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Two Days Ahead Of More QE, JPM Finds That World Is Already "Drowning In Liquidity"

Tyler Durden's picture





 

A few days ago, the BOE's Andy Haldane, rightfully, lamented that the apparent "solution" to the exponentially growing level of complexity in the financial system is more complexity. Alas, there was little discussion on the far more relevant central planning concept of fixing debt with even more debt, especially as the US just crossed $16 trillion in public debt last week, right on schedule, and as we pointed out over the weekend, there has been precisely zero global deleveraging during the so-called austerity phase. But perhaps most troubling is that with 2 days to go to what JPM says 77% of investors expect with be a NEW QE round (mostly MBS) between $200 and $500 billion in QE, the world is, also in the words of JP Morgan, drowning in liquidity. In other words, according to the central planners, not only is debt the fix to record debt, but liquidity is about to be unleashed on a world that is, you guessed it, already drowning in liquidity. The bad news: everything being tried now will fail, as it did before, because nothing has changed, except for the scale, meaning the blow up will be all that more spectacular. The good news: at least the Keynesians (or is it simply Socialists now?) out there will not be able to say we should have just added one more [    ]illion in debt/liquidity and all would have worked, just as our textbooks predicted. Because by the time it's over, that too will have happened.

From JPM's Michael Cembalest:

It has been a strange year. If you were concerned about the global economy this year, you were right:

  • Leading indicators of manufacturing, such as new orders, are weakening just about everywhere
  • Chinese, Korean and Taiwanese exports are slowing sharply; China may be growing at only 6%
  • European growth is ~0%, with the periphery in recession. Germany business surveys also fading
  • Last week’s US jobs report was weak across the board (payrolls, work week, labor force participation and wages)
  • US capital spending trends are slowing (e.g., capital goods orders ex-aircraft)
  • Countries like Brazil are showing signs of industrial fatigue due to an overly strong currency in 2010-2011
  • The US election does not look like it will bring clarity to the US fiscal/debt ceiling divide (polls show Democrats keeping the White House and Republicans keeping the House of Representatives)
  • US housing is staging a modest recovery, but it’s not a game-changer given its smaller contribution to employment
  • Corporate profits are high, but the trend in EPS revisions is negative and profits growth is slowing

However, global equity markets have done well, up 13% so far in 2012. The bottom line: with the world drowning in liquidity, the right portfolio moves this year have been to take advantage of low equity valuations, look through all the economic weakness and expect that continued monetary stimulus will  eventually bear fruit. We have done some of that but not as much as we might have, and as things stand now, global equity markets have outperformed what I had expected. The world’s Central Banks have made it clear that inflating their way out is preferable to the alternatives, an environment that is conducive to risky assets that are priced very cheaply, until and unless they lose control of inflation.

For those confused, Cembalest only added "unless" out of political courtesy, because as even the Fed itself admitted last night, first via St. Louis Fed's James Bullard and soon everyone else, the Fed has finally been exposed as being nothing but a puppet tool of politicians, who in turn have always been sponsored muppets of Wall Street (Who can possibly forget Chuck Schumer telling Bernanke to "get to work Mr. Chairman"). In other words, we now know politicians run not only fiscal, but monetary policy. How to hedge against this apocalyptic proposition? Simple. Cue Kyle Bass: "Buying gold is just buying a put against the idiocy of the political cycle. It's That Simple."

It really is.

 


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Mon, 09/10/2012 - 12:17 | Link to Comment Dareconomics
Mon, 09/10/2012 - 12:53 | Link to Comment Theosebes Goodfellow
Theosebes Goodfellow's picture

This is my take on Dareconomics:

Please visit my blog/

Please add foot traffic to my blog/

Look at me, I'm an econimic sage after having read ZH.

 

Really Dare, get an avatar before trying to get people to go to your site. Also, If you do have a "take" of the Fed QE, just post it, even if you have to cut and paste it from your blog. Geeesh....

Mon, 09/10/2012 - 18:45 | Link to Comment Element
Element's picture

And there was also the Central Bankster brain-trust saying that their tools do work, they just need to be, "...much more aggressive using them".

