What QE Hath Wrought (In 8 Stunning Charts)

Tyler Durden's picture

First - always remember, what The Fed does is for Main Street, Not Wall Street (since 1987):

 

And with that in mind, here is what QE hath wrought...

S&P 500

  • SPX QE Returns: +176.23%
  • SPX Non-QE Returns: -32.73%

 

Europe STOXX 600

  • Europe STOXX 600 QE Return: +106.16%
  • Europe STOXX 600 Non-QE Return: -9.37%

 

Japan's Nikkei 225

  • NKY QE Returns: +154.39%
  • NKY Non-QE Returns: -7.49%

 

WTI Crude

  • WTI QE Returns: +119.48%
  • WTI Non-QE Returns: -105.14%

 

Spot Gold

  • Gold QE Returns: +3.31%
  • Gold Non-QE Returns: +41.59%

 

5Y5Y Inflation Breakevens

  • QE: -97bps
  • Non-QE: +204bps

 

US 10Yr Breakeven Rate

  • QE: -104bps
  • Non-QE: +275bps

 

US 10Yr Treasury Yield

  • QE: -293bps
  • Non-QE: +184bps

 

So - feel better now? Seems like QE really did the trick.

*  *  *

And now The Fed's balance-sheet is in decline...

On a rolling three-month basis, the Fed's balance sheet has been declining for the last two months.

And the three-month difference in total Fed assets has produced some interesting relationships since QE started. Below are some economic indicators that caught our eye...

 

As we noted previously, it appears Yellen is going to need to find an excuse to crank the flow once again...

 

Source: Jim Bianco of Bianco Research

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InjectTheVenom's picture

>>>>  CASINO

>>>>  free open market

unplugged's picture

>>>  economic totalitarianism   (choice "C")

flacon's picture

Do you guys remember all the rage about QE producing hyperinflation and "gold to the moon" live with James Turk and Peter Schiff on KWN? Seems like we got the wrong end of the deal on this - QE only works to inflate the assets of Warren Buffet types. I don't know where to put what little money I have left... where do I go from here? What are your plans?

Hype Alert's picture

It's 3:00, do you know where the volume is? for a 270+ day, it's pretty weak. Again.

 

Gold won't take off until the fiat bust.  I don't look forward to a market correction because everything get sold.

KnuckleDragger-X's picture

It's the middle of the afternoon and I now feel like getting my bottle of cheap, rotgut tequila out and getting hammered...just like those charts....

unplugged's picture

and the fiat bust will happen when china wants to bust it - right now they are having too good of a time buying cheap gold & USA real-estate

Consuelo's picture

Shortly after Breedhate decides to make his fatal move in Ukraine, to which China will move simultaneously in their sphere, which will precipitate another fatal move in the South China Sea, which will facilitate the final scenario you suggest.

 

 

taketheredpill's picture

 

I still have Gold and Gold equities (local only not Tanzania, Kazachstan, Mongolia wtf).  Central Banks haven't given up yet, no reason why Fed doesn't come back with QE4, or 5, buying Corporate ETFs instead of Treasuries or nay risk asset for that matter.

 

Also worth noting that if Central banks globally keep trying to destroy their currencies then may be demand for something untouchable, like Gold.

 

BeerMe's picture

We did get inflation though.  Looking at the right areas is important.  The QE money has been flowing into stocks and the past few years has hit commodity prices.  But since food doesn't make the CPI...well...

daveO's picture

And housing. That's the biggest trap, thanks to property taxes.

Seer's picture

How many folks do you think were happily swimming in pools in CA a few years back?

"I don't know where to put what little money I have left... where do I go from here? What are your plans?"

Have you not learned anything?  "Money" is worthless!  Assets!  Of course, the trick is to pick winners, so, WHICH assets?  I'll repeat once again, ALWAYS start from the ONLY TRUE FUNDAMENTALS: "Food, Shelter and Water."  If you aren't grounded in these then you're just playing Russian Roulette (worse).

"Plans" are to live as long as I can, with the least amount of discomfort.  If anyone has any better plan I'm all ears...

TheFourthStoog-ing's picture
TheFourthStoog-ing (not verified) InjectTheVenom May 9, 2015 11:09 AM

The 'casino' has worked pretty well for me. Maybe pick up some more bullion before it goes down again, huh?

AIIB's picture
AIIB (not verified) May 8, 2015 2:47 PM

Like I've said countless of times before... Since 'Bretton Woods' ended, ask yourself what the succession of FED CHAIRS has in common (which amounts to a 325 million to one multi sigma abberation)... Now - ask yourself the disproportionate number of billionaires that have been greated during that regime & ridden that wave (& what they have in common with the FED CHAIR money counterfeitting Yahtzee)...

