RICHARD FISHER: “THERE WILL BE NO QE3″
15 February 2012 by Cullen Roche
26 Comments
Maybe the Fed isn’t as intent on propping up Wall Street as some (myself included) presume. Here are some comments from Fed official Richard Fisher today (via Reuters):
“There will be no QE3,” Dallas Fed President Richard Fisher told reporters after a speech here. “I will support no QE3, no additional mortgage-backed securities, no additional Treasuries.”
“Wall Street keeps dangling QE3 out there,” Fisher said. “I think it’s a fantasy of Wall Street – it’s not going to happen, it’s not necessary.”
The Fed has already taken easy monetary policy too far, he said, filling the policy “gas tank” too full.
Why would Wall Street care if the Fed buys treasury bonds with cash of equal value? Hasn’t MMT/MR stated that this is of little consequence during a balance-sheet recession?
Or are we thinking QE3 would have consisted of buying MBS’s?
The reactions to this by markets is what should be considered. Markets are driven by people, many of whom have a flawed understanding of these things, and are not driveby logic.
#KeynesBeautyContest
Great presentation by JG:
http://www.businessinsider.com/jeff-gundlach-speaks-markets-economy-2012-2
The BI introduction is OK but do not miss the 70 slide presentation (link provided in article) . If you find a link to the audio webcast please post.
CR, how does big government jibe with MMT? From my recollection of the MMT stuff I read in your paper, I conclude MMT sees government in a society more as a small intermediary, call it a low cost broker, rathe than a big participant. From the military expense and government employees salaries chart it looks like the US government which is by definition is an unproductive enterprise has become a far too important actor in the economy. This may be what is preventing a recession now but is also preventing us from achieving anything but mediocre growth as far as the eye can see….
What relevance has Big Government got to the USA?
Among developed countries the USA has one of the lowest total (including state and local) tax takes as a percentage of GDP in the world, particularly in PPP terms.
And much of the government spending is on subsidising services from/among, or acquiring goods (weapons for example), from the private sector.
On Fisher remarks, one mus not forget he is one of the one,y inflation hawks at the FED.
http://static.reuters.com/resources/media/global/editorial/interactives/hawks_vs_doves_js/v3_hawks.doves.html
Not saying he will not end up being right but the statement must consider his bias.
Oh. I had not read the article CR linked. Fisher’s inflation hawk reputation is made very clear in the article.
It’s not so much the actual QE that props it, it’s the threat thereof. All they have to do is dangle the carrot and it’s a solid prop.
Well said.
The psychology of markets is complex and counterintuitive.
So market believes no QE3 is coming because it is bullish on the economy:
http://www.marketwatch.com/story/us-stocks-sink-further-after-fed-comments-on-qe3-2012-02-15
But in reality, it is clear from the minutes it will come if economy softens. I believe it will come.
http://www.calculatedriskblog.com/2012/02/fomc-minutes-few-members-argued-current.html
It’s the NY Fed that has the power and that’a where policy is set-none other. Anything from the mouths of the powerless are either contrived deflections, false promises, posturing to avoid the obvious misdirections or just noise. Announcements like this are often used to allow fedfraud to work it’s magic.
B Ferro,
What are your thoughts on this rally continuing? The guys over at Zeal LLC seem to think the rally has room to run (thanks to poster Former Hussman/ECRI Believer here is the link: http://www.zealllc.com/2012/spxroom.htm). However, simultaneously Cullen’s algo is saying we’re due for a pullback. IMO, we have a nice sentiment clearing correction before hitting new highs of 1500, perhaps on a QE3 announcement or something out of Europe. Curious what you think.
Guess they will skip QE3 and move directly to QE4.
The Fed continues to impart stimulus, and we know it must lest the economy take another hit.
No mbs? Oh man bill gross just cannot catch a break this cycle
BTW, I just bought a good chunk of XLE 77 March 30 calls at 96 cents each just in case Israel goes bananas on Iran before then. I bet 0.5% to control an XLE value equivalent to about 40% of my portfolio value. If bet goes bad I may recover a bit of the option premium. At worst, I will hurt my YTD performance (currently at +0.20%) by 0.5%. The game I am playing is a small bet on a possibly large payoff event…
BTW, I continue to be short the SP500 via June 16 1350 puts. The leveraged position has me about 40% short.
The only longs I have is 5% in VDE and a 2% experiment on 4 crazy biotechs Maulding recommended recently to see if any of them becomes a 40 bagger:-) BTX GALT INO and PVCT. I don’t know/follow any of the companies. This is just a stupid gamble to see if stock picking works. I intend to hold them forever see what happens. Another statistical experiment…
And btw, I am about 10% short the euro since last week when Euro was over 1.325 via EUO. So far a money maker. I lost almost 1% of last year’s performance (slightly above 7%) to this trade. Let’s see if this time around I do better.