When in a hole ... stop ...

Tue, 09/11/2012 - 02:11 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

http://www.youtube.com/watch?v=umua_0yYvTE#t=5m55s&feature=BFa&list=PL8F...

There is only 1 "take" on fed printing.  One day there will HAVE to be a new currency, b/c this one is printed into oblivion and is based on the petro dollar accord.  pure and simple.

in the intermediate period, there will be a monumental transfer of wealth into hard commodities such as art, land, and metals. 

That is why we buy precious metals.  pure and simple. 

There is no take on printing.  only money makers and idiots.

http://www.youtube.com/watch?v=dXJNR1sax-I&feature=autoplay&list=PL8FF5E...

 

Mon, 09/10/2012 - 12:21 | Link to Comment Lost Wages
Lost Wages's picture

Is JPM buying stocks or bonds? :)

Mon, 09/10/2012 - 12:32 | Link to Comment urbanelf
urbanelf's picture

Yes.

Mon, 09/10/2012 - 12:34 | Link to Comment Stock Tips Inve...
Stock Tips Investment's picture

You have to stay awake. The markets are starting to show signs of life. Whether up or down. What matters is to do so in circumstances in which we can benefit. And that's just what I think will happen.

Mon, 09/10/2012 - 12:21 | Link to Comment Dixie Rect
Dixie Rect's picture

Long: government issued dunce caps

Mon, 09/10/2012 - 12:21 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

"Cue Kyle Bass: "Buying gold is just buying a put against the idiocy Fascist intent of the political cycle. It's That Simple."

Calling it idiocy is being way too kind. Fascist sounds much more accurate.

Mon, 09/10/2012 - 18:47 | Link to Comment Element
Element's picture

Both are are great comments actually.

Mon, 09/10/2012 - 12:23 | Link to Comment Everybodys All ...
Everybodys All American's picture

The world is drowning in debt. There you go I fixed it just so people don't get confused even though we know liquidity is code for debt in central bank circles.

Mon, 09/10/2012 - 12:24 | Link to Comment Sudden Debt
Sudden Debt's picture

here in Belgium, our politicians want to force banks to give at least 4% on deposits. in that way the banks need to lend money out to pay for the interest of the accounts.

it sounds sound to me.

Mon, 09/10/2012 - 12:50 | Link to Comment alangreedspank
alangreedspank's picture

Maybe. But how did it go last time the government forced banks to do something ?

Mon, 09/10/2012 - 12:57 | Link to Comment Haole
Haole's picture

So, for instance, "governments" ultimately forced bankers to depose democratically elected politicians and replace them with more bankers in Greece, Italy and Spain? 

Mon, 09/10/2012 - 13:16 | Link to Comment alangreedspank
alangreedspank's picture

And also forced banks to lend money to people they wouldn't have otherwise, hence, partly why the housing bubble.

Mon, 09/10/2012 - 12:26 | Link to Comment Haole
Haole's picture

"...the Fed has finally been exposed as being nothing but a puppet tool of politicians..."

Uh, isn't that backwards?

Mon, 09/10/2012 - 12:52 | Link to Comment alangreedspank
alangreedspank's picture

No, the Fed is the bread and butter of politicians wanting to promise 'free' stuff to their consituents. The Fed is here to buy their debt and provide the liquidity.

Mon, 09/10/2012 - 13:33 | Link to Comment THX 1178
THX 1178's picture

Why does the Fed have shareholders then? Why does the Fed take a profit? Why was it chartered by bankers and industrilaists. Sure it gives politicians a way to pay for things without raising taxes. The banker-shareholders like this too. VP Rockefeller... government isn't controlled by banks, it IS BANKS.

Mon, 09/10/2012 - 12:26 | Link to Comment q99x2
q99x2's picture

Yes but they need that money to buy the weapons and infrastructure to kill us with.

Mon, 09/10/2012 - 12:32 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

We needed to kill you in order to protect you.