 

It's not that hard people.

Seek_Truth's picture

I dunno.

They_wear_funny_hats?

madbraz's picture

the only difference now in "non-QE" returns is that at some point in 2012 "someone" in charge mastered the art of levitating markets through algos and HFT.  

 

dudley do, dudley don't

Law97's picture

That's what I thought was most interesting.  QE1 and QE2 ending had a direct negative effect on equities.  QE3 ending, no negative effect at all.  Wonder how that could be?  It's almost as if they started buying equities directly under the table ...

MajorFall's picture

Corporate buybacks from ZIRP and ECB QE took over

madbraz's picture

i don't buy the stock buyback explanation.  the market has not behaved normally since 2012.  invisible hand in risk and fixed income at critical times.  

khakuda's picture

The only excuse she will need is 3-5 days with the Dow down a couple thousand points in total and QE4 will get threatened.

Great post by the way.

Mmmmm.  Delicious bubbles.

Seer's picture

And that will be readily achieved following a bump in interest rates.

davidalan1's picture

"Life leaves clues"

rccalhoun's picture

its a free open market in as much as you can predict what the fed will do and how the market will react

madbraz's picture

zerohedge got the chart numbers all inverted, perhaps that's why some may think that yields go down during "American QE".

 

the chart clearly shows and indicates that 10 year yields crashed 293 basis points in periods of non-QE.  the heading incorrectly shows it as during QE.

 

"American QE" is just another cute acronym for "whatever level bill dudley requests"

Market Rage's picture

This is a nasty headfake.  Even if they jam the close higher, I think this whole day is bs.

madbraz's picture

let me tell you this...you take away QE and at the same time you give the NY FED one month vacation and you are guaranteed a healthy and necessary stock market correction.  if it's 15% or 80% is anybody's guess.

Groundhog Day's picture

they cant take vacation, they are doing GOD"S WORK

taketheredpill's picture

Exactly.  If Fed thinks they can hike 25bp and "manage the fallout" good luck to them.

 

madbraz's picture

the last 3 weeks has been as if a rate hike was priced in, but only on the long-end.  it makes no sense.  today we get yield curve steepening after what is obviously disappointing and very concerning data.  there is no reflation trade, there is no evidence whatsover to support that bet - other than the levitation in oil prices.

taketheredpill's picture

 

TREASURY TABLE IS BACKWARDS FWIW:

SHOULD/BE

US 10Yr Treasury Yield

  • Non-QE: -293bps
  • QE: +184bps

OR DID i ADD UP THE B.P. CHANGE WRONG?

Sam Spade's picture

You are correct - rates actually rose during every iteration of QE.  That chart shouid help put to rest the myth that QE was about lowering interest rates (rates rose because QE increases inflation expectations, which was one of the Fed's goals).  One could have made a lot of money over the last several years exploiting this basic misconception regarding Treasury yields.

taketheredpill's picture

 

ADDING UP THE CHANGE IN TREASURY 10-YEAR YIELDS:

 

Contrary to the 2013 Sell-Off spin, the worst thing for Bonds would be QE4, best thing for Bonds would be for Fed to start to Sell Treasuries.

madbraz's picture

quieeet please, they may hear you!

taketheredpill's picture

 

 

Look at the 10-Year Bond Table closely and keep in mind the Dealer bullshit near the end of a QE period that "you don't want to buy bonds, when QE ends and the Fed stops buying then Yields will spike".

 

Self-serving Assholes.  Oxymorons.

 

 

 

disabledvet's picture

I agree with this. QE was a disaster for treasuries and great for equities...but interestingly vice versa as well.

Now we have "taper" and the pressure on "Mr Yellen" to "get to work" must be quite intense.

Of course the job of the Fed is not to goose financial markets but create sound money.

They have utterly failed in this regard as prices soar yet again and America Politus veers towards it's next financial apocalypse.

max2205's picture

Only in amerika 

TeethVillage88s's picture

Ok yes these are finance charts, but another way to examine AE is to look at the Effect on People, Household Wages, Household Wealth, Retirement Funds, Equity in a Home, Savings, Disposable Income, Total Population in Prison or Listed as a Criminal, Total Black Market Labor, Taxes Lost to Loopholes to the wealthy or Black Market Labor, CAPEX Investment, Investment in capital facilities & capital Equipment, US Capital Flight overseas, Trade Imbalance, measures of Malinvestment would be gold & silver prices, Stock Prices (bubble), who is buying dwellings as investments, the price of homes bought, lack luster existing home sales in lower price ranges $40K - $150K.

