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With Just 4 Days Left Till Jackson Hole, Are The "Great Expectations For QE3" Too High?

Tyler Durden's picture


And so we return to that point when the most engaging, yet useless, topic of discussion is what Bernanke will say or the Fed will do, in this case this coming Friday at the 2011 edition of the Jackson Hole Fed meeting, and specifically Ben's keynote speech. By now we have seen endless iterations of what pundits expect will happen: from nothing to another round of QE. Today, we present SocGen's take which is that while an outright third round of monetization is unlikely for now, the Fed may well proceed with a lite version of QE in the form of "sterilized" operations, or curve targeting, aka Operation Twist, as was noted here some time ago. One thing we certainly agree with SocGen on: "If markets remain under pressure, Bernanke could be forced to commit to something next week." The market obviously knows this, in which case if the market case is for QE3 or bust (and remember: Wall Street is still stuck in beta levered world where the only P&L comes courtesy of the Fed this will be most welcome) today's latest vapor rally will be promptly nullified by Wall Street which has only 4 days left to send a very loud message to the Chairsatan.

From SocGen: Great Expectations For Jackson Hole

Bernanke’s Jackson Hole speech will be the highlight of the week. Expectations are high, but those looking for an outright commitment to QE3 are likely to be disappointed. QE3 may well happen eventually, but the Fed will likely use up more conventional and less controversial tools first. The most likely next step in our view is a duration extension of the Fed’s securities portfolio. Bernanke could refer to it as “sterilized QE,” giving the markets what they want to hear. Other options include broadening policy guidance to include the balance sheet. For example, the Fed could promise not to reduce its securities portfolio until 2013 or, better yet, promise to keep it “at least” at the current size until 2013. The latter would open the door to QE3 more formally, yet without committing to it outright. The Fed could also cut interest on reserves or shift to outright inflation targeting. Price level targeting would be the nuclear option, but it is probably too early for that.

Sentiment measures in the US have continued to slide last week. Early regional manufacturing surveys for the month of August suggest that the national ISM could print in the mid 40s. A 42 level has historically been consistent with flat GDP growth and therefore is a threshold for recessions. In this context, the risks are certainly growing. To be sure, hard activity data has held up well so far: retail sales, production and employment all increased in July, suggesting that Q3 will see positive, albeit slow GDP growth. Our real time recession probability model, based on the four coincident indicators used by the NBER in dating business cycles, suggests only a 2% chance that the economy was in a recession as of July (see the accompanying chart). However, if financial conditions and sentiment continue to deteriorate – and our view is that much of that depends on European policymakers – we could start seeing cracks in hard data in the fourth quarter. At the moment, we would peg recession risks around 40%.

If there is a recession in the next 12 months, it is not all that clear what it will look like. Given that the US economy is already operating well below capacity (nearly 7% by CBO estimates), it is hard to imagine another deep contraction. Instead, we would probably see flat or even slightly positive GDP growth, but below the pace needed to sustain employment gains. For example, 1.0% GDP growth, if sustained, would lead to a roughly 1% contraction in employment which is equivalent to 10k jobs lost per month. This would push the unemployment rate higher, toward the 9.5%-10% range over the course of one year. Inflation would likely ease, opening the door for further monetary and perhaps even fiscal accommodation.

Next week’s Jackson Hole meeting is awaited with much anticipation. Bernanke is due to speak on Friday and markets are looking for a commitment to further monetary support. The focus of the speech is likely to be on additional easing tools which were discussed extensively during the August 9 FOMC meeting. The tools include further language guidance (for example no balance sheet contraction until mid-2013), cutting interest on reserves, changing the composition of the Fed’s securities portfolio, or establishing an outright inflation target. A more controversial option would be price level targeting, but it is a long shot to expect Bernanke to endorse such a radical policy shift at this stage. Finally, there is of course the option of QE3.

We still think that it is too early for a QE3 commitment. For now, both inflation and inflation expectations remain quite high. The CPI report for July certainly did not make things easier for the Fed. It showed some evidence of pass-through and rising rents are also adding to upward pressure on core inflation. These could reverse eventually if the economy continues to grow at or below stall speed, but the Fed will have to wait. As for inflation expectations, they are finally moving in the right direction. The 5y5y forward breakeven dropped over 30bps last week to 2.52%. If this trend continues, an important hurdle to further quantitative easing could be lifted before year-end.

The political backdrop is another important consideration which complicates matters for the Fed. Conservatives remain firmly opposed to ‘printing money’ and have been very vocal about it. Though the Fed should in theory be independent from the political process, Bernanke surely does not want to put the central bank in the cross hairs of a presidential campaign. The bottom line is that the Fed will ultimately do what is right for the economy, but it will need to build a strong case first.

If markets remain under pressure, Bernanke could be forced to commit to something next week. If so, the most likely next step in our view will be duration extension of the Fed’s portfolio. Bernanke could even call it ‚sterilized QE,? giving the markets what they want to hear. The impact would be similar to outright QE with the curve likely flattening further and pushing yield-hungry investors into riskier assets. However, the impact on the dollar would be more limited as there is no outright increase in the money supply.