Vietnam redux..........

http://en.wikipedia.org/wiki/Ben_Tre

Mon, 09/10/2012 - 13:56 | Link to Comment Ying-Yang
Ying-Yang's picture

eugenicubonics bitchez

Mon, 09/10/2012 - 12:32 | Link to Comment yogibear
yogibear's picture

Have to keep the stock market going up. Bernanke and the Fed should just have an index added to thier balance sheet where takes  the countrfieted money and just buys all the stocks with printed money.

It would give the boys on Wall Street happy and create future favors for NY Fed Dudley and Goldman Sachs.

Bernanke is buying everything,  

Higher and higher and higher debt ceilings. Larger and Larger student loans, more food stamps and entitlements.

More and more and more debt.

Why work? Just have Bernanke print and send everyone his printed money. People would spend it.

For Bernanke, Dudley, Yellen, Draghi and the rest of the Central Banksters any fiscal resposibility has been thrown out. It's just print until something sticks.

Like throwing crap on teflon. If your throw enough, it may stick but you may be buried in it.

 

 

 

Mon, 09/10/2012 - 12:26 | Link to Comment knukles
knukles's picture

Du-uh.....

Mon, 09/10/2012 - 12:27 | Link to Comment Bartanist
Bartanist's picture

Obviously the problem is NOT insufficient available debt, it is too much available debt, too little value creation and that big sucking sound that comes from the banks and government.

When banks feel they deserve a cut of ALL assets created in the world, simply for creating money out of thin air (and distributing it) and government thinks they deserve a cut of all economic activity in the world, just because they have the physical power to beat, kill or imprison anyone with impunity; then IMHO there are serious fundamental flaws in the system.

Value creation is not valued correctly and bully power (money or physical coersion) is over-valued.

Someday the grown-ups will need to take over for the kids and sociopaths.

Mon, 09/10/2012 - 12:27 | Link to Comment Pasadena Phil
Pasadena Phil's picture

When your old car with a worn-out engine starts sputtering, step on the gas! If it works once, step on the gas again! Don't worry about flooding the engine. We'll burn that bridge once we get there. One problem at a time.

Mon, 09/10/2012 - 12:31 | Link to Comment Tortfeasor
Tortfeasor's picture

Paradoxically, the solution to obesity caused by too much potato chips, too much soda, and too much icecream, is more potato chips, more soda, and more icecream.

Mon, 09/10/2012 - 12:31 | Link to Comment Winston Churchill
Winston Churchill's picture

That debt can only  keep increasing in value Ben,just like you said of housing.

De je vu all over again.

So many bubble, and one big prick.

Mon, 09/10/2012 - 12:32 | Link to Comment Robslob
Robslob's picture

Gold will tank along with everything else when the system blows...a small problem of course will be "sold out" when that comes to pass.

So it isn't really about price...it is about purchasing power and regardless of whatever banker dictated price gold ends up at it will still have purchasing power...the dollar, not so much...

Mon, 09/10/2012 - 14:33 | Link to Comment KickIce
KickIce's picture

When the system blows there will be war. or due to war.  Anyway, doesn't matter, everything tanks except food, fuel and firearms/ammo.

Mon, 09/10/2012 - 12:35 | Link to Comment Al Huxley
Al Huxley's picture

If they stop giving the money to the fucking banks and give it to me instead, I promise to spend it and not just leave it parked at the FED.

Mon, 09/10/2012 - 12:36 | Link to Comment Robslob
Robslob's picture

+ $16 Trillion

Mon, 09/10/2012 - 12:41 | Link to Comment Dr. Engali
Dr. Engali's picture

I promise to buy plenty of precious metals which will summarily be lost in an unfortnate boating accident.

Mon, 09/10/2012 - 13:03 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Mrs Cog says the problem behind all my boating accidents is that I need a bigger boat.

I think it might be something else.

Boating accident

h/t to WilliamBanzai7 for this image.

Mon, 09/10/2012 - 13:19 | Link to Comment Colonel Klink
Colonel Klink's picture

When this thing sinks, everybody better be ready to SWIM BITCHEZ!!

