Don't Expect A Central Bank Bailout This Time, ECB's Nowotny Warns

To all those hoping for a sign or signal from central bankers that the recent correction in US stocks was necessary and sufficient for intervention, here are some disappointing examples of what they have said recently:

"If stock prices or asset prices more generally were to fall, what would that mean for the economy as a whole?" asked outgoing Fed Chair Yellen during her exit interview, selling the all-time highs. "The financial system is much better capitalized. The banking system is more resilient," the former US central banker added, listing her accomplishments. "I think our overall judgment is that, if there were to be a decline in asset valuations, it would not damage unduly the core of our financial system."

That was that moment when the "Yellen Put" instantly vanished, and stocks - predictably - plunged, while the industry’s most obviously ill-conceived financial innovations – inverse VIX ETFs - collapsed to essentially zero in the space of thirty minutes on the first day of new Fed chair's Jay Powell tenure.

* * *

"I think it’s basically a market event, and these things can be healthy," stated Dallas Fed president Robert Kaplan, diagnosing Monday’s -4.1% S&P 500 epileptic fit. "I don’t think it will have economic implications. 2018 will be a strong year in America. We’re at or near full employment. I continue to expect three rate hikes this year," explained the former Goldman banker.

* * *

"This is the most predicted selloff of all time because the markets have been up so much and they have had so many days in a row without meaningful down days,” said Philly Fed president Bullard. "Something that has gone up 40% like the S&P tech sector would at some point have a selloff." he added philosophically.

* * *

NY Fed’s Dudley chimed in at the end of the week: "An equity rout like the one that occurred in recent days has virtually no consequence for the economic outlook."

* * *

Then on Sunday, Austrian central bank Governor and ECB member, Ewald Nowotny - in the most direct warning to liquidity addicts and market bulls yet - said "the recent drop in equities is a normalization, a reasonable wake-up signal to show that stock markets can’t just keep rising all the time,” speaking on Austrian television.

"Behind [the drop] there is an expectation in markets that central banks will increasingly raise interest rates, and there are certain good reasons for that. The U.S. is expanding. However, one has to say that the task of central banks isn’t to satisfy markets but to ensure overall economic stability. So if necessary, interest rates will have to rise and markets will adapt to that."

If the last week is any indication, the markets' adaptation to rising interest rates will be very painful indeed.

Causing further indigestion among the bulls, Nowotny also said that Euro-area inflation still has room to move higher "so the ECB is still on the careful side. But that certainly won’t last forever. In the foreseeable future there will be a need for the ECB to raise interest rates, as is currently being done in the U.S."

As for the ECB's QE, the Austrian said that the asset-purchase program will continue until September “and then we will discuss whether or not to end it. I make no secret of the fact that I don’t think we will need it, at least not in its current form. And only after we have ended it will the question of interest rates come into play

* * *

So, to summarize, a lot of warnings only this time not to the bears, but the bulls, which suggests that BofA implicit expectation (or rather hope) for an imminent central bank intervention may lead to great disappointment...

... especially among retail investors who - despite the XIV implosion - have rushed right back and are buying inverse VIX ETFs as if nothing happened.

Finally remember: "Powell Ain't Yellen" and maybe the Fed wanted this Correction. Why? Because as One River CIO Eric Peters wrote this morning:

... what no one said was what’s most obvious. For every bull, there’s a bear. And the Fed would far rather have a bear market hit before the $1.5trln tax cut, $300bln budget stimulus and $90bln hurricane relief turbocharges one of history’s longest economic expansions. Than after.

And if Peters is right, and the Fed is finally prioritizing the economy over the stock market, then "bombs away for risk assets"  it is.

Comments

TeethVillage88s Sonny Brakes Sun, 02/11/2018 - 16:18 Permalink

Wait Banks are not Safe.

- I am Charged $1 a month for Protection Money on Savings Account
- Banks have ID Fraud each week for years, it takes months to fix this shit
- Point is that We citizens experience loss, wealth loss, fraud, and the System is corrupt, systemic corruption is clear

- Banks are not Safe for our Money, but TPTB want to outlaw cash, Bitcoin, limit cash withdrawals, get paperwork on Set amounts of purchases or withdrawals... FACTA Laws... Foreign Banks refuse to do business with intrusive System in USA and shut out Citizens who live or work overseas in some cases... Economic Freedom Reduced by FACTA & US Surveillance Systems, US Banking System, US Banking Regulators, Police Records & Data Records on all Citizens from Anglo Countries transferred to all countries for use in their hotels, tourist industry, travel industry, transportation industry, and ports

 

https://en.wikipedia.org/wiki/List_of_data_breaches

https://en.wikipedia.org/wiki/Yahoo!_data_breaches

https://en.wikipedia.org/wiki/Equifax_data_breach

https://en.wikipedia.org/wiki/Data_breach

https://en.wikipedia.org/wiki/Security_breach_notification_laws

https://en.wikipedia.org/wiki/List_of_cyberattacks

In reply to by Sonny Brakes

Xredsx TeethVillage88s Sun, 02/11/2018 - 20:11 Permalink

So the human race is and has been enslaved by a system for some time and it happened like a thief in the night? Ok, so what happens when the sheep wake up to the fact that the money is not actually real in this real life game called monopoly? Oh well, i guess those that are actually good at this real game of monopoly are goi ng to learn a hard truth. It always goes back in the box, eventually.

