Here Are The Negatives In Today's ECB QE Announcement

Tyler Durden's picture

Everyone knows the positives, or rather positive, even if nobody at the ECB is willing to come out and say it: the ECB's QE - whose structural details were laid out previously - will boost stock prices, and... that's it. Who benefits as a result of this has now become a socioeconomic and philosophical discussion.

So here, courtesy of ADMISI's Marc Ostwald, are the negatives:

  • Risk sharing is very limited, with national central banks taking 80% of the risk on sovereign bond purchases, and rather un-reassuring was Draghi's comment that "most national central banks have adequate buffers to absorb a negative event" - most being how many.
  • Not good news for Greece, while it and Cyprus will be eligible for purchases of govt under a 'waiver' for (bail-out) 'programme countries', the ECB already has a very high volume of Greek bonds on it balance sheet from the SMP programme, and given a limit on total holdings for each sovereign issuer, it will not be eligible for purchases until it redeems debt in July asnd August. It should be added that other Italy and Spain and other bail-out countries will implicitly also have a lower available volume of total purchases, until SMP holdings are redeemed.
  • BUT perhaps the key aspect relates to the limits on the 25% limit on purchases of a single issue, which ensures that the ECB adheres to the ECJ's ruling about the ECB ensuring that is does not interfere with "price formation". So here's the key aspect, there are some $12.0 Trln of FX reserves in the world, of which roughly a quarter are held in Euros. Operating on the traditional metric that roughly half of those will be invested in Govt Bills and Bonds, this means that FX reserve managers will have to be involved in the process of establishing prices for whatever is purchased under the Govt bond QE programme. Eminently anything that is sold by central banks will not find its way into the private financial sector, therefore that EUR 60 Bln figure may often overstate what is being injected into the market.
  • Last but not least, the expanded programme does not start until March 15, so "Mr Market" now has a very long waiting period to sit on holdings of EUR debt before selling to the ECB, and with plenty of event risk in the world, starting with the Greek election, and to mention the prospect of an imminent Ukrainian default. Sort this under an uncomfortably long period before the QE 'party' gets started.

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hedgeless_horseman's picture




I had sold all of my German Wheelbarrow Calls to Goldman's trading desk.  I am such a muppet.

Otherwise...King Dollar!!!!!!!!!!!

F.A. Hayek's picture

No loaves of bread for you, I guess.

hedgeless_horseman's picture



I am back to looking at European vacations for August.  Baguettes on the French Riviera!

Thanks, Mario!

KnuckleDragger-X's picture

There are some very nice castles going cheap right now and an Evil Overlord has to start somewhere......

Alea Iactaest's picture

<--- Courchevel (EUR)

<--- Zermatt (CHF)


Headbanger's picture

There will be no Europe by March 15 and the ECB members will have escaped to a secret hide out in Argentina !

KnuckleDragger-X's picture

that's where the overlord part comes in since the sheep will still need to be herded......

stant's picture

Turn the lights back on Ellis island . Or bring the Iowa class outa moth ball.

El Oregonian's picture

We're in the Money! We're in the Money! no, wait....

ukspreads's picture

DAX is the new DOW, Buy the FUcKinG All TIme HIGH !


EDIT: Mark me down as much as you like sucker - The DAX is still going up.....

slaughterer's picture

By Sept 2016: DAX 20,000 at EUR/USD .60.    Everybody rich... er, nevermind.  

Oracle 911's picture

By March 15 the Germans will leave the EU. I think.

kurzdump's picture

There are no 'Germans' anymore; they lost WW2 and have become extinct since then.

Oracle 911's picture

Sadly true, the German spirit was killed by an Austrian schmuck (means Hitler) and the Anglo-Saxons.

But Germany's industry doing well and they will kick out Merkel and leave the EU probably this year.

Theosebes Goodfellow's picture

This does though make you wonder whether it will put a damper on the Davos party going on. Or maybe they called this QE? Just because the agendas are hidden doesn't mean they aren't there, very much like just because you're paranoid doesn't mean they aren't out to get you.

slaughterer's picture

Exactly, Germany will disappear through the back door of the currency union, leaving the PIIGS to drown by themselves.  

KnuckleDragger-X's picture

I normally don't do the conspiracy theory thing but I'm really starting to wonder what Germany is really up to since they know this won't end well.

Oldballplayer's picture

Merkel and Vald doing the bosanova?

Maybe they will figure out if they try together, they really CAN take over the world this time.

Fun Facts's picture

conspiracy theorist = derogatory label used to disparage and silence any person who dares to question the corporate media/Govt/ZWO mantra of lies.

new game's picture

germany loves this arrangement-trade advantage with their string industrial base.

the debt is the ecb's problem. when the rats scramble it will be each country for thier own. hmmm.