Mon, 09/10/2012 - 13:23 | Link to Comment ptoemmes
ptoemmes's picture

Equal weighted ballast in the bow might work, e.g. another fat guy...as long as you igone the water rushing over the gunwales.

Come to think of it...yet another metaphor for the end game of adding more debt.

 

PS

Where's the beer?

 

 

Mon, 09/10/2012 - 13:46 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

In the belly already. Just finishing up the ham on rye before heading to shore.

Another load of PMs deposited in Davey Jones' locker.

http://en.wikipedia.org/wiki/Davy_Jones'_Locker

Mon, 09/10/2012 - 13:33 | Link to Comment Dr. Engali
Dr. Engali's picture

Hilarious...thanks for the chuckle.

Mon, 09/10/2012 - 13:38 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Mrs Cog says I'm too fat so no more nookie until I can see my nooker.

I think she's serious this time. :)

Mon, 09/10/2012 - 13:40 | Link to Comment Dagny Taggart
Dagny Taggart's picture

Perhaps now would be a good time to consider the organic and sprouts darkpocalypse diet lol? Just sayin...

Mon, 09/10/2012 - 13:55 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Hey Dagny, You still over at Turds joint or have the Mods banned you like me? LOL.

Mon, 09/10/2012 - 14:01 | Link to Comment Ying-Yang
Ying-Yang's picture

invest in a tool called the pecker periscope.. then all ahead full

Mon, 09/10/2012 - 13:10 | Link to Comment knukles
knukles's picture

BINGO!

A 3 pointer for describing exactly the fucking problem with the way the Federalies are attempting to manage out of a Liquidity Trap.
Should the money be given to The People, The Consumers who comprise 70% of GDP/economic activity, the money WOULD GET SPENT thereby goosing the PT portion of MV=PT as opposed to simply pushing V downwards.

That is exactly what was meant by Dumping Money from a Helicopter in the first fucking place.  Not giving it to the Banksters at 0% for the positive carry of a life time which even they can screw up.

See... just credit everybody's 401(k) with cash back to pre-crash levels, give everybody a free (Gubamint grant for doing fuck all nothing, like welfare all around) $10K and it'll get spent, come hell or high water.
And if somebody says "Oh booyah, we can't do that, it'll be inflationary with all than additional cash floating about", then don't do another QE or just go the fuck ahead and raise reserve requirements to sterilize the shit.

Wake the Fuck Up!  We're already handing out that kind of money to the financial elite, anyhow.

JESUS...............

Mon, 09/10/2012 - 12:37 | Link to Comment SRVDisciple
SRVDisciple's picture

Keynesian economics requires the ignorance of the masses.  Only if the tractor-parts-builder in Kansas who starts to see his business heading off of a cliff is unaware that uptick/stabilization in business is due to gummit printing will he operate as if nothing is wrong. He will hire, spend, and plan for growth. If he knows that his few extra sales are due to a Bernanke Bandaid, then he will continue to act as if business is really down and will play things close to the vest.

Mon, 09/10/2012 - 17:54 | Link to Comment sessinpo
sessinpo's picture

Keynesian economics requires the ignorance of the masses.

 

Very true. That also applies to just about all forms of government and ideology that discourages individualism and individual freedom, something socialist fear and detest. You know, the anarchist and trouble makers when actually the opposite is true. I won't intrude upon you and you don't intrude upon me. In fact, we might become friends and through cooperation, make something great. Oh yea, I forgot, Obama said we don't build things. My bad.

Mon, 09/10/2012 - 12:38 | Link to Comment SemperFord
SemperFord's picture

But silver is sooo much cheaper!

Mon, 09/10/2012 - 12:39 | Link to Comment Dr. Engali
Dr. Engali's picture

 

"The good news: at least the Keynesians (or is it simply Socialists now?) out there will not be able to say we should have just added one more [ ]illion in debt/liquidity and all would have worked,"

 

They won't be able to say that with any credibility ( not that they have it now) but that won't prevent them from saying it anyway.