But govt GDP & Inflation numbers are useless to use.

Measure the price increases across the board and in the major expense you see how people must have multiple jobs in a household and how little disposable income. Of course Banking Fees, utility fees/rates, phone fees/rates, cable fee/rates, internet fees/rates & Property Taxes & Government Fee go up.

disabledvet's picture

Real asset values have collapsed inside the USA. Gold, silver, real estate, labor...all with the help ofthe feckless fucks of Washington DC I might add.

Who is left to pay any taxes anymore?

The States might want to rethink their "Union Contract" here....they won't of course. "Just print me a paycheck." The value of that dollar is of no consequence to anyone anymore.

Indeed what counts most is that it be worthless...

I Write Code's picture

Chart show that rates RISE during QE, fall between QE's. 

Guy was just making that same point over on SeekingAlpha.  Surprised me there, too.  What does that tell us?  Nothing good.

Lady Jessica's picture

Front running in anticipation of the next QE round?

I Write Code's picture

Well I dunno. 

It's rates that rise, the bond prices go down during QE which is after all the point, the Fed is buying crap nobody else would, paying more for crap than anybody else would, that a normal person would consider a waste of money.

IOW, it's pass out some money to your good buddies.

Or conversely, let the Fed bury you in money so you can loan more to the muppets.  Only, you forget that last part.  Turns out there's no amount of money so large it can't be stolen on the way to a good purpose.

OK, I guess I do know after all.  Kind of wish I didn't.

ted41776's picture

we're going to need more nailguns

not a yahoo's picture

So yields went down whenever there was no QE? These guys are good!

bnbdnb's picture

Markets arent falling because dividends still beat 3s, 5s and 10s.

assistedliving's picture

put me out of my misery...just shoot me

http://www.kitco.com/market/

 

 

Livermore Legend's picture

For those Who Have Been Paying Attention, those Who Are Paying Attention, and Posterity:

I Can and Will Reduce it ALL, that's Right ALL, to this:

SPX @ 2300 - 89 % = 253

SPX @ 4000 - 89 % = 440

SPX @ 5000 - 89 % = 550

SPX @ 7000 - 89 % = 770

You See, where the Ball Stops on the Wheel is of No Matter in the End: 253 is the Same in OUTCOME as 770:

Ruined Lives and Ruined Reputations.

The Mathematical Metrics which precipitated that level of Fall are ALL at more extreme Measures today in Spades, and Human Nature has not Changed.

And EROEI wasn't an issue then; Quite the Contrary.

A 1932 Style Low Cannot Be Stopped and Will Not Be Stopped.

There Can Be No Graceful Decent from this Ascent.

It is the ARROGANCE, IGNORANCE and Extraordinary Popular DELUSIONS of Men to believe anything to the Contrary.

To Believe indeed that Mathematics are Subject to Human Veto.

As I have Said, TRILLIONS, NOT BILLIONS Will Be Permnently Lost By Current Rentiers.

For those who don't want to Lose, you Do Have a Choice.

 

 

 

 

 

 

 

 

Livermore Legend's picture

For those Who Have Been Paying Attention, those Who Are Paying Attention, and Posterity:

I Can and Will Reduce it ALL, that's Right ALL, to this:

SPX @ 2300 - 89 % = 253

SPX @ 4000 - 89 % = 440

SPX @ 5000 - 89 % = 550

SPX @ 7000 - 89 % = 770

You See, where the Ball Stops on the Wheel is of No Matter in the End: 253 is the Same in OUTCOME as 770:

Ruined Lives and Ruined Reputations.

The Mathematical Metrics which precipitated that level of Fall are ALL at more extreme Measures today in Spades, and Human Nature has not Changed.

And EROEI wasn't an issue then; Quite the Contrary.

A 1932 Style Low Cannot Be Stopped and Will Not Be Stopped.

It is the ARROGANCE, IGNORANCE and Extraordinary Popular DELUSIONS of Men to believe anything to the Contrary.

To Believe indeed that Mathematics are Subject to Human Veto.

As I have Said, TRILLIONS, NOT BILLIONS Will Be Permanently Lost By Current Rentiers.

For those who don't want to Lose, You Do Have a Choice.

 

 

 

 

 

 

 

 

GreatUncle's picture

S&P 500 charts looks so kewl. This continual rise with no correction?

Can understand the others, a bit up and down but they are all secondary ripples in the global economy as the primary global reserve currency is manipulated.