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Stocks, Precious Metals Spike On Report Fed Considering "Sterilized" QE
Update: yup. It's Jon "Mouthpiece" Hilsenrath all right. This is nothing but a test to gauge if the market will ramp on the clarification that future QE may be sterilized. If market ramps regardless, the sterilized clause will be ultimately eliminated. Full story link.
Original:
While we have yet to see the actual report, almost certainly emanating from Jon Hilsenrath, it appears that the QE3 rumormill has started, initially with speculation that the Fed's activity will be merely "sterilized" or more Twist-type purchases, unclear however if in TSYs or also in MBS. Via the WSJ:
- Fed Officials consider "sterilized" option for Future bond buying
- Operation Twist Reprise, QE Other Options For Fed Bond
- Still Unclear Whether Fed Will Launch Another Bond-Buy
As a reminder, yesterday we said that according to the EURUSD, the implied market expectation is for a $750 billion QE out of the Fed. However, that is for unsterilized balance sheet expansion. If the Fed goes ahead and does not grow its balance sheet (hence "sterilized"), it may well be EURUSD, and thus risk, and gold, negative, as no new money will enter the market for actual speculation. Which perhaps is precisely what the Fed is planning, as every incremental dollar now goes into Crude first, and everything else later. In other words: this is a very big risk off indicator as no new money will be available to pump up stocks, and all this will do is try to make longer-dated yields even lower, an approach that has proven to be an abysmal failure to date.
This also means that while the ECB is borrowing ever more and more tricks from the FRBNY Goldman team, such as massive Discount Window usage, the Fed is now using the ECB playbook when it comes to selective easing without generating inflation - the US goes German. Of course, there is no such thing as truly sterilized intervention, as ultimately the Fed will merely fund the banks indirectly in some other way, to give them the dry powder needed to sterilize and generate the required ROEs without which their stocks would plunge.
This move may have to be faded:
From the WSJ. INFLATION word count 9:
Federal Reserve officials are considering a new type of bond-buying program designed to subdue worries about future inflation if they decide to take new steps to boost the economy in the months ahead....The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed's previous efforts to aid the recovery..... If growth or inflation pick up much, officials seem unlikely to launch a bond-buying program because the economy might not need the extra help or because doing more could spur higher inflation. The Fed's approach to a bond buying program matters a lot to many investors. More money printing could push commodities and stock prices higher, or send the dollar lower, if it sparks a perception among investors that inflation is moving higher, said Michael Feroli, an economist with J.P Morgan Chase.
Fed officials have used different types of bond-buying programs since 2008. In each case the aim has been to drive down long-term interest rates to spur investment and spending by businesses and households. In case they decide to act again, they're exploring three different approaches, according to people familiar with the matter. Those approaches are:
• First, they could use the method they used aggressively from 2008 into 2011, in which the Fed effectively printed money and used it to purchase Treasury securities and mortgage debt. The Fed has already acquired more than $2.3 trillion of securities in several rounds of purchases using this approach, widely known as "quantitative easing," or QE.
• Second, the Fed could reprise a program launched last year in which it is selling short-term Treasury securities and using the proceeds to buy long-term bonds. This $400 billion program, known as "Operation Twist," allows the Fed to buy bonds without creating new money.
• Third, in the new novel approach, the Fed could print money to buy long-term bonds, but restrict how investors and banks use that money by employing new market tools they have designed to better manage cash sloshing around in the financial system. This is known as "sterilized" QE.
The Fed's objective under any of these programs would be to reduce the holdings of long-term securities in the hands of investors and banks. The Fed believes that reducing the amount of long-term bonds in the hands of investors drives down long-term interest rates, encourages more risk-taking, and thus spurs spending and investment by households and businesses.
The differences between the three approaches involve where the money comes from and where it ends up. The Fed hasn't literally print more money, but it has electronically credited the accounts of banks and investors with new money when it purchased their bonds under quantitative easing. The Fed has pumped more than $1.6 trillion in new money into the financial system this way, and has also rejiggered it existing holdings, as part of its bond-buying efforts.
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It is....Im so un-entertained by all this its not even funny.
Sterilize the Fed.
Please?
Why do we need QE given such a rubust recovery?
Robust euphoric recovery AND QE! Plus SPR tapping! ALL the best rolled into one!
" as no new money will enter the market for actual speculation."
That must be related to all the talk lately regarding Israel has been swindled into buying US stocks (with money from the US no doubt) and all the greatness coming from post Lehman collapse which also said to be flowing into the markets.
This game has to end somewhere, sometime. Biggest game of jenka ever.
Also this stupid announcement is EXACTLY what is keeping investors away from equity markets.
I know personally what i hear from around these parts (canada) is that the wealthy, "sophisticated" investors aren't trading. They have their portfolios but anecdotally hearing that some of the brokers with $500m plus books, their business is down 50-75% y/y. A direct quote "nobody believes that what the fed is doing is not just blowing another giant bubble".
People are investing but more often than not, in private infastructure projects related to the oilsands, private service companies with specialty tech, and companies involved in transportation of crude (and assorted infastructure support products).
The take away is that the continued intervention into the public markets by monetary authorties isn't creating confidence. The intervention plus the continued lack of cohesive regulatory oversight is leading to the erosion of confidence in public markets. We see evidence of this everyday in the "wolume" numbers.
When stocks and commodities move on 'news', this is indicative of:
1 normal market behavior in secular bull uptrend
2. speculative markets in late sage Ponzi
3. phony news driven markets about to collapse giving insiders last chance to get out
I'll go with choice #3.
LOL yea exactly, these cocksuckers are grasping frantically at straws now.
