THE ONLY NEWS THAT MATTERS TODAY
The Financial Times had a loud headline this morning on their main page proclaiming the end of monetary easing. They said:
“An end to global monetary policy easing is on the horizon, with the US Federal Reserve set to signal it will cease asset purchases at the end of June.
When the rate-setting Federal Open Market Committee meets on April 27, it is unlikely to limit its options by ruling out asset purchases beyond the second $600bn “quantitative easing” programme – or “QE2” – that is due to finish by the end of the second quarter.”
While the credit ratings agencies are stealing the headlines this is the more important story today. If the QE2 trade is ending today’s market action is fairly consistent with what I would expect to see. Equities are falling, bonds are rallying and the USD is rallying. This is not even remotely consistent with concerns over a sovereign debt problem in the USA. What this is consistent with, is the end of the QE2 trade. As I stated last week, the US dollar will be the primary tell for the end of the QE2 trade. Today’s rally in the dollar is sending a loud message. Clearly, it’s unwise to extrapolate from one day’s market action, but as we inch closer to June the market is likely to become more volatile and these signals are going to become more pronounced.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
Follow Me:
54 Comments
Anybody want to help a little guy with how to play the end of QE?
I know the timing of the trigger pull is all on me, but I guess my questions is what’s the best thing to aim at? Long Tsys? Short Commodities? Am I WAY off with either of those? All ideas welcome.
Chris: Run away as fast as you can.
Chris I’d play rates — what you should expect to see is a replay of the market after QE1, but before QE2:
end of QE1 (Mar/Apr ’10): 10yr UST 4.00%; 30yr UST 4.80%
before QE2 announced (Aug): 10yr UST 2.50%; 30yr UST 3.50%
buying the 30yr on 3/31 and selling on 9/1 was ~25% return; ~62% annualized.
that is true, but why would someone buy the 30 year on account of the MBS purchasing (QE1) coming to a close? ..unless they knew the specifics and certainty of QE2 in advance ala PIMCO.
THAT is how money is made. fraud.
It’s because QE signals that the risk trade (buying risky assets) is on by providing liquidity to the markets. Traders sell their “safe bonds” and buy risky assets. In this case, it seems that risk appetite limited itself to commodities because of worries that this policy will drive inflation up. When QE ends, risky positions are cancelled and the money goes back into “safe” bonds, driving their prices higher.
Chris there’s a guy named Porter Stansberry. You may have seen his ads for the “End of America”. He has laid out a blue print to follow in his investment newsletters which you may be able to access from a free source or you may have to subscribe to one.
He offers a step by step guide and an on-line alert when things are changing. For the past several years, he keeps writing, “We told you. Did you buy it…” He then cites the issue of his recommendation and the amount of gains made on the trade.
Its fun to watch even if you didn’t get into the trade. Very good!
I try not to condemn any source of information if I’m not an expert on the subject matter, but I do feel like I have to give a mild warning about that particular outlet…
Nothing is free. Ever. That video cost something to produce and he is running a ton of radio and even tv ads. That’s not a public service. If he is providing a free plan but spending all that money to put it out there then he or his direct clients are going to make a ton of money selling at some point whatever it is he has you buying now…
Plus convincing people to buy something through the power of fear always reminds me of Glenn Beck and gold- and that leaves a rather sour taste in my mouth by association as well. Get your information wherever you feel it’s solid, but just saying…
short everything…….but not precious metals for very long.
Cullen, But gold and silver should have fallen along with the dollar rally. They are not! Could this also mean that its is the problem with PIGS that are causing dollar rally rather than end of QE-2 trade?
You’re probably onto something there. Maybe a bit of both?
Cullen, have you seen this?
Rolling Stone
The Real Housewives of Wall Street
Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?
America has two national budgets, one official, one unofficial. The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. According to popular legend, we’re broke and in so much debt that 40 years from now our granddaughters will still be hooking on weekends to pay the medical bills of this year’s retirees from the IRS, the SEC and the Department of Energy.
