Art Cashin's Post Mortem On Japan's Now Failed QE 8

Tyler Durden's picture


While the US is only now embarking on QE3, on Tuesday night, to much fanfare, the Bank of Japan, in sympathy to the Chairsatan, launched QE 8. As we reported, the entire JPY10 trillion incremental intervention was fully priced in and digested less than 9 hours later, confirming that monetary policy is now completely helpless to do anything but destabilize currencies for a brief period of time (and at every greater dilutions). Here is how this farce of central-planner hubris looked through the eyes of UBS' veteran trader Art Cashin.

From UBS Financial Services

Japan's Eighth Version of Quantitative Easing Has Brief Influence – The Bank of Japan, which first began Quantitative Easing back in the year 2000, reached back in the closest and brought out version number eight.

It was a rather obvious attempt to weaken the yen and it achieved that goal – for about 27 minutes.

Europe and the U.S. awakened to find Asian markets rallying in response to the BOJ initiative. They decided to join the party. Before they could get fully started, the glow started to wear off.

The yen, which had fallen on the BOJ move, began to rally.

In New York, stocks opened rather neutrally. At 10:00, they got a big boost from a jump in existing home sales. Stocks began to rally, led by the homebuilders.

At 10:30, the markets were surprised by a huge surge in crude inventories. That was the second half of a one/two punch.

Earlier, Saudi Arabia vowed to increase oil production to help clients, especially Europe.

When the inventories hit, an already shaky oil market plunged sharply. Coming on the back of Monday's trapdoor plunge that quickly sent the stocks of oil companies spiraling lower, taking the futures down in a nano-second.

Luckily, the plunge was short-lived and the bulls regrouped in a matter of minutes. By late morning, stocks were back in rally mode, aided by the late session firming in Europe.

In early afternoon, the rally stalled as it grappled with napkin resistance (S&P 1464/1467).

Stocks backed off to regroup and retried the rally late in the session. Again, they were turned back at the resistance.

There was a somewhat incongruous fade in the final ten minutes. It was incongruous because the market on close orders were officially tilted to the buy side. Traders thought the fade might be a function of more position re-juggling in front of Friday's reweighting.

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Thu, 09/20/2012 - 10:42 | 2814941 malikai
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..And this is the model Benocide made, and is following, play by play..

Thu, 09/20/2012 - 10:44 | 2814954 WALLST8MY8BALL
WALLST8MY8BALL's picture


Thu, 09/20/2012 - 10:50 | 2814967 malikai
malikai's picture

Could you imagine Krugman in that job? Heh.. It might have been over by now if it was him, actually...

Thu, 09/20/2012 - 10:57 | 2814992 scythian empire
scythian empire's picture

all of these type comments show a lack of understanding.

1. this is govt debt, not fed debt

2. if inflation seems an issue, the reserve requirement can be changed by the fed and the excess reserves are no longer an issue.


the issue you all have a problem withi is deleveraging, which has dampened your lifestyles and caused some of you jobs... which is corporate and personal behaviour. 

your blame is misguided.

downvote for being contray to the "educated" contrarians!

Thu, 09/20/2012 - 11:05 | 2815009 Landotfree
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The type of debt is immaterial as is which currency is used.  At the end of the day, hairless monkeys have elected to borrow/lend to one another in payment of interest.   Any such system build on a large scale then requires exponential growth to sustain itself.   Unfortunately or fortunately, humans do not have unlimited power, so eventually the system will peak then collapse.  Of course there are cycles within the cycles, as of right now you are in an up cycles within the large down cycle.  

This larger down cycle will last many many decades this time, eventually the equation will consume the unfunded liabilities... ie people.  I figure the hairless monkey population will deflate by 1-3 billion, my guess.  Last time only consumed 100+ million of the hairless monkeys.  

Thu, 09/20/2012 - 11:05 | 2815011 LawsofPhysics
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Right, never heard of the term "socialization of losses".  The debt would not have been the government's (and taxpayer's) problem if your fascist puppets had not bailed out all of their buddies in the private sector. Real consequences for bad behavior will return whether you like it or not.  Fiat is dying, period.

If this is simply "deleveraging" and we really still have heathly "markets" then go ahead raise interest rates, I double dog dare you.