Even if the new move is "sterilized" and they restrict how the new cash can be used,it will still ecourage banks etc to take more risk with their other cash not already in oil. Stupid assholes.
they tried that in the late 1920's. Same thing happened. You can't control cash.
Under Sharia law, Ben would have lost both hands, his tongue and his testicles by now.
More caviar and champagne please; when the ship sinks I want a full belly.
Stop trying to get me to spend money I don't have
Sheesh ES was only down to 1,340 and they already pull out QE? Kooky.
"The Fed believes that reducing the amount of long-term bonds in the hands of investors drives down long-term interest rates, encourages more risk-taking, and thus spurs spending and investment by households and businesses."
there you have it. Fedgod wants the poorest to spend and take risks, so they want the everyone broke and they are actively implementing plan R for rape.
a favorite comedy skitch leaves the hero saying, "my god, that woman's trying to kill me"
Tyler says-----“””Wrong. Only thing that matters is if Primary Dealers get one incremental dollar as part of more "easing." This is ALL that matters.’’’’
This Fed/Wall Street Magic does give Witchcraft and Voodoo a more dignified status.
There is nothing "sterilized" in this plan.
Biggest Problem For Gold and Silver: Doomsday Never Comes
Have a read... How can I debunk this?
http://www.forbes.com/sites/greatspeculations/2012/03/06/biggest-problem-for-gold-and-silver-doomsday-never-comes/
Doomsday implies a particular day. That does not need to happen, as long as enough people become more aware of what fiat currency is, gold will again find it's rightful place as a store of value, if not as a trading vehicle. Seems to me this is happening.
The Author states: "The hard data on inflation shows that it is under control and the world economy has many deflationary tendencies."
That debunks the whole article as far as I'm concerned.
However, you can reference history and the value of gold also.
You don't need a "doomsday" for precious metals to retain their value.
What is your timeline? Do you need cash now or do you want to convert USD to Precious Metals to hold value for more than two years?
Precious metals have increasing applications in electronics. Gold is being researched for health applications, including a carrier for anti-cancer treatments.
The growing middle class societies in India, Asia, and South America all view Gold as the precious metal of choice for jewelry, currency, and status.
Keynesian fiat database currency pushers of the expiring Western "democracies" see gold as a "barbarous relic".
Who do you believe?
This is like throwing buckets of water at the outgoing tide. It isnt going to work.
You cant fight the gravitational force of deleveraging.
All they are trying to do is fill the void to prop up asset prices.
M1 Velocity: http://research.stlouisfed.org/fredgraph.png?g=5wy
Should I trade gold for usd before gold tanks?
How the fuck do you "sterilize" something when BONDS are bought with it??? Is this like "we'll print cash for the gov, but don't worry, it won't spend it, promise!"?
Jack the Ripper sterilized his instruments, too.
So far we've had vaporized money, sterilized money and we've always had piratized money....so how about some sanitized money like gold and silver for a change that we can really believe in!!!
buy physical gold and silver.
Only in a FIAT DISASTER would "sterilization" come into being.
It is a LIE and total BULL SHIT.
They make it sound like it (the debt) magically "goes away", when in fact they (that mysterious "they") just print more money.
They should start sterilizing bankers.........
I’m calling it a triple forward flip with a one and a half twist. Get it right and you win the gold. But, as any Olympic diver can tell you, it’s also a lot easier to flub and end up with a score of three out of ten.
I just wonder at what point people figure out the Federal Reserve has zero ability to affect the economy in a positive fashion (other than by maintaining a stable rule, e.g. gold)? In terms of information theory, the only way the Fed helps anyone is if it has a collective IQ some quantum step higher than the rest of the market. But we just learned Bernanke's kid has $400,000 in graduation debt, so we know Helicopter Ben is no bright bulb. There goes the omniscient Fed theory.
In other words, the Fed is always 'pushing on a string', as is the ECB for that matter. What they have set up with their Keynsesian knob fiddling are the conditions for a Biflationary Depression. http://www.futurnamics.com/biflation.php
Speaking of Bankers and sterilization,the world should have a casteraste a banker week so they no longer breed and pass their genes on.
And whats this with the name "Jon"
Does this automatically make you an idiot and a shill.???
Jon Corzine,Jon Nadler,Jon Hil(sin)rath
See the pattern.?
Numerology at work with Sumerian Lizard People. Anybody can see it. Good work, B-,,,
A castrated QE?
Brings back memories of my youth when we used elastrators to 'dock' the sheep....they'd hop around for a bit, but then get used to it as their nuts turned numb.
KNW reports a lot of physical gold buying today in Europe. We may see a spring loaded rebound.
"a "new" type of bond buying"
Abbra Caddabra,and a lttle hocus of the pocus,and alla shazam.........
..............................PONZI........................................
Cool.....
Gotta get me one of them bond buying bogus scams going.
Oh...?
Not so you say.
Who can play.?
I don't think the Fed has any other choice-they are clearly losing the race to the bottom-
Devaluation must be kept competitive or trade/the economy simply vanishes-
**************
http://www.acting-man.com/blog/media/2012/03/CB-balance-sheets-as-percen...
http://www.acting-man.com/blog/media/2012/03/ECB-balance-sheet.jpg
Tyler, we talk about ECB - Fed balance sheet equilibration in order to balance the relative currencies.
Seems to me that if the world begins using the dollar less (e.g. petrodollar) that those dollars will come into play. In other words, even if the Fed did not keep up with Europe in printing and expanding the balance sheet, the loss of the reserve currency status would achieve the same or simlar from a supply-demand perspective.