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Mon, 08/22/2011 - 10:46 | 1585863 SeverinSlade
SeverinSlade's picture

QE3 will not be rolled out the same way that QE2 was.  Equities are likely to be disappointed on Friday which could trigger the plunge necessary for QE3.

Mon, 08/22/2011 - 10:52 | 1585882 bankrupt JPM bu...
bankrupt JPM buy silver's picture

QE3 is already happening.  We just cant see it.  If it wasnt, MS, AIG, BAC etc, would already be at zero.

Mon, 08/22/2011 - 11:48 | 1586153 Taku
Taku's picture

QE3 will send gold to the moon, and it'll send half the planet's inflation there as well, destabilizing a few more sovereigns. But since it's exported, "it's OK", problem's gone and kicked down the...

Mon, 04/16/2012 - 02:03 | 2347915 jaffa
jaffa's picture

In this case, the creditor hopes to regain something equivalent to the debt and interest in the form of dividends and capital gains of the borrower. The repayments are therefore proportional to what the borrower earns and so can not in themselves cause bankruptcy. Once debt is converted in this way, it is no longer known as debt. Thanks.

Mon, 08/22/2011 - 11:01 | 1585917 slaughterer
slaughterer's picture

This is the historical sentence from last year's BB Jackson Hole speech that set the markets on fire: 

I believe that additional purchases of longer-term securities, should the FOMC choose to undertake them, would be effective in further easing financial conditions.

Read more:


All that is needed is another statement like this, however qualified and cautious, for markets to rally. 

Mon, 08/22/2011 - 12:12 | 1586240 Snidley Whipsnae
Snidley Whipsnae's picture

It did ease conditions... especially for the bankers

Look at the insider buy/sell ratio since then... a gazillion to one... and saps are still playing the paper games...

Mon, 08/22/2011 - 10:46 | 1585865 Herbert_guthrie
Herbert_guthrie's picture

Further QE is NOT a given.

Further monetization of debt IS......

Mon, 08/22/2011 - 10:48 | 1585866 SheepDog-One
SheepDog-One's picture

WHAT CASE for QE3? Im not seein it at all! 15% drop in the markets just aint it, most people arent even aware that markets are off their YTD bubbled-up wheres the case?

Im sensing a big let down from Jacksons Cornhole bankster orgy unless they tank the markets real quick. And I dont mean another -200 DOW drop either, I mean CNBS in full panic at the out of control drop, banksters running around yelling armageddon up and down Wall St.

Mon, 08/22/2011 - 10:48 | 1585871 SeverinSlade
SeverinSlade's picture

Agreed.  I think too many investors are jumping in on anticipation of QE3 and not wanting to miss the move to the upside.  What happens if QE3 isn't announced on Friday?  Those investors that were anticipating QE3 will almost surely panic and sell.

Mon, 08/22/2011 - 10:57 | 1585899 dracos_ghost
dracos_ghost's picture

I agree with you -- no QE3. I think the next "stimulus" push will be for repatration of 2.5+Trillion in offshore dollars. Hell, they even spoke about on "Meet the Press" this weekend from Obama's crew.


Mon, 08/22/2011 - 11:38 | 1586106 Bring the Gold
Bring the Gold's picture

Dracos, honest question here. By repatriation of dollars are you talking about CB's, Sovereign wealth funds etc., dumping dollars into US markets? That would certainly goose the markets but wouldn't it also be highly and I do mean HIGHLY inflationary? What impacts do you see and what interview are your referring to if I may ask?

Thanks in advance to any who can answer these Q's.

Mon, 08/22/2011 - 12:54 | 1586473 dracos_ghost
dracos_ghost's picture

Was referring to US corporation holdings offshore. There seems to be a meme in DC to do another repatriation bill to allow the offshore dollar to come back onshore at a reduced or 0% tax rate.

"Meet the Press" is a Sunday morning talk show here in the US primarily discussing politics. They usually have a round table discussing various current event topics and the repatriation of US corporation dollars was one of them.

It was the Aug 21 video:  at around 41:45 minute mark.

As far as the inflationary impact, I believe that is what is wanted by the Fed et al. By doing it the repatriation way, it would be a zero sum game I think in terms of new money supply ( the money is already in play) and they could get the value of propping up asset prices like last time without having a heavy hand in the game.

But again, like last time, it probably would be a short term phenomenon.

I just think it is suspicious that the needed injection, QE3 or otherwise, is being whispered at 2.5T and that's the amount of cash held offshore by Multinationals.

Mon, 08/22/2011 - 12:41 | 1586406 BandGap
BandGap's picture

I don't see it, either.  Especially with the inflation numbers of late.  But it has been a long time since I gave a shit anyway.