 

Mon, 09/10/2012 - 12:42 | Link to Comment resurger
resurger's picture

We will have "Unlimited Interventions" untill the S&P touches 1,500+

Ben Bernanke

Mon, 09/10/2012 - 12:43 | Link to Comment CrimsonAvenger
CrimsonAvenger's picture

See, this is why I don't give a shit about QE - it's the difference between drowning in 30 feet of water or 29 feet.

Mon, 09/10/2012 - 12:43 | Link to Comment fresno dan
fresno dan's picture

Oh, you zero hedge commenters, what with your reality and sustainability.

We're in this pile of sh*t because we stopped making loans for new  houses. 

·                     But ask yourself a few questions: In such a system, what metric is used to say, Oh, determine who gets a loan for a house, and how much should the loan be for?
If home prices are continually rising, due to the amount of credit available to buy houses, and rising house prices justify ever bigger loans to buy ever more expensive houses, what stops this process?
A lack of new suckers. That is why I am proposing the fresno dan economic recovery program: NEWSUCKERS
Novel economic work stimulus utility cumulation* kabuki expansion recovery statute - - MerriamWebster tells me "cumulation" is a perfectly cromulent word

What!??!?!  - The Federal Reserve is already doing that?  No wonder I only make 53 cents a day collecting pepsi cans in a shopping cart and The Bernanke makes a bundle...

Mon, 09/10/2012 - 13:01 | Link to Comment Theosebes Goodfellow
Theosebes Goodfellow's picture

+1 for using the word "cromulent" in a sentence.

Mon, 09/10/2012 - 12:51 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Two Days Ahead Of More QE, JPM Finds That World Is Already "Drowning In Liquidity"

Premature ejacQElation?

Mon, 09/10/2012 - 12:52 | Link to Comment muppet_master
muppet_master's picture

Alignment of the stars = the cons are telling you that its never been a better time to buy casino stocks.  = SELL NOW spx @ 1435!!!!

 

1)  A “breather from eur 1.28 is perfectly NORMAL” says director of forex.com…ok yes perfectly normal to go back to sub 1.20

 

http://www.marketwatch.com/story/dollar-recovers-some-ground-2012-09-09?link=mw_story_kiosk

 

 

2)  This fool says he sees “green shoots” = shredded money if you buy high @ spx 1436…wait for dead cat bounce FROM SUB spx 1000.

 

http://www.marketwatch.com/story/august-retail-sales-should-help-cure-jobs-hangover-2012-09-09?link=mw_home_kiosk

 

3) this fool still bullish @ spx 1437

 http://www.marketwatch.com/story/were-all-wrong-about-europe-and-qe-2012-09-10?link=mw_story_kiosk

 

 

and my fav shoe shine boy mark hulbert..his record:  1) oct 2007 djia @ 14.2k and he said: “gonna go to 16k” 2) when citibank @ $38 in 2008 he called it a buy..now its at sub $2.50 or so !! LOL !!

 

4)  hulbert said on fri spx 1438 (the TOP):  “The stock market’s strong showing, especially in light of the good news out of Europe on Thursday, is making some investors want to kick themselves for “selling In May and going away”

 

http://www.marketwatch.com/story/who-said-sell-in-may-and-go-away-2012-09-07

 

of course 5/1/12 spx @ 1412 he said: “May doesn’t have to be bad for stocks” = me short !!

 

6/2/12 after Fri’s close he said watch out for an AVALANCHE of sell orders on 6/4/12 Monday spx @ 1270 = me PANIC COVER MY SHORTS

 

Freakinggenius”…I have the links in a Word file…if anybody requests them (5/1 and 6/2 links from Hulbert’s “majestic” casino calls…ROFLMAO !!!!

Mon, 09/10/2012 - 12:54 | Link to Comment mademesmile
mademesmile's picture

Obama's next speech:

 

" Greeting fellow Americans. We are getting out of the biggest depression since WWII. It's taken everyone, pulling together, to move this country in the right direction. Almost everyone. As you know, the banks have been given access to a huge amount of money, but they aren't spreading the wealth. They refuse to make loans available to hard working Americans, even though the small business people need funding. There are people who are renting because the banks refuse to give them a loan so they can buy that American dream, and become homeowners. Because of these bank failures, the government has decided to bypass banks and make loans directly to the people. If you meet the qualifications, you will receive a $100,000 loan AND a $5,000 stimulus check, just to get the economy moving again. You know who to vote for. Forward!

