How The Fed Quietly Bought 1,150 S&P Points

Tyler Durden's picture


With the need for exponentially larger expansions of the central bank balance sheets - and most importantly, the rate of expansion (flow) not just the size (stock) - we thought it useful to see just how the Fed's actions had impacted the S&P 500. From the lows in March 2009, 1150 S&P points have been 'created-or-saved' thanks to central bank largesse. That is a cost of $2 billion (not million!) for every S&P 500 point since the Fed started to expands its balance sheet by $2.3 trillion. Money-well-spent, we are sure you'll agree. In the meantime, it is the printing-endgames that we care about and the horrible sense of deja vu that the following chart inspires should at minimum see investors scaling back (which it appears the sensible retail investor is) - despite the imploring of every long-only asset manager.

The S&P 500 overlaid with the various Fed experiments...

And it seems like the balance sheets of the central banks need to expand at an ever-increasing rate just to stand still in terms of asset prices...

Does make one wonder what the 'real' value of the S&P 500 would have been without all that assistance?

But we are heading towards the end of Operation Twist and given the previous examples we have seen, it seems we are echoing once again...


Charts: Bloomberg

Your rating: None

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Thu, 05/10/2012 - 16:30 | 2414523 RacerX
RacerX's picture

See, this is why we need QE3.

Thu, 05/10/2012 - 16:36 | 2414537 Dr. No
Dr. No's picture

But per the chart, we wont get it till a 150+ point drop in S&P

Thu, 05/10/2012 - 16:48 | 2414589 Sancho Ponzi
Sancho Ponzi's picture

'a cost of $2 million for every S&P 500 point '

That should read $2 billion per point

Thu, 05/10/2012 - 16:53 | 2414620 Badabing
Badabing's picture

QE 1 527pts

QE2  2314pts

LTRO 317pts

1158 pts not 1150pts but who’s counting.

Can I have the extra $16,000,000

Thu, 05/10/2012 - 16:59 | 2414646 Pladizow
Pladizow's picture


Thu, 05/10/2012 - 16:48 | 2414592 SheepDog-One
SheepDog-One's picture

Yea thats the story from all the 'experts', who seem to never call anything right and never see anything coming. I dont believe it at all myself, this line the 'QE3-4.New' is loaded in the breech and will be fired just as soon as we get around -150 point drop, then all back to normal again...I think its total horse shit.

Thu, 05/10/2012 - 21:08 | 2415754 I should be working
I should be working's picture

Well we're almost halfway there, right? Give it two more weeks.

Thu, 05/10/2012 - 16:39 | 2414545 bdc63
bdc63's picture

I'm gettin the shakes ... time to shoot up!  Anybody seen my dealer? -- don't cut me off now! 

Thu, 05/10/2012 - 17:04 | 2414665 Pladizow
Pladizow's picture

Is it that "traditional" bald guy with the gray beard?

Thu, 05/10/2012 - 16:47 | 2414586 ihedgemyhedges
ihedgemyhedges's picture

And down goes JP Morgan.........................

Thu, 05/10/2012 - 16:51 | 2414601 CURWAR2012
CURWAR2012's picture

If we see JPM go down, will silver rise?

Thu, 05/10/2012 - 17:26 | 2414784 Sudden Debt
Sudden Debt's picture

Strangely, 35 in the middle.
Now that jpm drops to 38.5 silver should go back to 32.
I keep them next each other on my ticker because it somehow feels like they're connected at 35.

Thu, 05/10/2012 - 16:55 | 2414629 bdc63
bdc63's picture

wow -- this is going to be fun to watch ... down over 5% after market?!

G-d I love SKF!

Thu, 05/10/2012 - 17:09 | 2414693 jus_lite_reading
jus_lite_reading's picture

Why is anyone surprised about this? Afterall, this is what a ponzi looks like!! 

Notice how "the markets" are itching for more ponzi fiat? They didn't crash back to earth yet because they KNOW Uncle BEnron will print more for them...