Maybe the publication of where the $$$ went in the last bank bailout just as Bush was exiting (1.2T) will wake the thinking public up.  Those numbers are fucking stomach turning.  And no one bats an eye.

Mon, 08/22/2011 - 15:17 | 1587180 The Man in Room Five
The Man in Room Five's picture

How about an orchestrated market crash this week, so the Fed can come to the rescue Friday? Pure speculation but it seems like a possibility

Mon, 08/22/2011 - 10:46 | 1585867 redpill
redpill's picture

It will be some form of stealth QE. Kind of like that stealth chopper. Let's just hope it doesn't crash and get shown to the Chinese.

And OT but I found this funny

Mon, 08/22/2011 - 10:50 | 1585874 SheepDog-One
SheepDog-One's picture

Stealth behind the scenes bond yield maintenance program QE? Something tells me that wont excite stocks to new bubble highs and float us along calmly till 2013 end....nah, nothings fitting here something big is coming up quick.

Mon, 08/22/2011 - 12:16 | 1586264 Snidley Whipsnae
Snidley Whipsnae's picture

SD One... when push comes to shove stocks will be thrown under the bus to save bonds...

Mon, 08/22/2011 - 10:53 | 1585886 ??
??'s picture


I was thinking more in the form of an MQ-1_Predator

Mon, 08/22/2011 - 10:47 | 1585868 oa92000
oa92000's picture

 QE3 or not has nothing to do with

Jackson Hole? 

Mon, 08/22/2011 - 10:52 | 1585881 Quintus
Quintus's picture

It does, in the sense that Wall St is being pretty blunt about what they want their placeman in the Fed to do at Jackson Hole.  If he disappoints, then they'll get nasty.

The only relationship between Jackson Hole and QE3 is the weight of expectation that has been placed upon The Bernank to announce something that will keep the bonuses flowing.

Mon, 08/22/2011 - 10:49 | 1585872 uno
uno's picture

QE the Caribbean and UK edition

Mon, 08/22/2011 - 10:50 | 1585873 oa92000
oa92000's picture

Obama is the winner in this mess, he can blame the whole thing on Tea Party???

Mon, 08/22/2011 - 10:54 | 1585888 SheepDog-One
SheepDog-One's picture

No ones a big enough idiot to believe it, except for a few of obamas lowest common denominator base maybe.....23% approval of obamas handling of the economy, case closed.

Mon, 08/22/2011 - 11:59 | 1586196 uno
uno's picture

that 23% will defend him even if O puts them into Fema camps

Mon, 08/22/2011 - 20:03 | 1588305 StychoKiller
StychoKiller's picture

Well, he's just tryin' to pertect us frum the zombeez!

Mon, 08/22/2011 - 11:14 | 1585880 papaswamp
papaswamp's picture

Any bets on todays short term debt aution? Since it is short term I expect it will sell fine...waiting for trouble to show up in longer term first, as uncetainty reins...but I could be wrong.



Mon, 08/22/2011 - 10:52 | 1585883 carbonmutant
carbonmutant's picture

Our community organizer needs QE3 for his re-election campaign next year. Don’t want to waste the QE prematurely. The public doesn’t have that long an attention span.

Mon, 08/22/2011 - 11:08 | 1585942 lolmao500
lolmao500's picture


Mon, 08/22/2011 - 12:45 | 1586428 BandGap
BandGap's picture

Forget attention span, the way the bailout cycles are shortening, if the trigger is pulled too early it might go poof just when the soundbites start to hypnotize.

Mon, 08/22/2011 - 10:53 | 1585885 buzzsaw99
buzzsaw99's picture

Whatever is announced we know who will benefit for certain.

Mon, 08/22/2011 - 10:53 | 1585887 baby_BLYTHE
baby_BLYTHE's picture

one would think the price of Gold is too high and the dollar index too low for the great chaircreature to engage in another helicopter drop. But as usual, it is to be reminded the man has stated countless times in various papers and speeches that he will go to all the ends of the earth to prevent deflation and stoke the fires of assets appreciation and price inflation.

My prediction: he will bluff with QE 3 on Friday, but not outright announce it. As no stability in the markets becomes commonplace over the next several months, he will have no choice but to engage in more money printing tail end of 2011 or very early 2012.

Mon, 08/22/2011 - 10:56 | 1585896 SheepDog-One
SheepDog-One's picture

Go for it, Id love to see my gold at $4,000 while everyone has lost confidence in stocks and the dollar and we're paying thru the nose for hyperinflated prices. They have no way out now, so I'll enjoy watching them flail about for a while longer from the sidelines.

Mon, 08/22/2011 - 11:01 | 1585915 baby_BLYTHE
baby_BLYTHE's picture

I'm with ya sheepy, I got into arguments with some of the other students in my econ class last semester about how gold would preform post-QE. The entire class and even the professor ganged up on me telling me gold was a giant bubble set to burst once Benocide put the breaks on QE back in June of this year.