Downvote for being an idiot.

Thu, 09/20/2012 - 11:29 | 2815075 scythian empire
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namecalling is such a reputation builder, way to go.


was TARP profitable?


you're clearly reacting to your emotional responses and not taking a full view.  is what it is.

Thu, 09/20/2012 - 11:57 | 2815164 q99x2
q99x2's picture

I see your point. Quit giving yourself points.

Thu, 09/20/2012 - 12:18 | 2815203 LawsofPhysics
LawsofPhysics's picture

"was TARP profitable?"


For whom?  for the taxpayer, who lost purchasing power and saw commodities jump.  NO.

 The top 0.1 % certainly saw their "wealth grow".  So many paper promises so few real assets.

No need to call you anything now as your cowardice is showing.  Why do you fear bankrupcy?  This is how the bad debt  should be cleared.  Perhaps it is because the paper-pushers know the real value of their labor is zero.  All those BAILOUT companies chould have gone bankrupt, PERIOD.

Fine, it is was it is and the moral hazard remains.  Keep bullshitting and ignoring the underlying structural problems, you will give yourself away and no names will need to be called.  Ignoring the real issues of moral hazard and collateral does nothing for your credibility either.

Thu, 09/20/2012 - 12:54 | 2815389 bubbleburster
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Law: I completely agree with some of your points.  While Wall Street acted like a saucy hooker, swinging its fat hips and lecturing the world about how US Capitalism was the best game ever invented while also casting dirt on the downtrodden and poor......but was the first to cast it's jaundiced eyes at bailouts and last minute overnight saviors.  I was appalled at the lack of courage and knowledge that Paulson and Bernake showed when Lehmann finally collapsed.  Instead of taking over Lehmann and other monster company's under failure.....they let Lehmann die, which was a collosal mistake and forced BofA and C to buy up other sick sisters. Bankruptcy has its place and if handled properly there is no need to put systemic risk up to the highest level.

I maintain that some form of this scenario could have been invoked by Paulson, Bernake and Geitner.  When they hear the news that Lehmann is cooked, they could have:

  • Called a press conference the next morning to calm markets and counterparties by saying that the US gov't has deemed L. too big to fail
  • They explain that L forms too much of a central hub of the worldwide system and cannot be allowed to collapse
  • the gov't has taken over the company but will wind it up and sell everything off over time.
  • management is maintained but all power to fire / hire is stripped immediately.
  • the gov't will back stop all trading but they will install a large enough staff of experts in the field to oversee the daily functioning with an eye to winding up
  • the gov't will announce a timetable over the next 30 days to take L into bankruptcy; until that time they are effectively nationalized, much as Fanny and Freddy became. 
  • Within 6 months of being taken over the gov't task force makes a formal report to congress on how to wind up L.
  • The gov't allows foreign banks to bid for the different parts of L.
  • all the while L maintains its employees and there needn't be any panic.

Of course they didn't do any of that and the financial system went into severe shock.  Allowing corporations to go bankrupt should not be interferred with any more than the cleaning and purging effects of recessions should be messed with.  However, L's bankruptcy was not handled correctly; it was effectively thrown under the bus and to the lions all at once

Greenspan was also very wrong about thinking that he could figure out a way of forestalling recessions forever.  Such hubris should be seen now for what it is and not admired or followed.

Thu, 09/20/2012 - 12:17 | 2815225 Nobody For President
Nobody For President's picture

Mr. Empire, are the drugs you are presently on recreational, prescribed, or illegal?

Thu, 09/20/2012 - 11:12 | 2815030 malikai
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If you're gonna say downvote, the least you could do is hit the red arrow.

People like me want to see those red numbers because it lets us know we're on to something.

Thu, 09/20/2012 - 11:31 | 2815080 scythian empire
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it's never fashionable to be first...

Thu, 09/20/2012 - 11:38 | 2815106 malikai
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Unfashionably :)

Thu, 09/20/2012 - 11:59 | 2815171 scythian empire
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still learning protocol

Thu, 09/20/2012 - 14:51 | 2815775 Panafrican Funk...
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Attempt to understand the difference between "real" and "nominal".  That really seems to be the heart of your misunderstanding.