Rest of my portfolio is a large chunk of actively managed fixed income (about 55%) , some RE via the TIAACREF RE account, and about 10% cash.
And I forgot, I also have about 5% of my portfolio in a mix of GLD, GDX, GDXJ close or in the money 2014 call leaps just in case BW long term call on gold is a little bit further than most believe;-)
THIS IS NOT INVESTMENT ADVICE. JUST A REAL, POSSIBLY FUN, ROUGH EXAMPLE OF A REAL LITTLE GUY TRYING TO MAKE A BUCK AND POSSIBLY LOSSING A FEW TRYING:-)
As you may have read recently, we all believe we are better at investment management than we really are. With all the years of studying/experience/free time I have, I would like to believe I can do better than smart passive money management. This is an incredible difficult feat an ambitious goal which I have achieved in the last 22 years, possibly just by luck:-). For most people, a diversified low cost portfolio of efts will beat active management 99.99% of the time.
Good luck, Octavia. In general and especially with EUO. I ate some asphalt on that trade last year.
Funny, but EUO was one of my better trades last year…must have been the timing. Made 15% from 10/28 to 2/2. Probably go back in when it gets near 17. I’ve been in and out 3x now, each time a winner.
I look for waht people beleive to be good news and a solution, and based largely on what I read here, know it won’t really solve anything so I short it when people get all happy about the euro.
since 2008, i have noticed that Dallas has been a minority voice in the fed for austerity. Hopefully Fisher will continue to get overruled.
Krugman recently highlighted the ignorance of another Fed official (maybe it was Fisher).
Makes you wonder how these officials get appointed or removed. Texas is known for crony capitalism – wonder how much effect that has especially in an election year.
the whole “QE#” shark has long since been jumped so i don’t doubt there will be more “QE”
euro swaps, ZIRP, some newfangled americanized version of the LTRO.. sure
Will the Fed launch QE3 at oil at $100 (now)?
Based on what happened to commodities in general during QE2 they would need to be wholly inept to have $100 oil be the trigger for more QE.
I think they care more about the equity market and bond market than $100 oil. After the minutes were released. BG at pimco immediately sent a twit saying long rates would rise without qe3
Gross: #Fed’s #Fisher says no QE3. 2PM ET minutes may reveal more. I suspect they can’t quit. Curve would steepen dramatically @ long end.
Gross is talking his book. He is heavily invested in MBS, “shaking hands with the government”. -> http://investments.pimco.com/Products/pages/346.aspx
More lies from the fed. What does anyone expect?
OK. So they print money can call it something else. Big diff.
Idea: Instead of calling it QE3, why not call it the “Lusitania.” Another big monstrosity ship that went down.
Regardless of what they call it there WILL be “Quantitive Easing” in some form, currency generation by whatever name.
The reason is very simple, “every bank loan is a new creation of money, and when it is paid back it ceases to exist, testimony of Canada’s Central Bank Governor in 1939 before Parliament under oath. What this means in practical terms is that every countries currency is BORROWED into existence as DEBT! The problem, only the principal is ever created so to allow interest to be paid, there MUST BE an exponentially growing level of NEW and BIGGER loans to keep enough currency circulating for an economy to function. The new loans must be sufficient to REPLACE the paid back principal AND the un-created interest, which has no other avenue than to accumulate as a DEBT pyramid as happens in any Ponzi scheme.
When you have a combination of bank reserves being depleted as people lose faith in paper promises, PLUS a lack of viable collateral to loan against, then the only thing left is inventing some new means to generate currency expansion, which we have been witnessing these past few years as this Ponzi scheme collapses in on its self. Knowledgable people understandingly want to own REAL ASSETS that will hold value, not paper promises from people who have proved to be totally irresponsible, whether that be promises of politicians to get elected into positions of power, or greedy bankers who have leveraged themselves into oblivion.
The bankers may have thought that the best possible collateral is sovereign DEBT because of politicians TAXING power, but as we are now experiencing, that too is finite and can only be pushed so far before people revolt. BOTTOM LINE, there is no free lunch, mathematically a fractional reserve banking system can not work long term any more than a pyramid scheme can grow to infinity, the end game is near and it won’t be pretty.
remember, once an “official” denies it, it will definately happen.
baked in the cake, take it to the bank (not the FED, of course, as they don’t deal with “little” people)