All I can say, I take the next level of that class with the same professor and many of the students starting this afternoon (First day of class!). Boy, today will be an easy day in class for me. ;)

Mon, 08/22/2011 - 11:04 | 1585928 SheepDog-One
SheepDog-One's picture

Go get em!

Mon, 08/22/2011 - 11:10 | 1585953 Yardstick of Ci...
Yardstick of Civilization's picture

Sounds like you should be teaching the class . . . .

Mon, 08/22/2011 - 11:18 | 1585997 baby_BLYTHE
baby_BLYTHE's picture

I am not an econ major, only taking it to fulfill general requirements. The book we are using is a Macro econ book penned by Gregory Mankiw- a Keynesian clown friends with Paul Krugman and adviser to Romney's Presidential campaign.

can't say I will be able to convert the professor, but some of the students are taking a liking to some of the things I have to say. A few even read ZH daily now!

Mon, 08/22/2011 - 11:39 | 1586113 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

Drop out and make it on your own like a true zero heger!

Mon, 08/22/2011 - 12:08 | 1586228 baby_BLYTHE
baby_BLYTHE's picture

I do believe college is no longer a wise investment for many. I, however, go to school basically free via scholarships I received out of HS, my on campus job and tuition benefit from my Mom that worked for the University for twenty years. I also have a ton of friends that live around me and I love the city even if it will plunge further into ruin due to wrath Rahm Israel Emanuel's and the Chicago machine gun political regime

Mon, 08/22/2011 - 12:45 | 1586430 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

yeh, if I had to go back I'd do something that might be useful in the coming shit storm: agriculture, engineering of some kind, or learn a straight trade like mechanic, plumber, nurse even

where to after you finish? an internship at the JP morgue to get a view of the working of the beast?

Mon, 08/22/2011 - 12:54 | 1586466 baby_BLYTHE
baby_BLYTHE's picture

no way would I ever work at any zombie bank nor hedge fund hyena club. I am not majoring in Econ, business or anything of the sort. I am actually studying Photography (my real passion) with a double-minor in Chinese and History.

I am having a lot of fun and enjoying life while school isn't too difficult for me. I am able to SAVE money (+ invest in PMs) unlike most others including my friends that are already in a good amount of debt with virtually no savings.

Mon, 08/22/2011 - 13:24 | 1586557 slewie the pi-rat
slewie the pi-rat's picture, perhaps also the nation via the "chi-town 0'Bama" political machine

my last live-with romantic interest, with whom i spent the first 10 of the last 22 years, was a Bears fan and since i always been a "raider" we would sometmes have what was almost make-up sex after games, me coming onto her after her team won and she caring for me after a loss, to the point where i usta be able to tolerate, almost,  my team's 4th-quarter shenanigans, looking forward to the fifth quarter tailgate party

i don't know what our behated chairsatan will say or do, but here is what he should do: tell the pols, again, to get the damned budget under control, and that if they continue their porcine FAIL he will no longer be responsible for the "confidence" game...

Mon, 08/22/2011 - 14:05 | 1586795 baby_BLYTHE
baby_BLYTHE's picture

damn, Slewie. The only worse sports franchise than the Oakland Raiders are the Chicago Cubs. We Sox fans always give it to them good calling them members of the 'Century Club' (as in no World Series in over 100 years).

Mon, 08/22/2011 - 15:47 | 1587261 slewie the pi-rat
slewie the pi-rat's picture

she was a cubs fan, too!  she paid my way into a heluva lotta NL games, even in chi-town!  i would take her to the jokeland colisee-um, (where the whole place usta smell like burning rope in the 70's [yay]), and try to teach her why the DH was a good idea, since we could be home an hour earlier! 

sweetheart:  madden, the snake, the ghost, freddie b., et al usta have their "camp" in the same town in which i domiciled;  can you imagine how many drinks we bought them, trying to keep them from "upscaling" to freaking napa for their "training"...and failing?

oh...and...fuk the evil empire! 

Mon, 08/22/2011 - 16:12 | 1587378 Yardstick of Ci...
Yardstick of Civilization's picture

Photography rocks!  Good for you!  One of my best friends is a really talented photographer.  He was roommates with a few law students while launching his career but now makes more money than all of them and only has to work a couple days per week.  Stick with what you love . . . we need more art, philosophy, agriculture, and engineering.  Less financial services.

Mon, 08/22/2011 - 11:16 | 1585984 Caviar Emptor
Caviar Emptor's picture

Way to go, baby_B! 

Gold has transmutated from a relic, to a commodity and now full circle jerk back to real money. 

It's's "as good as gold"?????

Mon, 08/22/2011 - 12:23 | 1586309 Snidley Whipsnae
Snidley Whipsnae's picture

Your proff and classmates don't recognize that gold is being driven by inflation and FEAR.

Mon, 08/22/2011 - 12:46 | 1586439 BandGap
BandGap's picture

Like trying to outrun an avalanche. 