Thu, 09/20/2012 - 10:58 | 2814994 slaughterer
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Art Cashin has a history of being bearish/skeptical during QE-induced rallies.     

Thu, 09/20/2012 - 12:46 | 2815336 whatsinaname
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Doesnt the BOJ literally own the JGB bond market by now after all these QEs ? is there any data on that as to how much is in BOJ's hands now ?

Thu, 09/20/2012 - 10:50 | 2814969 larz
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You guys need patience their pee aich dee models are just about to kick in - oh ye of little faith

Thu, 09/20/2012 - 10:55 | 2814984 Biosci
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You've got it backwards.  PhDs love it when their models don't work; it gives them an excuse to generate new models.

Thu, 09/20/2012 - 15:03 | 2815817 larz
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oops my bad  stand corrected thx biosci btw no offence to those endowed with common sense and a phd

Thu, 09/20/2012 - 10:50 | 2814970 AynRandFan
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Did Japan's QE8 fail or do what it was supposed to do, namely confirm for Japanese investors that the BOJ is still there?

The Japanese have kept up this charade for 20 years.  Probably they figure staving off collapse this long is a sort of success.  An analogy would be living with terminal cancer.

Thu, 09/20/2012 - 11:12 | 2815029 SeattleBruce
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Unfortunately, that too is going to be an issue in Japan in the next 10 - 20 years with the GE Fukushima Nuke plant debacle.

Thu, 09/20/2012 - 11:18 | 2815042 JohnKozac
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20 years of many more to go?

Thu, 09/20/2012 - 10:51 | 2814971 LongSoupLine
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Thu, 09/20/2012 - 10:52 | 2814973 larz
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... and us little guys are first on their minds get ready for prosperity to equal the oligarchy for all! ohhh this is gonna be greaaat

Thu, 09/20/2012 - 10:56 | 2814979 yogibear
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Bernanke's about the only one buying debt. Bernanke's the only game in town. He propped up the last 4 years. Guess he intends to do it until infinity.

 Long boiled rope and amo.

Bernanke's Keynesian clown car (Bernanke, Evans, Dudley, Yellen). 

Thu, 09/20/2012 - 11:13 | 2815033 SeattleBruce
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"Bernanke's Keynesian clown car (Bernanke, Evans, Dudley, Yellen). "

Great image. :)

Thu, 09/20/2012 - 10:54 | 2814980 Amused2Death
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Bernanke: I think I'm turning Japanese!



Thu, 09/20/2012 - 10:55 | 2814985 Dr. No
Dr. No's picture

Its like there formula is F*ed up.  They'eve reached an asymptote and dont realize it. They keep staring at the screen an cant figure out why its not helping.

Thu, 09/20/2012 - 10:57 | 2814987 LouisDega
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Art Cashin is da man. I miss him and Mark Haines together every morning on CNBC at the NYSE talking man talk.

Thu, 09/20/2012 - 11:04 | 2815007 The Count
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Mark Haines....the only truly likeable and real person on CNBC. Isn't there a saying...The Good Ones Die Young?

Thu, 09/20/2012 - 11:01 | 2814997 Nothing To See Here
Nothing To See Here's picture

Insanity : doing the same thing over and over and expecting different results (A. Einstein)

Thu, 09/20/2012 - 11:09 | 2815017 Dr. No
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I always hated that quote.  Has he not heard of a chaotic system where the outputs are not predictable?

Thu, 09/20/2012 - 12:11 | 2815198 GoinFawr
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Randomness (chaos) is the construct of finite beings, applied to situations where the variables are too many and their interactions too complex to be easily calculated. IE to the universe nothing is random, just infinitely complex. Finite beings can be aware that the infinite exists, but are inadequate to the task of ever wholly explaining it because there will always be some new element of reality yet to be discovered.

Historically we've deified what we were unable to understand, and maybe there is something in that; right up to the point where it evolves into a belief that one particular explanation of the infinite is an absolute truth, anyway.

The bankocracy isn't doing the same thing over and over again and expecting different results at all, that's just what they keep telling us.


Thu, 09/20/2012 - 12:35 | 2815284 BearOfNH
BearOfNH's picture
  •  Has he not heard of a chaotic system where the outputs are not predictable?