In reply to by TeethVillage88s

karenm Sun, 02/11/2018 - 15:40 Permalink

BTFD'ers assume the CB's want to save the system because "they have to."

 

Wrong. NWO necessitates the fall of the old world order. 

Anonymous (not verified) Sun, 02/11/2018 - 15:43 Permalink

What did one concentration camp guard say to another?

"Did jew eat yet?"

"No, jew?"

JibjeResearch davatankool Sun, 02/11/2018 - 16:04 Permalink

You are misleading people!  ... by intention?

Some stocks are overvalued... some stocks are undervalued.  And, "value" is relative.

What people need to look for:

1. Cheap stock and pays dividend.

2. Stocks that will hit maturity in the next 5 years or so.  5G and some medical stock will ramp up now and mature in 5 years or so.  Nokia (Intel, qualcomm too, but not cheap) is a 5G corporation, it's cheap, pay dividend, and 5G will ramp up and mature in 5 to 10 years..., in 2025.  Verizon, ATT, Sprints, T-mo are all good investment for 5G.  IoT will demand 100X bandwidth provided by 5G network.

3. The decision is yours, the consequence is yours.

4. As always, diversify your portfolio.  All CBs are crazyfuk.

In reply to by davatankool

Dun_Dulind Sun, 02/11/2018 - 15:50 Permalink

Markets should have been allowed to do their thing back in 2008 but we've got to eat this one because we won't ever survive another 3 or 4 rounds of QE and I'm not so sure we can even get through this one.

JibjeResearch Sun, 02/11/2018 - 15:55 Permalink

No Maor QE?

Bwahah ahaha ahahahaha....

 

STFU, CTRL+P puuuulease.....

 

China is offering 4.5% or greater interest rate on its bond to build BRI..

I dare the FED, ECB, and BoJ to offer a bond rate at 5% ...

I'm diversified .... willing to test the white water!

 

GreatUncle Sun, 02/11/2018 - 16:05 Permalink

The central banks being the central planners are wholly responsible for what comes next.

"Good luck with the rate rises boyz!"

To have a rate rise and contract the economy you have to have an economy to take the pain!

Do you see a robust thriving economy?

 

Fantasy Free E… Sun, 02/11/2018 - 16:06 Permalink

Is this the end of central bank intervention? Probably not but there is a chance intervention will be halted for a few weeks. It isn't up to central banks.

http://quillian.net/blog/the-end-is-in-sight/

This is a political agenda. The question is, what next? There is no way the market will crash without the elite demanding action on the stock market. Will they get it? Given the current mentality of the general public, of course. My best estimate is that the fed and all other central banks will buy up stocks unapologetically and that will be the support that is offered. Americans still don't know how badly they are being fleeced and they still trust government just as they do their parents.

 

 

Rich Monk Sun, 02/11/2018 - 16:34 Permalink

No "bail outs" this time? No, because you self-serving asswipes legalized "bail-ins"!!! Eradicate Jews from both the financial system and government. It's a start! 

CatInTheHat Sun, 02/11/2018 - 16:39 Permalink

"I don’t think it will have economic implications. 2018 will be a strong year in America. We’re at or near full employment. I continue to expect three rate hikes this year," explained the former Goldman banker.

Full employment? More ZIOCON BANKSTER LIES.

ALL of this because of a SLIGHT rise in employees wages.

These fuckers are telling you that working class blowback is A BIG NO NO in the markets. So now ye shall face punishment so you never ever try to taunt Zio Cb banksters again! Up with the rates (off with your heads!)

In.Sip.ient Sun, 02/11/2018 - 16:50 Permalink

 

In the foreseeable future there will be a need

for the ECB to raise interest rates,

as is currently being done in the U.S."

 

Translated:  Yeah we need to increase interest rates

BEFORE the blockchain eats our lunch...

 

whatswhat1@yahoo.com Sun, 02/11/2018 - 19:40 Permalink

U.S. Stock Futures

S&P+13.00  /  +0.50%

Level2,632.00

Fair Value2,617.83

Difference14.17

Data as of 7:26pm ET

Nasdaq+21.00  /  +0.33%

Level6,438.75

Fair Value6,415.09

Difference23.66

Data as of 7:26pm ET

Dow+134.00  /  +0.55%

Level24,301.00

 

not that it means anything by close tomorrow