The only question now is who goes first, the US or Europe.  Flip a coin.

Mon, 08/22/2011 - 10:55 | 1585892 TradingJoe
TradingJoe's picture

As far as i'm concerned, there won't be nothing coming out of JH on Friday since the Obumer said HE WILL ANNOUNCE HIS STIMULUS right after Labour Day! IMHO Friday will be a blood bath and nothing else, hell we might even see that before Friday's 10AM "speech"! Fact is "markets" will go lower, much lower, as in S&P 875-950 ish! Then we might see things rolling!

Mon, 08/22/2011 - 10:59 | 1585909 SheepDog-One
SheepDog-One's picture

Obamas 'NEW' stimulus...yes he's kept this one in his pocket for 3 years, and after joking about his own 'shovel ready jobs' stimulus total failure, now hes got the 'real plan' and sure everyones going to believe him because we're all just fuktards. Whatever!

Mon, 08/22/2011 - 11:14 | 1585978 SheepDog-One
SheepDog-One's picture

I think if we were going to see the market implosion fear and panic for big star studded diamond encrusted QE announcement, we would have already seen it. I dont think the plan is a Friday -200 day and use that as call for $2.5 trillion QE3, I just dont see it coming at all. 

Stocks will get ZIRP, which in itself is just full out retard mode, I mean if someone 20 years ago told you we would be 0% for years on end, with the markets NEAR all time highs, you'd called called them a total lunatic! Thats where we are today, considering 0%, and semi-annual trillions in money printing just 'normal'.

Mon, 08/22/2011 - 11:00 | 1585893 FranSix
FranSix's picture

According to Bloomberg, Three Month and Twelve Month nominal yields negative:

Oop. My bad. Reading through the mobile website presents difficulties. Looking for negative nominal yields up to the 1yr;

Mon, 08/22/2011 - 10:57 | 1585900 hettygreen
hettygreen's picture

It doesn't matter what hot air is emitted in the cool, sylvan valley of Jackson Hole. If the markets continue down this week some Fed watcher with an overactive imagination will divine the entrails (oops, meeting minutes) and declare all is not only well, but the 'recovery' is actually running ahead of schedule. Just look what happened following the most recent meeting. Down and then up for what four days? I'd give it (the inevitable rally) until Labour Day. Then it's tits up.

Mon, 08/22/2011 - 10:57 | 1585901 monopoly
monopoly's picture

Just amazing that these markets move on the comments of one bearded failure. Even if he does QE3 now, the market reaction will last for a few days or weeks, and then back to reality. But there is no doubt he will continue to destroy the dollar.

And, are the miners finally getting some respect? Lets see if there is follow thru tomorrow.

BAC the best short out there. 0

Mon, 08/22/2011 - 11:18 | 1585995 rosiescenario
rosiescenario's picture

I'd be worried that, since it is an obvious short, those short it will get targeted for a will attract a lot of weak shorts easily shaken out, etc. Personally, I'd look for a less obvious short, though my guess is BAC will no longer exist

Mon, 08/22/2011 - 10:58 | 1585903 Irish66
Irish66's picture

Need QE3 just for BAC

Mon, 08/22/2011 - 10:58 | 1585907 Hedgetard55
Hedgetard55's picture

How can Ben justify a "bond maintenance program" when yields are at historical lows, especially in real terms? I think he knows another round of overt QE threatens a dollar implosion, and that would be lights out for everything, including Ben and the FED. He will be Public Enemy #1, with a bullet.

Mon, 08/22/2011 - 11:03 | 1585923 slaughterer
slaughterer's picture

Dollar down a further 20% would solve alot of problems from the Fed's perspective. 

Mon, 08/22/2011 - 12:39 | 1586399 Hedgetard55
Hedgetard55's picture

Perhaps (but it destroys the middle class, and ultimately the economy) but a 60-90% drop is Armageddon.

Mon, 08/22/2011 - 10:59 | 1585910 LawsofPhysics
LawsofPhysics's picture

QE3 is already happening and will result in the true cost of creating capital out thin air being pushed on to more of the middle class.  Commodities and all physical assets of real value will adjust closer to their inflation-adjust price. I am positioned and hedged accordingly.  Go ahead Ben, do more, I dare you.  Pump my meager equity portfolio or pump my physical and commodities portfolio, personally, I don't care either way.  Selling more paper gold (not physical) for more arable land to expand operations will follow.  bring it.

There is a real cost for creating capital and then mis-allocating it.

Mon, 08/22/2011 - 11:03 | 1585922 SheepDog-One
SheepDog-One's picture

Thats right, GO FOR IT BEN! I dare you! Keep printing mass dollars and destroying it, hey Ive got my gold and silver please keep rocketing them to the moon! Bernanke and Obamas bag of tricks is now empty, theyve all had their days in the sun now no one believes anything they say anymore...

The Boy Who Cried Wolf economic model is now dead, and I dont care how fancy the next presentation of the same old shit is, its over.

