• Sprott Money
    05/06/2016 - 06:03
    The US, in its own decline, is showing this same self-destructive tendency. The worse things get, the greater the inclination of the citizenry to say, “Carry on, everything’s fine.”

The Market Is Expecting $850 Billion NEW QE

Tyler Durden's picture


Last week we discussed what the expectations were for Draghi's OMT - approximately EUR250bn - which coincidentally provided cover for the rest of the year (conditionally) for the entire new issuance of the European Union. Based on EURUSD's recent exuberance - something we saw ahead of QE1 and QE2 - the market is now more than primed for some serious USD debasement. The current EURUSD of 1.2850 implies a Fed-to-ECB balance sheet ratio around 1.11x. If we assume the ECB wil not have to fire its conditional bazooka (of which is priced in 100% likelihood of EUR250bn), then the Fed is expected to conjure a monetization scheme of around USD580bn - anything less would be a disappointment to the market. However, if we assume the ECB will be doing it's bond-buying monetization thing  - as per the equity market's expectations - then the Fed will need to come to the table with a bag of swag around USD850bn in order to debase the USD just enough to regain some hope. It seems like the market has priced in a great deal of monetary policy exuberance  - especially considering how 'confident' consumers appear to be.


EURUSD vs Fed/ECB balance sheet 'expectations'


and via Citi - the action of EURUSD leading up to QE1 and QE2 was positive only to be followed by the more significant sell-off...

[chart shows EURUSD performance rebased to 100 at T-40days]

Given the market's very tightly related correlations, a 3-5% drop in EURUSD could damage US equities quite severely if the USD debasement does not arrive. A shift to 1.20 (which is where Fed/ECB balance sheets are currently positioned) would imply a drop to 1340ish for the S&P 500...


Chart: Bloomberg

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Tue, 09/11/2012 - 11:49 | 2781966 bigdumbnugly
bigdumbnugly's picture

850 billion or don't even bother... bitchez!

and like now, man.

Tue, 09/11/2012 - 12:00 | 2782025 camaro68ss
camaro68ss's picture

Im having hopium withdraws.....hurry....print me some fresh FRN's

Tue, 09/11/2012 - 12:02 | 2782030 ratso
ratso's picture

Boehner can't control his own party members - that's the problem!

Tue, 09/11/2012 - 12:08 | 2782056 FL_Conservative
FL_Conservative's picture


Tue, 09/11/2012 - 12:33 | 2782162 common_sense
common_sense's picture

So, 17 Trillions of debt ??

Not a big deal, let's go for approuval into the next year, no problem!!

And the Heidelberg meeting? is it running now?? isn't?

But what about Apple?? what about berni? what about supermario? what about germany? what about oil prices? what about unemployment? what about deficit all over the world? what about commodities?

Ah ok, Heidelberg meeting is just about 650 Trillion of derivatives... ah it's ok! not a big deal, IS JUST LOTTERY. Betting now...


Tue, 09/11/2012 - 11:53 | 2781976 Cognitive Dissonance
Cognitive Dissonance's picture

I don't stampede with the herd for anything less than $2 Trillion.

$850B is chump change bro.

Tue, 09/11/2012 - 12:03 | 2782033 cougar_w
cougar_w's picture

I read the headline and thought exactly the same thing. The markets will probably tank outright if they don't come out with a combination of gimmicks totalling $2T.

$850B was the number 3 years ago. And before the Eurozone came unglued. Hell's bells they'll need $1T in liquidity just to inject dollar swaps into the ECB. Those guys are toast.

I've just changd my mind. Bennie needs to come out with $3T total (or in coordination with other CBs) or the global wheels come of before January.

Tue, 09/11/2012 - 12:16 | 2782087 Cognitive Dissonance
Cognitive Dissonance's picture

I bet the sisters wouldn't pussy foot around. In fact I know they wouldn't.


Is it time for another chapter yet? Are we there yet? :>)

Tue, 09/11/2012 - 13:04 | 2782262 cougar_w
cougar_w's picture

Oh oh! Have you caught this one yet?


What's wrong with a little out of control psychotic raging feline insanity between friends? It's all good fun.

I kinda works with the current topic too. I need to update the main page.

Tue, 09/11/2012 - 13:23 | 2782322 Cognitive Dissonance
Cognitive Dissonance's picture

New to me bro. I will devour it later. :)


Tue, 09/11/2012 - 12:17 | 2782091 malikai
malikai's picture

But I thought those swaps 'don't count', as they say. Maybe the fed could just do it anyway and not bother telling anyone. Hell, they did it big time in 08/09. Why not now, why not since?