Mon, 09/10/2012 - 13:07 | Link to Comment phyregold
phyregold's picture

Maybe i missed it but where the hell is the part they say 2 days until liftoff?

Mon, 09/10/2012 - 13:23 | Link to Comment Colonel Klink
Colonel Klink's picture

I didn't know you could drown in confetti?

Who knew!

Mon, 09/10/2012 - 13:42 | Link to Comment Quinvarius
Quinvarius's picture

But the banks are not solvent.  The people who have been printing the money have only been printing it for bank solvency purposes.  They will not stop.  The ponzi scheme needs to lever up more, get some free money, or die.

Mon, 09/10/2012 - 13:44 | Link to Comment Meesohaawnee
Meesohaawnee's picture

im just so fucking sick of this QE bullshit this sounds like a good week to just take a break. I cant stand it anymore. I cant stand these self serviing fucks who keep trying to tell me its good. More and more its ill get back to all this if or whenever we get to a "market".. literally  my ears cant take the phrase QE anymore. god make it stop.....

Mon, 09/10/2012 - 15:50 | Link to Comment Savyindallas
Savyindallas's picture

I'd like to ram a magic bullet QE shit crusie missile up Bernanke's ass -then it can head straight to Wall street and bounce off the Goldman sachs building and head striaght for the halls of congress--leaving a trail of shit all over these pusillanimous criminals.

Mon, 09/10/2012 - 13:54 | Link to Comment xtop23
xtop23's picture

The morgue doesnt want outright QE because it might implode their shorts in metals? Just a thought.

Mon, 09/10/2012 - 14:11 | Link to Comment walküre
walküre's picture

Who says the banks aren't passing on ZIRP to the people?

New cars at 0% can be had everywhere....

All you have to do is drive it off the lot, lose 30% of the purchase price right then and make thousands of dollars in payments per year until the shit is paid off.

Sorry, you can try to flip cars like you flipped houses but it's just not the same...

Here's my economic recovery plan.

GIVE IT AWAY. QE the shit out of Detroit and GIVE THE CARS AWAY FOR FREE. Get people in new cars / trucks or whatever and start a boom in manufacturing of new cars / trucks. There will be waiting lists! Japanese and German car makers will not benefit.

Why is it so fucking difficult for the AMERICAN political class to get their head around GIVING THE PEOPLE a renewed sense of economic optimism. How many cars are we talking? How much money would that cost? Who cares! We print it!

Then GIVE AWAY HOUSES. Just watch how that would STIMULATE the construction and manufacturing businesses!

GIVE IT AWAY, JUST GIVE IT ALL AWAY!

Mon, 09/10/2012 - 14:37 | Link to Comment loveyajimbo
loveyajimbo's picture

Wonder if Uncle Ben will pay the full 100% value being claimed on the honest banker books for the toxic MBS bonds they are dying to unload on the public... if he does, and they are, in fact, worth maybe 50% in the real world... another royal ass screwing to John Q...  this stimulates the economy or creates jobs?!?!!?  And Uncle tom Obummer never considers bring back Glass-Stegall, or forcing the NASB to revise the incredible rules allowing bankers to value their shit at whatever they want... Is this piece of corrupt offal really running for a 2nd term?!?!?

Mon, 09/10/2012 - 15:42 | Link to Comment lolmao500
lolmao500's picture

Liquidity? I'm not drowning in liquidity. Big banks are. Everybody else? Not so much.

Mon, 09/10/2012 - 19:37 | Link to Comment silverserfer
silverserfer's picture

drowning in liquidity?

fuck jpm. arogant no good cock licking, reacharound circle jerk, salad tossing, anus sniffing banking dirtbags. die.

 

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