Greenspazm's picture

And the golden tongue has punched through the 1300 fart box (1302.80 momentarily)

Alea Iactaest's picture

Just making the charts look pretty (in USD). Check Ag in GBP and Au in EUR. The story comes into focus.

$1380 is the intermediate target with another $75 on top of that by the end of the year.

If you're into charts of manipulated markets. But just like the pagan calendar and numerology, the people making the big bucks follow this stuff so you might want to at least consider it.

franzpick's picture

Accepting any proposition from the Dragh queen is negative.

El Oregonian's picture

Oh, you mean "Count Draghi-ula"?

buzzsaw99's picture

but, but, that duplicitous cunt lagarde said it would be good for the "laggard economies"

ejmoosa's picture

In the beginning, it was the people that stood to benefit from the issuance of bonds that evaluated the risks and chose accordingly.

The issuers of these bonds soon tired of making the case for these bonds, and decided that it would be better to market these instruments outside of the areas where the beneficiaries lived.  There would be less questioning of the risks involved.

And today, we have the Central Banks, who have decided that they will bear the risks for all those bonds around the planet.  There's no reason for us to worry about the risks of all these instruments.

If there is risk, then there will be loss.

And then we will have come full circle when they demand that we pay for the risks that they took on so foolishly.



rlouis's picture

I totally agree, but the ECB decided there are only HYPOTHETICAL LOSSES. 

Seasmoke's picture

Can I now buy a BMW for $20,000 cheaper ???

Bell&#039;s 2 hearted's picture



King Dollar CRUSHING IT ... again


when will china depeg from usd?


tick tock tick tock tick tock ...

FreeMoney's picture

China has a problem with that...they will never want to take the losses on all of the treasurys they hold.

FreeMoney's picture

China has a problem with that...they will never want to take the losses on all of the treasurys they hold.

Bell&#039;s 2 hearted's picture

and remember ... a LOT of emerging market debt priced in usd ... good luck to them getting their hands on enough $$s to stave off defaults

NoWayJose's picture

Stiffing the Greeks in this is setting up to make the Grexit Vote a potential black swan.  Had they left some wiggle room, the markets might have been able to cling to some type of 'stay in the EU bailout through QE'.  With that off the table, the effects of an anti-EU vote will be magnified.

madbraz's picture

we currently have a stealth QE going on in the US - "temporary" reverse repos which have grown from $80 billion a few days ago (when the market was falling) to almost $170 billion yesterday.  expect these volumes to grow to $250 billion +.  they are most definitively not "temporary". 

madbraz's picture seems that there is some shenanigan going on between London and NY - I wouldn't be surprised if collateral used here is being recycled to europe at the close here and then re-recycled back to the US after Europe closes.  re-rehypothecation, if you will.  that would be a way to get european QE to spill over it's manipulative tentacles over here.


i've raised this suspicion before and the more i see the strange behavior of FI markets, the more it seems to confirm that some strange "force" is trying to interfere.

Chad_the_short_seller's picture
Chad_the_short_seller (not verified) madbraz Jan 22, 2015 3:25 PM

There is absolutely no doubt in my mind whatsoever that some sort of "qe" is going on here in the good ol honest abe murica. No fucking way!!! The market wants to sell off but it just keeps grinding up, esp the day of the sotu. Come the fuck on with that bullshit. Market was down 150 and just happened to pull through and close green for the day. Just in time for obama to brag about the economy. The cb's got that mother fucker's back, period. The jews love him and they put him into office and the jew media got his back too. All jews working together to lift him and everything he touhes.

bshirley1968's picture

Why isn't anyone asking some obvious questions?  Like......

With the dollar at a 7-8 year high, how is gold/silver not getting crushed?

With the Euro getting weeker by the week, how is this Euro QE not going to push it lower along with Japan, China, etc., and the dollar even higher?

That being said......

How in the hell can anyone imagine that a "stronger" dollar from here is going to be in anyway positive for the US economy?

Will gold/silver continue to go higher as the dollar gets even "stronger" against all of these race-to-the-bottom fiats?

When is the next round of QE for the US coming to knock the dollar back down?  Since this "strong" dollar is about to set a wildfire of out of control bankruptcies loose in this country, destroy corporate earnings, and throw us into a deflationary tail spin.

Just wondering about your thouhts.

socalbeach's picture

The "dollar" is not at a 7-8 year high, the "dollar index" is at a 7-8 year high.  The dollar index is the value of a dollar relative to a (random) basket of fiat currencies, mostly the euro.  So considering gold as a currency, it's the strongest, followed by the dollar, followed by at least some of the currencies comprising the dollar index. Currencies like the Swiss franc could even be stronger than gold, I haven't checked.

Fix-ItSilly's picture

Roll the TLTRO and LTRO into QE?  Won't affect the markets.  It would be a dud for the economy.  But Draghi would supreme-master-of-the-universe status quite quickly.