Mon, 08/22/2011 - 20:11 | 1588326 StychoKiller
StychoKiller's picture

It's those fat-cat private jet owners!  Arrest them all and throw them into GITMO, c'mon Obamatron, ya know ya want (to say ya want) to!

Mon, 08/22/2011 - 11:04 | 1585929 lolmao500
lolmao500's picture

Bernanke should do his conferences on Saturdays. That way, they can manipulate the markets at will before Monday's opening.

Mon, 08/22/2011 - 11:04 | 1585931 Yardstick of Ci...
Yardstick of Civilization's picture

We already have QE3.  Hello, ZIRP until 2013?  Market isn't tanking this week to convince Benny-the-Douche.  If anything, Friday will be Ben talking about how things are bad but looking better, which will be bolstered by "good" (manipulated) economic data this week.  New Home Sales tomorrow, Durable Goods, and Initial Claims will all be bullshit.  The Fed has to keep some powder dry, or it really will be powerless.  We need a much, much bigger crisis (like S&P 400) to get a $1 trillion injection.

Mon, 08/22/2011 - 11:05 | 1585934 rosiescenario
rosiescenario's picture

"Given that the US economy is already operating well below capacity (nearly 7% by CBO estimates), it is hard to imagine another deep contraction."


Huh?  So the author is saying capacity would be maintained in the face of declining demand????


Here's a question, we know about how 'survivorship bias' skews the market data....just wondering if this is also true for 'capacity utilization'....for example, if one were to shutter a factory, is that capacity still counted in the equation or does it jus disappear????

Mon, 08/22/2011 - 11:06 | 1585937 SheepDog-One
SheepDog-One's picture

Well now everyone wants to dance on the head of a pin, but one thing is pretty obvious, that is theres no diamond encrusted jubilee QE3 like Ive been hearing of '$2-3 trillion QE announcement'....pretty obvious thats not going to happen. 

Mon, 08/22/2011 - 11:08 | 1585943 Stoploss
Stoploss's picture

Weekly 200 day now resistance. back down we go.

Mon, 08/22/2011 - 11:11 | 1585958 oa92000
oa92000's picture

any data regarding Tea  pary approve rating?  thx

Mon, 08/22/2011 - 11:11 | 1585964 Ryman1075
Ryman1075's picture

QE will happen, BAC is off almost 5% today.  Metals are up.  The market seems to be holding it's breath today.  QE is already priced in I think.  If no QE comes it will be a downward spiral...

There is no way to stop this runaway train.  The talking heads have already been talking QE3 for a few weeks.  Once announced, it will have a small effect.  They are probably already laying ground work for QE 4 & 5.

Looking forward to the great reset!

Mon, 08/22/2011 - 11:18 | 1585993 SheepDog-One
SheepDog-One's picture

Right, look back to January....every bit of daily horrible news from then (DOW under 10,000) till now has been met with 'Well this means QE expectations are high now so stocks up, pricing it in'.

If Ben doesnt announce that trillions of free money will be dumped over Wall St, we're in deep discounting mode. And I just DONT see Ben stepping up to the microphone and making the case for it, hell markets are calm as hell, we have nice +200 DOW opens, hell all is well!

Mon, 08/22/2011 - 11:13 | 1585976 web bot
web bot's picture

Wasn't SocGen on life support 2 weeks ago?

Wow... remarkable recovery.

Mon, 08/22/2011 - 11:24 | 1586029 SheepDog-One
SheepDog-One's picture

LOL yea I thought they basically called in the priest on SocGen just last here they are giving their expert opinion on what we should do? Sheesh, crazy world.

Mon, 08/22/2011 - 11:15 | 1585982 choorles
Mon, 08/22/2011 - 11:19 | 1586002 Kilgore Trout
Kilgore Trout's picture

But, but... A pinch-faced bitch with huge tits on tv this morning referred to Friday as the day "when QE3 will be announced".

No "if" in the statement!

Mon, 08/22/2011 - 12:43 | 1586424 Bring the Gold
Bring the Gold's picture

That tears it if the MSM is pumping it. I think Rickards and the soon to be, if not already, zombie SocGen that it will be a different form of QE eg Twist #2. There argument makes all sorts of sense.

Mon, 08/22/2011 - 11:20 | 1586007 digalert
digalert's picture



"sterilized" is bankster speak for laundered

wash, rinse, repeat...

Mon, 08/22/2011 - 11:21 | 1586015 snowball777
snowball777's picture

QE2 was monetization with the PDs as middle-man.

If they're dumb enough to do QE3, it will be the same deal, only with swap lines and Zooropeans taking the PDs place.

Mon, 08/22/2011 - 11:24 | 1586032 SheepDog-One
SheepDog-One's picture

Yep, QE's WERE all about monetizing the debt!

Mon, 08/22/2011 - 11:22 | 1586020 SheepDog-One
SheepDog-One's picture

SocGen now lending their expert commentary on QE3? Wasnt SocGen just in the ER on total life support with the priest called in....just last week?

