This page has been archived and commenting is disabled.

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


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
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:

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'

Tue, 09/11/2012 - 12:03 | 2782035 Inthemix96
Inthemix96's picture

More made up money invented from fresh air given to the banks for near zero-per cent interest to not lend to the populace for 20%+ interest?

Interesting.....  How bout, the non-federal, with no reserves gives every man woman and child in America 50,000 grand?

Would this create moral hazard?  Would this reduce the wages or bonuses and re-numeration of our overlords?

A storm is a brewing, people are waking up fast and in numbers, they realise its bollocks.  They know their labour is being stolen through inflation.  May you live in interesting times bitchez.  :-)

Tue, 09/11/2012 - 12:50 | 2782209 edifice
edifice's picture

It would cause massive deflation, as Americans pay off credit card and student loan debt. They have to keep the iDebt iBubble growing.

Tue, 09/11/2012 - 12:04 | 2782040 cosmictrainwreck
cosmictrainwreck's picture

and here I thought it was just them trying to DIS-prove the 9/11 syndrome

Tue, 09/11/2012 - 12:06 | 2782041 falak pema
falak pema's picture

calling Graham Summers, who should change his name to Winter if this happens...

Just goes to show that Draghi and Ben are the true Laurel and Hardy team of fiat ponzi. 

Madoff must be really pissed off; why ONLY me...?

Tue, 09/11/2012 - 12:16 | 2782086 Winston Churchill
Winston Churchill's picture

Silly comment.

He stole from the 1%.

Its only legal stealing from the 99%.

Tue, 09/11/2012 - 12:19 | 2782096 malikai
malikai's picture

Its only legal stealing from the 99% if you're in the 1%.

Tue, 09/11/2012 - 12:54 | 2782226 cougar_w
cougar_w's picture


Tue, 09/11/2012 - 12:06 | 2782047 dark pools of soros
dark pools of soros's picture

Place your bets now, Benny's ball is spinning

Tue, 09/11/2012 - 12:09 | 2782052 Stackers
Stackers's picture

No QE3 until DOW 11,000. Why "do" when you can "talk" and muddle through.

Tue, 09/11/2012 - 12:10 | 2782059 rumblefish
rumblefish's picture

why are gold and silver prices 'tied' to whether or not the fed issues QE xx. Doesn't the fact that our debt continues to climb at robost pace justify higher metals prices?

Tue, 09/11/2012 - 12:59 | 2782243 ParkAveFlasher
ParkAveFlasher's picture

Yes.  Price is an adjective, it is an utterance.  You agree or don't. 

Tue, 09/11/2012 - 12:11 | 2782061 Quinvarius
Quinvarius's picture

In 1913 the National debt was about 3 billion dollars.  At this rate, in 2113, the national debt will be 85300 trillions.

Tue, 09/11/2012 - 12:17 | 2782088 dark pools of soros
dark pools of soros's picture

where will Israel keep all those yearly purchased jet fighters from USA debt by then?

Tue, 09/11/2012 - 12:11 | 2782065 Mongo
Mongo's picture

The "market"

Tue, 09/11/2012 - 12:12 | 2782069 jomama
jomama's picture

lol, 'market'.  good one!

Tue, 09/11/2012 - 12:14 | 2782074 Arnold Ziffel
Arnold Ziffel's picture

The market may expect $850 Billion but I'd just like my $3,000 Thingamajigs.

Tue, 09/11/2012 - 12:14 | 2782077 Money By Trading
Money By Trading's picture

Every bull I talk to is expecting good news from German Court and from Fed.  Caution.

Tue, 09/11/2012 - 12:19 | 2782095 walküre
walküre's picture

"market" isn't anticipating shit. They need to sell off at some point. Maybe when the "market" has tanked, can Ben resume his printing fest. At least the next massive sell off is coming with the narrative that "anticipated hopes for more QE were smashed".

All propaganda, all bullshit, always, all the time.

Tue, 09/11/2012 - 12:20 | 2782101 singsing
singsing's picture

Too funny, the New New Deal is nothing but endless rounds of paper asset purchases allowing government to finance the Old New Deal.

Tue, 09/11/2012 - 12:24 | 2782124 Everybodys All ...
Everybodys All American's picture

What are they going to buy with that $850 billion is the question? I don't see that much available as ZH has rightly been pointing out. Could that much issuance be sterilized? I don't think so. In my opinion the market is being setup for a disappointment and we shall see soon enough.

What then is left in the Fed's quiver after that size of a purchase?  Also, I wonder if that is the plan what kind of assets to leverage would that leave the Fed balance sheet?