"As I have said so many times, God doesn't play dice with the world."

-- A. Einstein

Thu, 09/20/2012 - 17:03 | 2816255 Dr. No
Dr. No's picture

I hate that one too.

Fri, 09/21/2012 - 00:45 | 2816984 GoinFawr
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haha! +1

Thu, 09/20/2012 - 11:02 | 2815001 Dr. Engali
Dr. Engali's picture

I sure hope we don't have to go through 25 years of this crap. Just pull off the band aid for cripes sake.

Thu, 09/20/2012 - 11:13 | 2815032 Everybodys All ...
Everybodys All American's picture

Unless someone actually stands up to Bernanke then what other outcome could you expect but the extend and pretend economy and market.


No rational person would go along with this knowing what is happening all over the globe with this same kind of policies. Unless Bernanke and is cabal are taken to task expect more of the same for a very long time. I still maintain when all is said and done Bernanke will go down as the biggest pos of all time in the US.

Thu, 09/20/2012 - 11:21 | 2815037 Quinvarius
Quinvarius's picture

Japan was part of an American controlled currency system.  The Yen, the Dollar, and the Euro are really the same thing because they are instantly fungible.  Exchange rates are agreed upon and enforced by central banks within the American system.  It is a hard concept to grasp if you think our money has meaning, but that is the way it is.  The Yen has a value in dollars that is maintained or set by central banks.  So it is always immediately exchangable for those dollars becasue the Fed will always step into the market to maintain that exchange rate and the relative value.  Hence, as long as the Dollar is desirable and the Fed is willing to exchange Yen for them at a set rate, the Yen has that value.  Japan survived because we survived and maintained the system.  So when we go down, we are taking them all down. 

Thu, 09/20/2012 - 14:59 | 2815803 Panafrican Funk...
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"Japan was part of an American controlled currency system."

It's actually a British system, the U.S. is merely a vassal state.  

Thu, 09/20/2012 - 11:06 | 2815012 Quinvarius
Quinvarius's picture

Japan is radioactive, still wrecked from a tsunami, and having a military problem with China.  I don't think QE is the biggest stick in the room at the moment.

Thu, 09/20/2012 - 11:22 | 2815052 JohnKozac
JohnKozac's picture

<< Japan is radioactive, still wrecked from a tsunami, and having a military problem with China. >>


Tourism collapsed and car sales plunging.

However, BBC said last night this was very Bullish for GM and German auto makers. See, every cloud has a silver lining. Japan just doubled sales of German and GM cars in China while they punked their own car companies.

Thu, 09/20/2012 - 11:09 | 2815018 boogiedown
boogiedown's picture

New islands for US bases should provide plenty of new subsidies and "growth."

Thu, 09/20/2012 - 11:24 | 2815063 WhiteNight123129
WhiteNight123129's picture

Japan should have cornered its bond market from teh beginning like the Fed is doing.


Thu, 09/20/2012 - 11:34 | 2815091 Cazzi amari
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Thu, 09/20/2012 - 11:50 | 2815148 AynRandFan
AynRandFan's picture

Biggest difference I see between Japan's QE and stimulus spending efforts and ours is that their stock market crashed and ours zoomed right back up.  Maybe this is because of the extremely aggressive efforts of Hank Paulson and Ben Bernanke.  However, because those efforts have not spilled over into the general economy (yet), isn't the outcome likely to be the same?

Thu, 09/20/2012 - 13:16 | 2815476 johnjkiii
johnjkiii's picture

They had to fix both an over levereged Stock and Real Estate market. Stock here were overpriced but all the leverage was in RE as we had already had the dot.bomb "correction". They have fixed neither. They also had loads of Corp. cross ownership which had to be unwound. Both QEs prove that they don't work if by work we mean avoid finding a bottom and pain while reviving the economy.

Thu, 09/20/2012 - 12:25 | 2815258 Nobody For President
Nobody For President's picture

US markets (so-called) ain't exactly 'zooming back up' this week. QEinfinity so far has not displayed much in the way of legs.

Off topic sort of: Can we shorten QEinfinity (tm ZH) to iQE? 

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