Leading Indicators Predict Another Fed Intervention (Or EPS Rediscovers Gravity)

Tyler Durden's picture

For the last couple of decades, ECRI's leading indicators have provided a reasonable early warning for rising and falling forward EPS estimates. With the ECRI growth rate hovering near the July 2010 lows, having fallen considerably recently, it seems that either intervention (the new normal) will come in the form of QE3 (as it did the last time we were here in Q3 2010) or EPS estimates will start to collapse notably (in line with yesterday's perspective on the rolling-over of forward EPS expectations).

While we would not be surprised to see QE3 around the corner, it would seem a tough spin given recent GDP prints and the exuberance in equity markets and so perhaps (as we have been so clear about) we need an EPS flush-fest mark-down in stocks again as the opportunity for Bernanke's Put to get its strike shifted upwards. It is relatively clear though that incessant interventionist policy has once again broken valuation metrics and made reality harder and harder to discern.

h/t John Lohman

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GeneMarchbanks's picture

Just a little one? A mini qe maybe.

bernorange's picture

Fed members have been hinting at QE3 for the last week or so.  It is inevitable.


SheepDog-One's picture

Fed members have been hemming and hawing about QE rumors all year, now the rumor of QE is as good or better than QE itself...yet all we see is markets melting up 25% in a couple weeks back to near all time highs. Never any need for QE, just talk about it is good enough here in Fullretard Land.

Everybodys All American's picture

You have been right before on your QE calls. What do you think? Do they really need to at this point? My feeling is they hold off.

SheepDog-One's picture

I think before and now that theyre basically done, next while everyone is expecting their funds and 401K's and pensions to keep getting padded by the FED, some overnite we'll see they staged some event and grabbed it all.

baby_BLYTHE's picture

Sheepdog is right about the effectivness of the almighty 'hint'. Here are words from the printer himself...

the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services (stocks).

sjamesje's picture

All time highs are up around 14k for the Dow.  Still have a ways to go before we get there.  Would expect a never before seen crash i we do get there though!


sabra1's picture

google the graphs from the 1929 recession, to the 1932 depression. everyone thought all was getting better, then BAAAAAM!!!!!!!

css1971's picture

5 years of shit then WW3

Hephasteus's picture

Which reduces the complexity of the society and then baby boomers come pouring in flying out of vaginas complicating it right back up.

This time I don't think people are coming back. Ever.

If people want to experiment with continually constructing and then corrupting and then destroying complex societies let em have at it.

mayhem_korner's picture



Why QE when QE hinting levitates sheep so well?

We don't need force...just the threat of force will do...

Rynak's picture

Because of a little global debt and insolvency problem.

By now, this no longer is just about levitating the stockmarket (which has nothing to do with the economy) alone anymore.... sure, banksters would love to get even more, but by now, their profits aren't the only thing that matters anymore.... but also the (unrealistic) survival of an unsustainable system.

Printing will happen..... and shortly afterwards, there will be revolts across the globe.

brew's picture

where's robo trader when you need him...

Mark123's picture

Don't the primary dealers have the capacity to create almost unlimited amounts of debt anyways...QE1 left them with a lot of reserves sitting at the Fed no?  All the Fed has to do is make it clear to PDs that they will backstop them in case things don't go so well, and then they can go shopping for assets!!!!!!!!!!!


So I don't think there will be any more official money printing for quite a while.

Dollar Bill Hiccup's picture

That's like saying, "I'll just put it in a little bit ..."

Irish66's picture

no way will they even attempt qe3

markar's picture

Really? Not only will the Fed print but so will the ECB. There is no other way out for them. gold to the moon

junkyardjack's picture

Exactly, what other option do they have? Default? The only thing there is to do is to print its just when will they do it.

buyingsterling's picture

What about the $16 trillion the fed loaned out to banks, which has not been paid back? Why won't banks just exchange that 'money' for treasuries? Their 'balance sheet' would not be affected. The fed has already juiced the system, the 'money' is just waiting to be securitized.

Someone tell me why this is wrong, because it seems to obviate much of the talk about QE3 (not that the effects won't be similar).

buyingsterling's picture

Come on, someone here understands this stuff. Is this $16 trillion irrelevant, and will it sit on the sidelines? If it's irrelevant, why hasn't it been returned? Thanks in advance.

Smiddywesson's picture

If a 50% haircut can be called something other than a default, printing can be called something other than printing.  And they are doing a hell of a lot of not printing already (and that's just what we know about)

jcaz's picture

QE3 is already underway- the value of the Dollar tell you all you need to know....

abugarance's picture

why so mate? sure thing they will,

Fed's mandate: drive all americans to utter poverty, force savings rate to zero in order to fund food bills and petrol expenditure, keep yields on saving at zero so that everyone eats into capital

topcallingtroll's picture


people should "save" in all sorts of financial instruments including bulk used books.

GhostTrader's picture

So where is the top in this rally, guys?

mayhem_korner's picture



If you denominate equities in gold or silver, you might ask "when's the hole in this boat going to get patched?"

rosiescenario's picture

.......you'd be waiting for the captain of this Exxon Valdez to sober up first and notice he was taking on water....

topcallingtroll's picture

I will consult Mr. Bollinger and let you know when.

Captain Benny's picture

I still think that yesterday was an attempt to burn remaining shorts and bears before a big downside flush out in the coming weeks.  The rally was massive on nothing concrete and just another kick down the road.

Mark123's picture

Are you saying that Unicorns are not concrete?  How dare you!

Captain Benny's picture

France, Germany, and Greece all seem to believe in unicorns just like the Norwegians believe in trolls...  If you ask me, there is a troll hiding under this bridge coming up in November.

topcallingtroll's picture

You are behind the times.
We dont live under bridges any more,
and we are all hoping Santa comes early.

undercover brother's picture

by hook or by crook, all downside movement and especially downside momentum must be eliminated from markets and anyone daring to report negatively, or actully short the markets, shall be punished to the full extent of the fed reserve bank.  so sayeth Bernankenstein.

SheepDog-One's picture

Or so they want everyone to think that downside has been eliminated.

Irish66's picture

China Construction Bank says Chairman Guo Shouing has resigned

jdelano's picture

whoa.  Really?  That doesn't bode well.  

Irish66's picture

can't wait to hear why

Smiddywesson's picture

To spend more time with his family no doubt

rosiescenario's picture

.......buuuut Barton just told us China is just doing fine......Guo should have talked to Biggs before he took that step, obviously Guo doesn't know what is really happening....

Mark123's picture

Must, get, european, markets, to close green....dear God push those computers harder you son's of bitches!

mayhem_korner's picture



What is the right-hand (EPS) scale - YOY change?

YesWeKahn's picture

Fire the mad man and end the mad bank.

defn8Dog's picture

With quarter-end window dressing now the norm, I was wondering whatever happened to T+3?  By that measure, the Q ended on Oct 26, to allow for settlement, but in the last several quarters, it seems frantic trading happens right up to the last day of the month.  Are managers including those positions regardless of the settled date? 

Thanks, dfn8

Panafrican Funktron Robot's picture

Opex seems to trump just about everything else regarding trading decisions at this point.  Weeklies/monthlies affect things much more than they did a couple of years ago.

tliberty's picture

Thanks for the post. It's the snake eating its tail. One intervention leads to another, and so on and so forth. I think it is safe to assume that the State will intervene in the market whether or not it is "neccesary." It is like a kid in a candy shop that has knocked the shop owner unconcious.