Tue, 09/11/2012 - 13:06 | 2782271 ParkAveFlasher
ParkAveFlasher's picture

I don't think they will "buy" anything but time as the boomers retire, cash out of the system, and go the equivalent of rogue.  Tantamount to a bank run on the central bank. 

Tue, 09/11/2012 - 12:33 | 2782142 Meesohaawnee
Meesohaawnee's picture

6 weeks before an election? 100+ crude guaranteed. ? Increasing discontent from the pubic? nope not gonna happen. This has been the goal since last year when the test balloon was out and a market without pomo didnt look good at alll. So ben launched QE 2.5 (opt twist) AND anytime  sellers got the upper hand his MSM hoe bags and lap dogs "leaked" positive stories thus getting inside the heads of any short seller or anyone who wanted price discovery. As we speak anyone is terrified to short and ben can ramp up the pac man game without the MSM's beloved QE3

Tue, 09/11/2012 - 12:33 | 2782160 Philippines
Philippines's picture

As long as you're asking, why not go for a cool trillion?

Tue, 09/11/2012 - 12:38 | 2782178 walküre
walküre's picture

BDI now officially in the belly of the beast after breaking through Satan's 666 previous "bottom".

Tue, 09/11/2012 - 12:39 | 2782180 surf0766
surf0766's picture

850 billion.. Bullshit gas is 3.94 here . 6 more cents and everything stops..  I normally see more traffic in the fall than the summer. Traffic is approaching sept 2008 levels

Pre 2008 travel to work took 75-95 minutes. Now 40 tops.


Gas will crush whatever is left

Tue, 09/11/2012 - 13:00 | 2782249 malikai
malikai's picture

There's an SPR for that.

Tue, 09/11/2012 - 13:22 | 2782318 SheepDog-One
SheepDog-One's picture

Really theres anything left in the SPR after the last 3 dumps? 

Tue, 09/11/2012 - 13:25 | 2782335 malikai
malikai's picture

There should be enough to get Obama reelected.

Tue, 09/11/2012 - 12:44 | 2782193 ZeroHour
ZeroHour's picture

Is it just me and my dyslexia, or does the article say $580B and the headline $850?


"Fed is expected to conjure a monetization scheme of around USD580bn"

Tue, 09/11/2012 - 13:45 | 2782354 cougar_w
cougar_w's picture

Inflation pressures, between the time the article was written and the headline was added.

Tue, 09/11/2012 - 13:02 | 2782254 tahoebumsmith
tahoebumsmith's picture

850 billion more nails in the coffin. They are bound and determined to make sure that when this ponzi falls apart there will no option short of a total reset where every man, women and child will be willing to give up everything just for the simple essentials in life to survive... We are in a very scary place, a place that is not real, something that has been created and controlled by only a few.

Tue, 09/11/2012 - 13:05 | 2782268 LMAOLORI
Tue, 09/11/2012 - 13:07 | 2782276 SheepDog-One
SheepDog-One's picture

And when no QE'z is delivered then that will be even better news and DOW = 14,000 whatever what is anyone going to do about it anyway?

Tue, 09/11/2012 - 13:51 | 2782427 NaiLib
NaiLib's picture

QE? :) In Europe everybody is awaiting the ESM, supposed to be there to bail out Spain and Italy. Supposed to have 700 B € Deposited by the Euro member states....

Seems people have forgotten that Spain a Italy are due MORE than 30% of that amount in capital to the ESM. Will be interesting to see just how they are going to

solve it. Spain will have borrow its part 100+ B € at 4-6%................

Tue, 09/11/2012 - 14:03 | 2782447 slackrabbit
slackrabbit's picture

Dear Ben please print 50 trillion....and i'll keep the barberous relic, beans and bullets...

Tue, 09/11/2012 - 16:02 | 2782934 one_fell_swoop
one_fell_swoop's picture

"The current EURUSD of 1.2850 implies a Fed-to-ECB balance sheet ratio around 1.11x"

WTF?  This is the stupidest thing I've read in a while. 

Tue, 09/11/2012 - 16:03 | 2782939 wagthetails
wagthetails's picture

why would Ben stop now? the ECB is giving him room to run here.  At the very least he can argue he is keeping the dollar weaker for exporters.  I just wish he'd see that it doesn't matter how cheap the dollar is compared to EUR if no one is EUR is purchasing.  Ben always has and always will want inflation. 

As much as i still think he will show up with a big plan, I have to believe he is questioning this Keynsian beliefs.  you can't tell me he isn't doubting his beliefs a least a little bit.  I think he hedges his action and releases a massive plan (possibly bigger than expected), but also says it is the last one. PERIOD.  This would allow his stimulus to flow into the economy w/o the market driving up 20%.  it also puts the ball back in the government's court (budget). 

Do NOT follow this link or you will be banned from the site!