There are SO MANY variables that have gone wrong and BEnron knows that... in his initial calculation, it was not so complicated, but they forgot the power of the internet and a law of physics that says if you pull a flower in New York you move a whole planet out of orbit in another galaxy..

Thu, 05/10/2012 - 20:06 | 2415519 Buck Johnson
Buck Johnson's picture

Everytime they do this, the frequency and  the duration of the QE's get smaller and smaller.  Meaning that it's effect is less everytime on the market.

Thu, 05/10/2012 - 16:33 | 2414526 Rahm
Rahm's picture

CTRL + P  in 3, 2, 1.....

Thu, 05/10/2012 - 16:35 | 2414530 mayhem_korner
mayhem_korner's picture



Correlation, muppetz!

Thu, 05/10/2012 - 16:35 | 2414531 Mugatu
Mugatu's picture

I smell blood!

Thu, 05/10/2012 - 16:35 | 2414541 mayhem_korner
mayhem_korner's picture



Funny, I smell toner.

Thu, 05/10/2012 - 16:44 | 2414572 Goldilocks
Goldilocks's picture

I smell desperation.

Thu, 05/10/2012 - 17:01 | 2414663 xela2200
xela2200's picture

I smell fear.

Thu, 05/10/2012 - 19:27 | 2415389 youngman
youngman's picture

I just smell

Thu, 05/10/2012 - 19:28 | 2415391 Nobody For President
Nobody For President's picture

I smell Shit.

(And it ain't me.)

Thu, 05/10/2012 - 21:18 | 2415788 Whatta
Whatta's picture

I mighta farted. Sorry.

Thu, 05/10/2012 - 16:35 | 2414533 lolmao500
lolmao500's picture


Well yeah. Since it's not your money. It's made up money. Then your friends on Wall Street can get rich and buy real assets with the profits... made up money giving the well placed people real assets... isn't it grand?

Thu, 05/10/2012 - 16:41 | 2414557 SheepDog-One
SheepDog-One's picture

1,150 S&P points just nothing but imaginary vapor, nothing at all backing it up except computer numbers. 

Thu, 05/10/2012 - 16:36 | 2414536 ArkansasAngie
ArkansasAngie's picture

Benny will not print until it is absolutely demanded of him.  Then ... of course ... he will. 

Thu, 05/10/2012 - 16:43 | 2414562 Dr. No
Dr. No's picture

Ben's a simple guy.  He has his princeton formula which states print if inflation below target.  Stop if above.  The only break of the while loop is when Jamie calls and pulls the plug.

Thu, 05/10/2012 - 16:44 | 2414569 nobusiness
nobusiness's picture

Of course anything more than a 3% drop in the S&P is what defines "demanded of him"

Thu, 05/10/2012 - 16:55 | 2414618 bdc63
bdc63's picture

Yep -- and then they cue Cramer to do another "HE KNOWS NOTHING!" rant, and voila!  It's like magic ... money from heaven ...

Thu, 05/10/2012 - 16:49 | 2414538 JustObserving
JustObserving's picture

Can the markets be more manipulated?  I suggest we replace the DOW with BEN to honor the Fed and give credit where credit is due.

Besides, it would be truth in advertising.

Thu, 05/10/2012 - 16:37 | 2414542 AldoHux_IV
AldoHux_IV's picture

What would be the true value of our politicians' portfolio?

Thu, 05/10/2012 - 16:38 | 2414547 ShorTed
ShorTed's picture

I can't believe you're exercising critical thought here,  BTFD...



Bid out!

Thu, 05/10/2012 - 16:45 | 2414553 lolmao500
lolmao500's picture

In other news...

Taiwan monitors Chinese naval moves

Taiwan's President Ma sees popularity plummet (somehow he was reelected in mid-January (election fraud?))

Experts forecast imminent provocations by Kim Jong-un

Report: N. Korea executing people on cannibalism charges

N. Korea Could be Preparing for Follow-up Rocket Launch

China Wants It All

China is insisting that international agreements do not apply in its dispute with the Philippines over Scarborough Shoal. Chinese warships entering the Filipino exclusive economic zone (anything within 380 kilometers of land) are violating a 2002 agreement by nations bordering the South China Sea. Scarborough Shoal is 200 kilometers from the Philippines, and 850 kilometers from China. After signing the 2002 agreement China changed its mind three years ago and is now claiming ownership of the entire South China Sea.

