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Forget Rate Hikes: Bridgewater Says QE4 Is Next; Warns World Is Approaching End Of Debt Supercycle
In a just released letter to clients, the head of the world's largest hedge fund delivers one of his usual sermons about the economy as a perpetual motion machine, affected by central banks, and where interest rates are supposed to boost asset returns by being below "the rates of return of longer-term assets."
None of that is terribly exciting and it is in fitting with what Bridgewater has said for a long time (incidentally, it is curious that just over the weekend, the FT released a piece in which a "US asset manager warns over risk parity" which is what Bridgewater's bread and butter is all about).
What is exciting is the following part:
That's where we find ourselves now—i.e., interest rates around the world are at or near 0%, spreads are relatively narrow (because asset prices have been pushed up) and debt levels are high. As a result, the ability of central banks to ease is limited, at a time when the risks are more on the downside than the upside and most people have a dangerous long bias. Said differently, the risks of the world being at or near the end of its long-term debt cycle are significant.
That is what we are most focused on. We believe that is more important than the cyclical influences that the Fed is apparently paying more attention to.
We suppose this gis suppoed to justify the Fed's preoccupation with hiking rates, and why Yellen has on more than one occasion spoken against soaring asset prices. And yet...
While we don't know if we have just passed the key turning point, we think that it should now be apparent that the risks of deflationary contractions are increasing relative to the risks of inflationary expansion because of these secular forces. These long-term debt cycle forces are clearly having big effects on China, oil producers, and emerging countries which are overly indebted in dollars and holding a huge amount of dollar assets—at the same time as the world is holding large leveraged long positions.
While, in our opinion, the Fed has over-emphasized the importance of the "cyclical" (i.e., the short-term debt/business cycle) and underweighted the importance of the "secular" (i.e., the long-term debt/supercycle), they will react to what happens. Our risk is that they could be so committed to their highly advertised tightening path that it will be difficult for them to change to a significantly easier path if that should be required.
Leading to the conclusion that "We Believe That the Next Big Fed Move Will Be to Ease (Via QE) Rather Than to Tighten"
Odd, that: it's precisely what we have been saying since the announcement of the taper in 2013.
As for why stocks just took a major leg down once the letter hit, Dalio's warning that the era of easy debt-funded returns is over, appears to be striking a chord...
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3 pensions - government work if you can get it
You don't know what kind of pensions I have.
That's true but generally speaking pensions will be worthless.
Not in the land of unicorns, they won't.
"That's true but generally speaking pensions will be worthless."
I think he is referring to the new contraction for "penis extensions", you know, pensions! He's had three of 'em.
Dollars to donuts your pension is based on promises of money you won't be getting.
Like Social Security?
Unless it is X ounces/mo in gold or silver from some highly solvent mining firm, I'm guessing you are fucked, so get in line with the rest of us pensioners who are counting on the purchasing power of the dollar to stay relatively stable but know it can't.
.....And it's gone! If they are dollar denominated assets it doesn't matter... Sorry, but...Buh Bye!
what kind of pensions do you have?
What a "genius".
FYI - The boyz are trying desparately to keep dow over 16000 right now. But that's less of a percentage down move than the other indices. HAHAAHHAA!
Also notice how major key players on Bloomberg are out today?
Prepping maybe?
The FED will simply print and buy just like Japan, China, and as they have done for the last 2 years. They will not suffer consequences until inflation and then hyper inflation arrives. The price of gold will be the lead indicator.
QE4 is the problem. The market has finally figured out that QE is destroying the economy.
Death by fire, or death by ice. Which does one choose?
Yes, what the world needs now is more QE bond buying. That will help us all. Or not.
The FED SHOULD rise rates right away, right now, TODAY if possible.
Any negative effect of a rate hike would be lost amongst the turmoil of the market decline.
They are missing a golden oppurtunity, but too stupid are they.
We already had a fucking years worth of QE today only to prop up markets.
It won't do you any good to get out of the markets. You'll get your "cash" and when the banks go under you'll bail them in with your "cash"
They can always go negative with interest rates. QE by early 2016, and negative interest rates will be discussed openly by Q2.
http://www.zerohedge.com/news/2014-05-17/bernanke-shocker-no-rate-normal...
QE-Whee on tap! We cannot wait!
"We Believe That the Next Big Fed Move Will Be to Ease (Via QE) Rather Than to Tighten"...
Really now???... What a fucking genius he is!
I could have predicted that when Janet failed to hold an emergency meeting and disclosed that because of prevailing market turbulence a quarter point rate hike would be immediate!... Best of all what the fuck will .25 do in this carnage anyway?
Instead what have we heard in the last 72 hours with better than 1000 point down on the DOW?!!!
US and China should merge. Just different approaches to intrustion/manipulation.
Ben in 2009:
Overall, the Federal Reserve has many effective tools to tighten monetary policy when the economic outlook requires us to do so. As my colleagues and I have stated, however, economic conditions are not likely to warrant tighter monetary policy for an extended period. We will calibrate the timing and pace of any future tightening, together with the mix of tools to best foster our dual objectives of maximum employment and price stability.
Ben in 2010
Ahh, yes, that virtuous cycle!!!
This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.
And then reality hits!
