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Complete Cheatsheet For What To Buy Ahead Of QE3

Tyler Durden's picture




 

Fed and/or ECB intervention is coming: whether it is called LSAP, QE x, Nominal GDP targetting, selling Treasury puts, or what have you. A regime that now exists only by central planning intervention, by definition requires ever more central planning intervention to sustain itself, let alone grow further. Furthermore, the banks not only want QE, they need QE. And since central banks serve other banks, not the people it is only a matter of time. Don't believe us? Read anything written by Bill Gross in the past year. So what to do ahead of QE3? Luckily, SocGen has released a complete cheat sheet of not only the dates of the next steps, but what to buy and what to sell ahead of the announcement. In short - one should buy Mortgage Backed Securities, in order to "simply buy MBS before the Fed" - something Bill Gross knows too well and has been hoarding MBS relentlessly as a result, as reported here. More importantly - one should buy gold. Lots of it as "USD debasement restarts." You didn't think the Fed will allow US corporate earnings - the only thing keeping the market alive - to be crushed with a EURUSD that will soon go under 1.20, now did you? And as for crude going to $250 - yes, it may cause huge headaches for regular folks but for banks it means record bonuses, and as a reminder, the Fed works for the banks, not the people, pardon neo-feudal debt slaves...

SocGen on the sequences of events:

Weak Q1 12 GDP and softening inflation pushes the Fed to another round of monetary easing, in 2 steps:

  1. In January, the Fed pledges to keep real rates at 0% until unemployment falls below 7.5% or inflation moves above 3%,
  2. In March, the announcement of another round of QE, concentrated on MBS purchases (c. $600bn over 6 to 8 months)

In table format:

And here are your pair trades: long gold/MBS - short EUR (or USD - we disagree with SocGen that the dollar would benefit from QE3).

Finally, on gold: "Buy Gold, as its price is highly sensitive to US QE as every dollar of QE goes into M0, triggering debasement of the USD. $1900/Oz est. to close the gap with the monetary base increase since July 2007(QE1+QE2)"

 

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Fri, 01/06/2012 - 08:09 | 2038566 akak
akak's picture

I am having peoples calling me?

Being happiness I am to reply to the mans who is calling the president who is Obama by the bad namings!

But the mans is now being rightheaded in the thinking about the bad Obama with WallStreet is taking from the good peoples for the bad peoples to be preventing them from buying and having the seeds and guns that thinking they are that they are going to avoiding the bad takings down the highway when it is gold that is crashing and bad peoples are taking from them all the seeds and guns and other nice things that the sillys being saving they were doing and then not having and now taking shitting in their camo panties, silly fat Americans thinking they are being always the bests. 

India here we are coming to being you and poor silly Americans like today Indians being will be doing the crying and living in garbage mountains and flies and making the eating of rats and dogs and starving and wanting but not having monies and not driving the giant cars and rest of world will be saying "see, I was doing the telling of you so!".

 

- Ranjipundaramavirundasingalongarama Gerund, Esq.

 

rgerund@attcustomerservice.com

Thu, 01/05/2012 - 20:26 | 2037560 new game
new game's picture

blacks swans never warn ahead. all else will be the slow methodical debasement which will reward the patient investor tuned to A) deflationary credit bust.  B) massive deleveraging and C) printing.  simple. most are overthinking all this.

Thu, 01/05/2012 - 20:28 | 2037570 chump666
chump666's picture

from wires:

Investors are expecting Standard & Poor's to cut France rating as soon as this month.

Thu, 01/05/2012 - 20:30 | 2037573 bill1102inf
bill1102inf's picture

This just in, US used less oil in 2010 than since 1994 when they started really tracking it. So much for supply and demand, at these demand levels with the massive amount of supply of oil\gas - gasoline should be $1.90 like when Obozo took office.  $250 oil, pFFFFt blow it out yer azz.

 

PS. Your chart is wrong. Gold is down 20%, not UP from the last peak.

 

PPS. Priced in houses, GOLD SUCKS!!!

Fri, 01/06/2012 - 08:13 | 2038606 akak
akak's picture

Idiot.

Yeah, gasoline SHOULD be $1.90 today, and actually is not all that much higher than that --- in 1994 dollars!  You conveniently overlook the approx. 60-70% depreciation of the dollar over the last 18 years. 

You also ignore the fact that world demand for oil (as opposed to just the demand from the USA) is MUCH higher than it was in 1994.

PS: Priced in bullshit, your analyses are still worthless.