Today, a Chinese military newspaper repeated the claim to Scarborough Shoal and warned that China would do whatever it takes to maintain its claim, no matter who (like the United States) backs the Philippines. That's pretty scary stuff coming from an official military publication.

Thu, 05/10/2012 - 16:39 | 2414554 SheepDog-One
SheepDog-One's picture

Yea the FED monetized the debt...Ive been saying that here for 2 years. 

Thu, 05/10/2012 - 16:40 | 2414555 Dr. No
Dr. No's picture

Well, not entirely true.  It wasnt all that quiet.  Between Ben's new press conferences and bailout's, there has been nothing secret about the pump.

Thu, 05/10/2012 - 16:44 | 2414567 mayhem_korner
mayhem_korner's picture



Not to us.  But walk down the street and quick-survey a dozen people and you will see the true meaning of "quiet."

Thu, 05/10/2012 - 19:32 | 2415400 Nobody For President
Nobody For President's picture

Fed? What?

Ben? Who?

Are they gonna be on Dance With The Stars?

Thu, 05/10/2012 - 16:44 | 2414571 SheepDog-One
SheepDog-One's picture

The entire market and economy, if you can still even call them that, just made up entirely of congnitive dissonance at this point. Litteraly just a computer construct like the Matrix.

Thu, 05/10/2012 - 16:44 | 2414559 Boilermaker
Boilermaker's picture

Better yet, what makes anyone think that they haven't been doing this shit during the 'great bull market'? 

They are just doing much more of it now.

 By the way, wonderful job banging the closing minutes to get the right color.  The headlines are already hitting on the 'snapping the losing streak'.  How pathetic can it actually get?

Thu, 05/10/2012 - 18:30 | 2415129 PeeramidIdeologies
PeeramidIdeologies's picture

Yup, and now they are fighting the tide...

Thu, 05/10/2012 - 16:43 | 2414570 Angus195
Angus195's picture

When Ben announces QE4 i'm long APPLE.....

Thu, 05/10/2012 - 16:50 | 2414590 mayhem_korner
mayhem_korner's picture



Yes. You and yer lightning-reflexes and Scott Trade account ought to beat those insider-informed algos to the table.

(BTW, Mr. Quick Draw, you might wanna practice getting OUT of positions in a hurry...)

Thu, 05/10/2012 - 17:50 | 2414895 The Swedish Chef
The Swedish Chef's picture

Look at the above charts. Does "lightning-reflexes" strike you as necessary to make money in a QE environment? 


You know, being a smart ass(hole) isn´t required to post comments here.

Thu, 05/10/2012 - 19:50 | 2415428 mayhem_korner
mayhem_korner's picture



Mr. Chef you think anyone makes money from this scheme?  Do you think those QE-propped "gains" in equities improve your purchasing power?  If you do, you haven't been paying attention.

Unless you are the one controlling the info (and the algos), market-timing is a fool's errand...So when someone opens their jowls with some notion that "when the gun sounds, I'm going to make hay" - as if no one else on the planet is watching the same thing - I simply like to show them the mirror. 

If that causes you to get flush in the cheeks, well, it's Fight Club.  Bring a point or get back to cookin' up some vittles. 

Thu, 05/10/2012 - 16:45 | 2414573 q99x2
q99x2's picture

Seems like the fuel is being watered down with each rise of the piston.

Thu, 05/10/2012 - 16:46 | 2414575 TooBearish
TooBearish's picture

In other news JPM has significant losses in CIO unit - whatever that means

Thu, 05/10/2012 - 16:55 | 2414576 Clint Liquor
Clint Liquor's picture

Money well spent

I'm sure your kid's grandchildren won't mind at all.

Thu, 05/10/2012 - 16:48 | 2414583 Badabing
Badabing's picture

The Fed knows where to set the stops, how cool is that!

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