QED
FED's going to buy more stock this QE. Yeah we are saved by banksters. Oh no they are saved we get Jade Helm.
https://www.youtube.com/watch?v=GwbqWWglElg
They'll pretend QE coming until September and hike the rate so they can fullfill their stupid fucking shemitah dates to collapse markets. I think everyone now is catching onto it and it's just a bit early.
You are a moron.
Heh, I should wear my glasses while reading ZH. With Beer Goggles on, I read your post as:
"You are a Mormon". I wondered how you could know, but then I re-read it and it wasn't nearly as funny as the first time though......
What is the Fed going to do? NOTHING!!! I suggest you consider the Fed and it's owner banks as nothing more than financial boiler room operators. They have pumped up financial assets with QE 1,2, and 3. All the suckers have bought in and been taught to BTFD, making it easy for them to sell into the top. Now. by doing nothing, they will unleash the Kracken, the 'dreaded" deflation. and great assets will fall from the sky for pennies on the dollar as debtors are liquidated and destroyed.
They never were going to take us to Weimer Republic territory. They always wanted deflation.
Boilers don't just operate themselves.
They have to be mindful of water chemistry, oxygen content, ph, water level, periodic (or continuous) blowdown to remove minerals, combustion efficiency, heat transfer efficiency, and condensate return, just for starters.
If you ignore them, they tend to blow up catastrophically.
These boilers are meant to explode catastrophically, violently seperating suckers from their money!
"If you ignore them, they tend to blow up catastrophically."
So true, but don't discount the code safety valves, low feedwater trips, feed preheater delta-T trips, fire-eye scanners and drum purge cycles. Still, I agree, it's not wise to rely on the built-in safety devices to protect those in the blast radius.
I think that was a good analogy of where the Fed is now. They are boiler operators having to run it 24/7, with no shift relief coming in. While they'd desperately like to ignore it and let it run itself, they are not sure what will happen if they take a lunch break an no-one is watching the control panel. It could go humming along, or it could undergo a catastrophic failure. Now, an alarm just came in and they realize it's one they've never seen on the annunciator panel before. The alarm response cards don't cover it, and now they are pondering what to do. They just know for sure that they can't shut it down - that would be a sign that they were in a corner and didn't have control. So, they are wondering, "what if I just tweak the burner feed a little more and hope the deaerator feed tank can keep up?"
'See No Bubble, Hear No Bubble, Speak No Bubble', by Ben B. and Janet Y.
If a crisis comes out naturally, the fed will simply use it to outlaw cash and implement negative interest rates on consumers to increase spending\debt.
If a crisis doesn't surface, they will raise rates to create one. Then outlaw cash and implement negative interest rates on consumers to increase spending\debt.
Whatever the Fed does in the short-term really makes no difference. They are creating a permanent serf class through the 'bondage' of 'debt'.
Yes, they will spend. They will buy all the precious they can get their hands on as the dollar crash and burns. Now who is fucked?
Don't forget that on 16 December 2014 the 1,603 page Cromnibus Bill put the Wall Street derivative Ponzi-scheme fraud under FDIC protection.
The FDIC will blow their wad on the first day and they will be out of business.
Bridgewater may be right ... but they may also be positioning/distracting for the bank.
I am thinking that the banks want to be able to buy assets for the penny on the dollar, to throw all rich arrogant people (excluding themselves) into the middle class America, want to blame unforeseen or market events for the turmoil and exist global masters of a slave race.
The root of our problem ain't that esoteric, folks. Doesn't involve "supercycles," or graduate-level math, or anything of the like.
Denninger has positively nailed how the liquidity trap works, that the Fed and the rest of the world's central banks have painted us into by artificially suppressing interest rates over the last 30 years. And he has done so in terms that anybody who has ever had a car loan or a mortgage can comprehend...
Bone-Smoking Nonsense
KEEP
FUCKING
STACKING
KEEP
FUCKING
PREPARING
KEEP
FUCKING
OUT
OF DEBT
.....FUCK the naysaying skittles up their asses douchebags...
THIS SHIT SHOW IS COMING DOWN
AND ALWAYS USE A CONDOM
YOU DON'T NEED A BABY
No, they are going to raise the discount and the fed funds rate by .25 bps in September. It is more of symbolic gesture than anything and it is not enough by itself to hurt the economy. This fed actually believes that the system has become dependent on ZIRP and wants to end that dependence. This is the only path back to normalcy.
imo, any excuse will do to not raise interest rates, ever again
fuck me, its midnight in Ireland and the wife has the MSM news on and its actually talking about a stock market "rout" because of a slow down in China... its ok people go bck to sleep nothing to see here.....except yous are all fucked!!
get in to AU before its too late...it may already be to late
www.teamramgold.com/about-us
IMO the Fed has been working a silent QE for a little while now.
After Wall Street's bloodied forces are reassembled, then and only then will the trumpets cry out QE4, QE4, QE4 to rally the men.
Into the Valley of Selling will ride the 600.
Just how much money are governments going to print in the name of supply side economics until they realize the poor masses already have good enough TVs, microwaves, PCs, cars and are already living on the edge financially after being screwed over and over for decades by the money cartel. Even if they want to stimulate the economy might as well give the money to the poor, at the very least the poor will actually spend it on the real market compared to misers called billionaires.
Quote: "Our risk is that they could be so committed to their highly advertised tightening path that it will be difficult for them to change to a significantly easier path if that should be required."
If that isn't an admission that centralized authority is the root cause of everybody's problems, I don't know what is.