Thu, 01/05/2012 - 20:37 | 2037593 YHC-FTSE
YHC-FTSE's picture

This makes it a bit more interesting than Citi yesterday, and that's another positive for gold, but buy MBS before the Fed? If the Fed doesn't deliver, you'll be holding a tin can and selling pencils on the street next to Bill Gross. 

Did I mention Bill Gross is endorsing Ron Paul? That's great for him and us, but just the excuse the Fed & TPTB need to ruin PIMCO after being weakened by bad calls on Operation Twist last year. 

Buying more gold. May day trade on bank stocks. 

Thu, 01/05/2012 - 20:38 | 2037598 toadold
toadold's picture

I've grown a tad suspicious of charts. I mean who believes the official CPI anymore. A five or ten year chart can be made sense of but a weekly chart these days moves like an epileptic whino with chiggers and fleas, lots of agitation but no predicatble direction. 

Thu, 01/05/2012 - 20:39 | 2037601 electricgorilla
electricgorilla's picture

After looking at this chart its safe to say the Fed will be buying more MBS and MBS ETF's may be a good play behind PM's

https://lh4.googleusercontent.com/-8vdXHenYHVg/TvvO6bZr9lI/AAAAAAAAEvM/b...

Thu, 01/05/2012 - 21:09 | 2037645 cranky-old-geezer
cranky-old-geezer's picture

 

 

And here are your pair trades: long gold/MBS - short EUR (or USD - we disagree with SocGen that the dollar would benefit from QE3).

Bullshit.

We've seen EURUSD rise dramatically whenever there's talk of ECB printing or QE here in America.   Your short recommendation would get killed ...and get you lynched.

No pair trades needed with counterparty risk. 

Just buy physical gold / silver and sleep well at night.

And both are huge bargains now.  Silver may dip to 25 but industrial demand alone will keep it from going lower, and industrial demand is going to overtake physical supply sooner or later, likely sooner.

Thu, 01/05/2012 - 21:24 | 2037675 Dr. Gonzo
Dr. Gonzo's picture

I can't afford gold. I am poor and can only buy platinum. 

Thu, 01/05/2012 - 21:26 | 2037682 BullyBearish
BullyBearish's picture

Fed's current POMO is running $45 Bill/Month...QE 2.75?

Thu, 01/05/2012 - 21:51 | 2037741 propflow
propflow's picture

The buys are a net wash because they are met with sales. Its not a stimulative outright purchase

Thu, 01/05/2012 - 21:50 | 2037737 propflow
propflow's picture

QE3 is happening right now! Only it is the cooking of the econ #s. Just look at the ADP this morning. The bernak dosnt have the political capital to do QE3 when the s&p is a biscuit from 1300, crude @~100, gold 1600, etc. etc. In order to get the quintessential QE, we would need the market to come under some serious pressure i.e. -1100 s&p and the euro bidless

Thu, 01/05/2012 - 23:23 | 2037938 plata pura
plata pura's picture

What thee talkin bout? Easing be perpetual from free money to the $7.77trlusd surprise.

Fri, 01/06/2012 - 01:55 | 2038212 rosiescenario
rosiescenario's picture

A bit off topic, but here's a question: Alcoa just announced it is cutting back operations due to weak demand for Al....is Goldman still the proud owner of 900,000 tons of Al sitting in Detroit????

 

Did Tyler put an article up on the Detroit Al storage biz earlier this year? Things may start to get more interesting for the squid and its foray into Al.

Fri, 01/06/2012 - 04:14 | 2038346 Iank35
Iank35's picture

It seems to me that there's a lot of 'what-ifs' out there.

Well here's some more.

What if central banks throw in the towel and don't print?

What if they want a slow walk down of world economies to try curtail exponential growth that threatens the whole human population (including bankers) as it smacks up against the finite world reality?

Sure, a lot of people are going to suffer as the price of oil explodes but the end game of this is that population WILL decline because of it.

A shrewd investor must surely prepare for every eventuality mainly by asking the question, 'what if I'm wrong'?

Fri, 01/06/2012 - 07:07 | 2038583 Ned Zeppelin
Ned Zeppelin's picture

Don't you know? Printing money permits us to avoid the realities of shrinking resources. Don't reallu have confidence that the CBs are benevolent master planners.  

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Fri, 01/06/2012 - 07:03 | 2038578 Ned Zeppelin
Ned Zeppelin's picture

"And since central banks serve other banks, not the people it is only a matter of time.

"YUUUUUUUUUUUUUP!" - Dave Hester, Storage Wars.  

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