Mon, 08/22/2011 - 11:24 | 1586031 the not so migh...
the not so mighty maximiza's picture

Trying to guess what psychopaths will do is difficult but fun

Mon, 08/22/2011 - 11:25 | 1586036 gwar5
gwar5's picture

Been so much talk of QE3, it's almost priced in, things will get ugly if they don't.



Mon, 08/22/2011 - 11:33 | 1586084 Doyle Hargraves
Doyle Hargraves's picture

This is why they NEED a BAC failure, it allows unlimited expansion in the guise of 'saving' the system...WIth BAC going down it gives the fed and CONgress cover to do what they think needs to be done, TARP 2, QE3, and every other expansion of balance sheet shenanigans, they will even have the tea party scared into their agenda. Long gold and ammo, Bitchez! 

Mon, 08/22/2011 - 11:36 | 1586096 FoieGras
FoieGras's picture

I heard Jackson Hole is a real shit hole around this time of the year.

Mon, 08/22/2011 - 11:46 | 1586146 sbenard
sbenard's picture

So the annual meeting of the central criminals -- I mean central planners -- I mean central bankers -- is this week?

Mon, 08/22/2011 - 11:51 | 1586171 TzaristBondHolder
TzaristBondHolder's picture

Astrology Rosecast Bradley sideograph shows the 25th August as a bottom

Mon, 08/22/2011 - 12:06 | 1586224 valuetrader
valuetrader's picture

Totally agree. It is too early for QE3. We are going to have QE3 or its equivalent but not just yet. There has been too much noise lately from all sorts of people, including abroad. Timing is bad. Still, don't forget that Japan, Europe and Switzerland are doing more QE. China, Russia and the rest of EM are on constant QE steroids by increasing their money supply by 20% or more per year, every year. In a few months it will be just fine for the FED to join the party but for now they will play hard to get, in my opinion. They'll just have a few drinks at the party and go home alone, while making a few suggestive remarks to water the mouths of the fast money boys.

Mon, 08/22/2011 - 12:20 | 1586287 Caviar Emptor
Caviar Emptor's picture

Ben's got a lot already on his plate going into Jackson Hole, unlike last year when things were simpler. There's a chance that big bailouts will be coming soon in Euroland and the US. Core CPI over the last 3 months rose 3.3% annualized. And there was no Arab Spring last year. Also last year QE hadn't had time to be fully discredited with high levels of structural unemployment and anemic growth to show for trillions spent. 


Mon, 08/22/2011 - 12:25 | 1586319 johngaltfla
johngaltfla's picture

1990's Riksbank solution or bust. IF they do not announce a policy of negative real interest rates, charging the banksters for holding their monies with the Fed, then equities will roll hard. There must be a massive reflationary effort in excess of $2 trillion and anything short of that type of liquidity nuke will cause market participants to price in a sharp recession in Q4 and massive fire sale on all risk assets.

Mon, 08/22/2011 - 12:32 | 1586365 Fiat2Zero
Fiat2Zero's picture

Isn't the committment to keeping rates at zero already QE3?  How is he going to keep rates at zero solely through jawboning?  I think too many people got preoccupied with the moniker QE2, and it has created a massive smokescreen.  Bernanke has always been a proponent of creative and unorthodox methods.  There will be continued massive, creative, and adaptive stimulus and monetization coming from the FED, both announced (when this has a desired effect, like changing expectations), and unannounced/secret as was the case with opening swap lines for the SNB last week.

All bullish for PMs of course, but not necessarily for stocks.  Stocks will be saved (until they can't be saved anymore?), but it will be a bumpy ride.  Stocks are, after all, just another planned market, so you're at the whim of the planners.

Do we really think the ChairSatan is going to stand up at Jackson Hole and say "Boyz, QE3 is served!"

Mon, 08/22/2011 - 13:27 | 1586583 slewie the pi-rat
slewie the pi-rat's picture



very well said, mister Zero!

Mon, 08/22/2011 - 14:38 | 1586984 MrPoopypants
MrPoopypants's picture

Good point. This means that the run up in bonds isn't based on expectations of a recession or deflation - it's based on price floors and the unlimited purchasing power of the Fed. Buying bonds is a no-lose proposition.

I still think it's not enough, though. The deficit isn't big enough. Following Ben's playbook from the helicopter speech, larger purchases will be made of foreign (European) assets.