Tue, 09/11/2012 - 12:52 | 2782198 Cognitive Dissonance
Cognitive Dissonance's picture

"But I thought those swaps 'don't count', as they say."

They don't count. They're just units of measure, cogs in a gear really. You just swap out one cog for another and the books balance like magic.

I like COGs! :)

Tue, 09/11/2012 - 13:32 | 2782367 juwes
juwes's picture

Giving away money worth more than apple to all of the banks is going to be a huge bonus to all corporations connected to those banks via credit feeding tubes... this includes the lawsuit-dependent apple.

These companies will take this free money and spend it on real world assets (not employees). The herd is not everybody, it is the 1% with all of the money.

The herd is left with a choice and only one choice. To invest in themselves with this beautiful 850 billion gift. And to invest in themselves is to ramp up the stock market, about 20% of which profits the middle class. Forget the poor, qe isn't for them.

Conclusion: its definetly time to buy large cap stocks that have feeding tubes filled with qe3. The time to short comes in another year, around Dow 20,000.

Tue, 09/11/2012 - 11:51 | 2781978 stinkhammer
stinkhammer's picture

I need me some QE; pretty please Ben

Tue, 09/11/2012 - 12:15 | 2782082 LawsofPhysics
LawsofPhysics's picture

No need with ZIRP and NIRP.

Tue, 09/11/2012 - 11:56 | 2781979 Deep79
Deep79's picture

NO QE thursday

Is the "Market" really this stupid?

Tue, 09/11/2012 - 12:10 | 2782060 Jason T
Jason T's picture

Tell Ben not to go to Texas.. 


Tue, 09/11/2012 - 12:59 | 2782241 LMAOLORI
Tue, 09/11/2012 - 12:11 | 2782068 Winston Churchill
Winston Churchill's picture

Jonesing  Friday.

BTFD in gold.


Tue, 09/11/2012 - 13:38 | 2782391 PiratePawpaw
PiratePawpaw's picture


Tue, 09/11/2012 - 14:52 | 2782677 Jake88
Jake88's picture

Why would you think that there might be a limit to how stupid the market can be?

Tue, 09/11/2012 - 11:52 | 2781982 CrashisOptimistic
CrashisOptimistic's picture

This is just silly.

There is no market.  There is only HFT.  

HFT doesn't give a shit about QE.  If Bernanke says he's not doing QE and is actually going to nudge up the discount rate 0.25%, the market would drop 0.5% and then grind back up to flat by the end of the day.

You guys need to stop looking at it.  It's just a computer warfare arena.  It doesn't mean anything anymore.

Tue, 09/11/2012 - 12:04 | 2782042 Cult_of_Reason
Cult_of_Reason's picture

Not so much by HFT (in and out in milliseconds) as by algos (20-60 minutes of non-stop Knight-like hitting the ask straight line mark-ups).

Tue, 09/11/2012 - 11:52 | 2781983 Atlantis Consigliore
Atlantis Consigliore's picture

$ 1 Trillion,  crash the dollar; drive rates to - negative real cost,  watch 25 million business layoff everyone, rehire part time, at 1099 subcontractor independent contractors.

   in protest;  bankrupt the govt. 

Tue, 09/11/2012 - 11:52 | 2781986 FuzzyDunlop21
FuzzyDunlop21's picture

this shit is just so fucked up

Tue, 09/11/2012 - 12:23 | 2782112 Non Passaran
Non Passaran's picture

... and bullshit?

Tue, 09/11/2012 - 11:52 | 2781987 buzzsaw99
buzzsaw99's picture

what jamie wants jamie gets.

Tue, 09/11/2012 - 11:53 | 2781991 gggunchi
gggunchi's picture

So everything and everyone is going to be sorely dissappointed when the truth comes out.  Oh wait . . . bad news = good news.  Good news = good news.  No news = good news. 


I hope Bernanke tells everyone no QE at all . . . ever again.  Would be an interesting day to watch the carnage. 

Tue, 09/11/2012 - 11:55 | 2782000 buzzsaw99
buzzsaw99's picture

I hope Bernanke tells everyone no QE at all . . . ever again.

dream on.

Tue, 09/11/2012 - 11:55 | 2782003 CrashisOptimistic
CrashisOptimistic's picture

As I said above, there will be no carnage.

THERE IS NO MARKET.  There is only HFT.

HFT won't allow carnage.  You'd see a 0.5% drop and then they'd grind it back up to flat by the end of the day.

Stop watching it.  It's not a market anymore.

