008?
The elite is happier than pigs in shit because all that QE allowed them to rebuild and repair their balance sheets while the 99% are paying the price - again.
Bill Gross wrote his Mea Culpa Ante in April 2013........
The "Man in the Mirror" Bill Gross Sees is Captain Smith.....
As explained in those works, the Ultimate Answer to "QE" is:
Elongation, Not Alteration.......
Where we are:
"Zugzwang"
falak pema, excellent question from you. and the articles from Dr. Krugman are a worthwile read, even if I generally don't agree with him
it does not look like Tyler is going to answer you, so I venture a small answer
as such, Tyler(s) always brought an Austrian School narrative, which is against specific predictions, and in favour of general predictions
Krugman's main point is that we are in a liquidity trap. his recipy is neo-keynesian: in a liquidity trap, governments can borrow with impunity, and so they should, in order to prime the pump, restore demand to pre-crisis levels, and generally preserve the existing production levels
the Austrian School criticism to that is that a crisis is always there as a natural state where malinvestment get's disinvested and cleared out of the system. it is the picture of a fire in the woods where old inefficient trees burn so that new, younger, more efficient trees can thrive
so the problem here is that if you are set to preserve the current production system more or less intact, you'll want to douse the fires with plenty of liquidity
and there, you'll find two models at work: the ECB doing that, and not more. and the FED/Treasury following the neo-Keynesian advice of monetizing like there is no tomorrow
both aren't really what the Austrian School mandates, which is letting the crisis work out it's creative destruction. so if Tyler keeps to this model, he'll just sneer at both
imho the key point is not that Gross expected rates to rise earlier. imho the key point is if central banks can really set rates, or just manage them
remember that for banking system lenders, what it really matters is the spread they get from lending, while for investors it's return on capital after discounting risk
and risk has become something completely warped. to make it simple, without any admitted failure whatsoever, there is no risk calculation
(the same as saying that if nobody dies, you can't have a life insurance anymore, because you can't price life insurances anymore)
eventually every economy climbs out of a liquidity trap... through (creative) destruction. in short, "something gotta give"
in Japan, it might be soon the currency. in Europe, we might witness the culling of the banks coupled some sovereign defaults. and we still have a disposable meta-currency for a real emergency. in the US... it's less clear. way less clear
the other way to climb out of the liquidity trap, though, is to wait until valuations are matched by the real economy
governments can never borrow with impunity. There is always a cost, tomorrow, for sustaining malinvestment and artificial rates today. At issue is whether or not "the price is worth it."
It is for the banks and the very wealthy. Not for anyone else.
Duffy, I agree with you. the question is when this tomorrow breaks it's dawn. on the other side, few except the utterly poor and the incredibly wealthy would stomach the full Austrian solution of casting the dies and see what happens
most of humanity is in the middle, and has too much to lose to bear the losses. the really poor have nothing to lose, the superrich can afford it
but if you aren't in those two categories... you might want to ask for moderation. a rare commodity, I admit
The FRB will be more than happy to do it behind the scenes, as long as it's in US Dollars.
last go round Federal Reserve did a currency swap on the order of hundreds of billions with ECB ... and ECB doled them as they saw fit to banksters.
Why i give bernanke a pass (sort of) of saying he didn't know where the $$s went. His deal was with ECB ... and only risk to FR was euro breakup
Everyone so fucking sure that it just goes on and on, surely the banksters will just keep backstopping everything....hey BTW just wondering how the 'smart money' record smashing buy-in fully leveraged 2 Fridays ago is going?
SD1 are you in the money now?
Not sure what you mean, 'in the money' how?
Did you go short on this topsy turd during the summer?
Oh no, I haven't gambled in the rigged criminal casino in quite some time. I frequently gamble at pool though, but never against unknowns, I leave that for the suckers.
As has been said countless times. He will only do what 'everyone' wants if a European nation decides to give up it's sovereignty. They won't.
the entire "fast money halftime" team shitting themselves now
"whatever you do, DO NOT short the death-cross, death-star on the russell 2000!!! HAHAHAHA"
yep, dont short small caps at 114.5 whatever you do. because 107.00 is definately higher than 114.5.
It's like the Fast Money guys are now realizing they've bet it all on Tom Brady's Patriots.....oh shit, what now?
By now it should be clear even to all how the "European transnational experiment" ends.
Due to huge discrepancies in culture, mentality, socio-economic circumstances and a great deal of history, Europe can never be a monetary union. It works wonders during "golden ages" (the entire 90's), but it starts cracking at the seams as soon as there's a crisis underway.
There will be "European" QE, but on a national level (see: 20th century economic history of Spain, France, Italy) after the EU crashes and burns.
risk happens ... rather fast too i might add
There is plenty of QE for those who can access money at near zero rates...
The "let the majority eat cake" monetary experiment continues...
You know damn well that behind closed doors Germany and the other northern EU countries that are propping up the ECB are going "oh hell no!!!'. Draghi may try to arrogate power to himself but that would be suicidal for the EU.
"investors loading up on some of the euro zone's riskiest government bonds on expectations that the European Central Bank will buy them are making a mistake"
Muppets never get told what the playbook is, they/we get told what we need to hear by those who are gaming us.
Lets see what happens......
HFT trader indicted - cnbc
German Gref, head of Russia's biggest lender Sberbank, on Friday castigated systemic inefficiencies in the Russian government that, he said, waste trillions of rubles and threaten to drag Russian society back into Soviet times.
http://www.themoscowtimes.com/business/article/sberbank-s-gref-inefficie...
Back to USSR you go ruskies.
USSR, USSA, EUSSR .. pick your poison, they're all the same now
Translation... The Germans said no. We have gone through it in the early 1920s and there was hell to pay for it.
Thanks for the heads up, Blackrock...lol
TOLD YOU SO
NO QE in Europe. There is NO mechanism or structure in place to do it.
Who is going to fund the purchases? Draghi's magic little unicorns?
Euroclear?
They offer services like DTCC for settlements. It's a giant paper laundromat.
The funds still have to go in from somewhere. They don't control funds or have authority as to where funds are being deployed.
"Who is going to fund the purchases...."?
.
If the thing starts to collapse they will rush in to support it. If a few people get burned they are not going to worry about it. Chances are it will crash or slowly wither. Chances are there will be varous forms of stealth QE. They are testing the market with a simulated exit.
Did I need on these pages years ago the QE is not a legal path for the ECB to pursue according to EU law?
Yeah, but what's your point? Laws.....shmaws, we don't need no stinking laws!!
Ironically today was basically ATL in yields for both Spanish and Italian Bonds
10y Spain 2.064
10y Italy 2.284
would be Interesting to know how many Billions of this dogshit the Japanese have bought...wonder if there will be a large dump in the coming days/weeks