Mon, 08/22/2011 - 16:19 | 1587418 slewie the pi-rat
slewie the pi-rat's picture

you may be right about europeon "purchases" which cld be done via "swaps" financed by QE or many other ways, since benzelbub is, at least, somewhat intelligent and perhaps able to see a poss fuking train wreck coming, just like anybody else, if the dead man's switch fails.  again. 

one way that comes to my addled mind is to trade them for the shit on the FEDs balance sheet!  "i'll trade you $500 Bil of my worthless baseball cards (well, worth 1 cent ea. in the 'market') for $500 Bil of your worthless paper;  let's try that, ok?  i'm tired of pushing this styoooopid button! we want a strong dollar!!!" (L0L!!!)  or maybe:  "look!  we are concerned 'bout inflation, just a tiny, but, ok?"  (not so L0L)  or:  "we need deflation here right now and we need to get some of the dead wood (zombies) picked up and, unhhh,...burned..." 

who knowZ?

maybe the deficit is "big enuf" but it is not yet PC to just say so in public, as opposed to here @ zH, where (gasp) tyler might disagree with ya...or not...


Mon, 08/22/2011 - 12:38 | 1586395 Fiat2Zero
Fiat2Zero's picture

Also, what happened with the rolling over of maturing treasuries?  When QE3 ended, there were a bunch of predictions of total chaos (perhaps the stock market's deflation _is_ that chaos).  Some (e.g. Jim Rickards) pointed out that the FED could use the 2.8 Trillion balance sheet to continue a kind of stealth QE.  However, the Tylers pointed out that this was far too small compared to QE (like 1/10th the size).  There have also been some very odd goings on in the Treasury Auctions, where Indirect Bidders (I think that's the term) bought most of the Treasuries (the implication being that someone, likely the FED, was still buying bonds, despite saying that QE3 had stopped).

Does anyone have a good, revised view of what has been happening in this realm that brings us from the end of QE3 to today?

Mon, 08/22/2011 - 14:00 | 1586649 slewie the pi-rat
slewie the pi-rat's picture

i think even tyler may be starting to see the $1.6 Tril of treasuries held by the FED a bit differently

the "indirect buyers" may include china which has already been schooled for using certain Primary Dealers to cover its direct puchases of Ts, while Bi-Ching (in public) about the US.

as a poker player, it might be kinda fun to hear benzelbub look at his "Hole" cards, pause, ask for time, light a stogie, and "push" with:  fuk these shitforbrained moronic asswipes!  i'll buy all of their styooopid Ts for USDs, right NOW!  put up or shut tf up.  bullshit walks, Bi-ChineZ!

as we know, china may already own "puts" on these Ts anyhow, for pete's sake!  now, they want to start "accounting wars"?  too much!  rilly!

am i the only person who can tell the diff between shit & shinola, here?  why would china say that?  maybe. just maybe, they have some "insider info" that QE, except for janitorial work, (and i bit 0'funding the trade deficit?) is pretty much over?  and they need a diaper change? 


Mon, 08/22/2011 - 14:56 | 1587086 Fiat2Zero
Fiat2Zero's picture

Good point on China possibly being an Indirect Buyer.  There has been an awful lot of jawboning out of China about not buying US bonds, despite the fact we know they have to (they are even great copycats when it comes to duplicating our financial inventions, such as "FED jawboning," to a tee).

Mon, 08/22/2011 - 12:56 | 1586476 Clorox Cowboy
Clorox Cowboy's picture

Yeah...Gotta love that "Recession Probability" graph and how it goes from <10% to >80% about 15 minutes AFTER each recession has already begun...


No wonder SocGen is doing so well with that kind of analytic wizardry on their side.  </LOSERS> 

Mon, 08/22/2011 - 13:17 | 1586545 walküre
walküre's picture

No further QE.

Paper gold is overplayed. Buy the rumor, sell the news. Shake out the weaklings dabbling in paper gold.

Take short term profit in paper gold. Remember who is driving the game. Same drivers as before. Check their track record.

See who's been piling into paper gold since July. All of sudden gold is sexy, gold is the place to be and to invest.

Buy gold now or be priced out forever. Sounds familiar?

Be in phys or be nowhere at this point.

CAVEAT EMPTOR across the entire market of paper derivatives and equities from this point onward.

Mon, 08/22/2011 - 13:19 | 1586550 Bobportlandor
Bobportlandor's picture

Jackson Hole needs renaming to Money Pit

Mon, 08/22/2011 - 13:54 | 1586725 LawsofPhysics
LawsofPhysics's picture

There will be no "official" QE without a major bank failure first.  But monetization and printing continues otherwise.

Mon, 08/22/2011 - 14:19 | 1586874 The Piker
The Piker's picture

Monetary policy needs to be a surprise to be effective

Mon, 08/22/2011 - 22:18 | 1588787 AldoHux_IV
AldoHux_IV's picture

"The bottom line is that the Fed will ultimately do what is right for the economy, but it will need to build a strong case first."

I'll believe that when me shit turns purple. QEx didn't work and only left things more fragile, imbalanced, and desperate for extreme backstop measures while further damaging the real economy. Obviously the markets being bullish about the continuation of a flawed strategy goes to show just how much this market is broken and far from any fix-- a this point nothing short of creative destruction will allow for the emergence of a better financial system.

Insanity is doing the same thing twicw and expecting a different outcome-- the markets are full metal jacket gomer pile psycho at this point.

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