Tue, 09/11/2012 - 12:23 | 2782115 falak pema
falak pema's picture

it is a market; but it is THEIR market. You are not invited to the insider talks so you walk in at your own peril. 

Reality goes on and its going strong for them as they pull all the levers. Wake up to the increasing Oligarchy power to run the market, our lives and those of the world; until they pull the plug where ever they want to; to DEFINE at their own behest the new normal. 

Our only grasp of reality is not our actions but our words, and the only thing that can change that is if and when these feudalists slip into a battle of T-Rexs; out of more greed or more desperation as losing oligarch in musical chairs mayhem; 'cos we pose them no threat at all! We don't even exist to them.

They have only one enemy; themselves. 

Tue, 09/11/2012 - 16:12 | 2782984 wagthetails
wagthetails's picture

HFT doesn't care about direction, just change.  So far, as ZH has pointed out, we are only trading on government policy and central planners...who ALL claim they will do whatever it takes.  all positive.  sure most of us are calling BS, but you never trade against the central banks.  but, eventually the CBs will be out of meaningful bullets....and i fear that one hiccup will cause HFT to run a massive flash crash...only this time there will be no return from the abyss.  This rediculous run over the past 3 months will only serve as a catapult making the crash bigger.  i hope i'm f'ing wrong.

Tue, 09/11/2012 - 12:07 | 2782051 cougar_w
cougar_w's picture

The two words "no" and "QE" will not appear together in a single sentence, in any combination or in any order. Probably, not in any paragraph.

In fact it would be safer just to keep them outside the room the entire time.

There is a storm brewing and the algos are restless. Can't afford to spook them on a day like this.

Tue, 09/11/2012 - 12:10 | 2782058 buzzsaw99
buzzsaw99's picture

verbally the door is always open to more qe, zirp 4evah, etc., etc.,...

Tue, 09/11/2012 - 12:54 | 2782219 cougar_w
cougar_w's picture

It stopped being monetary policy the instant it became perception management.

Tue, 09/11/2012 - 11:53 | 2781996 katchum
katchum's picture

At least $700 billion, because China did $350 billion and China is half the GDP of U.S.

Tue, 09/11/2012 - 11:56 | 2782006 JailBank
JailBank's picture

How far down does the market go if we don't get the QE announcement this week?

Tue, 09/11/2012 - 11:58 | 2782019 CrimsonAvenger
CrimsonAvenger's picture

It doesn't. Disappointment immediately turns to hope that it will happen at the next meeting. Rinse and repeat.

Tue, 09/11/2012 - 11:58 | 2782011 kito
kito's picture

"market" (aka goldman and co.) isnt expecting anything..."market" is duping gullible muppets into buying the rumor.........and then WHAM!.........

Tue, 09/11/2012 - 12:08 | 2782053 HelluvaEngineer
HelluvaEngineer's picture

Judging by boatloads of gloating longs online, I think they bought the top.

Tue, 09/11/2012 - 12:11 | 2782062 LongBalls
LongBalls's picture

You are right on this one. No QE yet. 

Tue, 09/11/2012 - 11:57 | 2782012 forwardho
forwardho's picture

I need some ZH 'er help. harddrive took a crap. I lost link to a chart showing the increases in the fed buying our own bonds in time elapsed form.  as time moved forward the hole chart turned red with amount of puchases.  I used to show it to people and they were blown away. any assistance helpful.

Tue, 09/11/2012 - 12:26 | 2782127 fuu
fuu's picture

This one?

The Fed vs Carl Orff: http://www.youtube.com/watch?v=QWMCWAqPnoQ

Tue, 09/11/2012 - 13:48 | 2782418 mkhs
mkhs's picture

 Behold The Fed's Takeover Of The Bond Market 


Did you ever think to try the search function?

Tue, 09/11/2012 - 14:18 | 2782524 fuu
fuu's picture

For some reason your link just took me to the news page.


Tue, 09/11/2012 - 16:03 | 2782940 mkhs
Tue, 09/11/2012 - 11:58 | 2782013 Squid Vicious
Squid Vicious's picture

the Shalom and ECB in a race to the bottom!


Tue, 09/11/2012 - 11:59 | 2782023 yogibear
yogibear's picture

All the Bankster HFT BOTs will take any extra  liquidity and trade with it. 

Bendover Bernanke will keep  printing and is building the biggest bubble in history.


Tue, 09/11/2012 - 12:00 | 2782026 FlyoverCountryS...
FlyoverCountrySchmuck's picture


Tue, 09/11/2012 - 12:02 | 2782029 Vincent Vega
Vincent Vega's picture

Addicts always need the next fix to be bigger than the last.....just sayin'

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