Why Isn’t Wall Street in Jail?
Most Americans know about that budget. What they don’t know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.
This article appears in the April 28, 2011 issue of Rolling Stone. The issue will be available on newsstands and in the online archive April 15.
Now, following an act of Congress that has forced the Fed to open its books from the bailout era, this unofficial budget is for the first time becoming at least partially a matter of public record. Staffers in the Senate and the House, whose queries about Fed spending have been rebuffed for nearly a century, are now poring over 21,000 transactions and discovering a host of outrages and lunacies in the “other” budget. It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. “Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. “Every one of these transactions is outrageous.”
Wall Street’s Big Win
But if you want to get a true sense of what the “shadow budget” is all about, all you have to do is look closely at the taxpayer money handed over to a single company that goes by a seemingly innocuous name: Waterfall TALF Opportunity. At first glance, Waterfall’s haul doesn’t seem all that huge — just nine loans totaling some $220 million, made through a Fed bailout program. That doesn’t seem like a whole lot, considering that Goldman Sachs alone received roughly $800 billion in loans from the Fed. But upon closer inspection, Waterfall TALF Opportunity boasts a couple of interesting names among its chief investors: Christy Mack and Susan Karches.
Christy is the wife of John Mack, the chairman of Morgan Stanley. Susan is the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley’s investment-banking division. Neither woman appears to have any serious history in business, apart from a few philanthropic experiences. Yet the Federal Reserve handed them both low-interest loans of nearly a quarter of a billion dollars through a complicated bailout program that virtually guaranteed them millions in risk-free income.
RS Politics Daily: Political news and commentary from Rolling Stone writers and editors
The technical name of the program that Mack and Karches took advantage of is TALF, short for Term Asset-Backed Securities Loan Facility. But the federal aid they received actually falls under a broader category of bailout initiatives, designed and perfected by Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner, called “giving already stinking rich people gobs of money for no fucking reason at all.” If you want to learn how the shadow budget works, follow along. This is what welfare for the rich looks like.
In August 2009, John Mack, at the time still the CEO of Morgan Stanley, made an interesting life decision. Despite the fact that he was earning the comparatively low salary of just $800,000, and had refused to give himself a bonus in the midst of the financial crisis, Mack decided to buy himself a gorgeous piece of property — a 107-year-old limestone carriage house on the Upper East Side of New York, complete with an indoor 12-car garage, that had just been sold by the prestigious Mellon family for $13.5 million. Either Mack had plenty of cash on hand to close the deal, or he got some help from his wife, Christy, who apparently bought the house with him.
The Macks make for an interesting couple. John, a Lebanese-American nicknamed “Mack the Knife” for his legendary passion for firing people, has one of the most recognizable faces on Wall Street, physically resembling a crumpled, half-burned baked potato with a pair of overturned furry horseshoes for eyebrows. Christy is thin, blond and rich — a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of “palm healing.” The only other notable fact on her public résumé is that her sister was married to Charlie Rose.
It’s hard to imagine a pair of people you would less want to hand a giant welfare check to — yet that’s exactly what the Fed did. Just two months before the Macks bought their fancy carriage house in Manhattan, Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan’s penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment.
So how did the government come to address a financial crisis caused by the collapse of a residential-mortgage bubble by giving the wives of a couple of Morgan Stanley bigwigs free money to make essentially risk-free investments in student loans and commercial real estate? The answer is: by degrees. The history of the bailout era reads like one of those awful stories about what happens when a long-dormant criminal compulsion goes unchecked. The Peeping Tom next door stares through a few bathroom windows, doesn’t get caught, and decides to break in and steal a pair of panties. Next thing you know, he’s upgraded to homemade dungeons, tri-state serial rampages and throwing cheerleaders into a panel truck.
It was the same with the bailouts. They started out small, with the government throwing a few hundred billion in public money to prop up genuinely insolvent firms like Bear Stearns and AIG. Then came TARP and a few other programs that were designed to stave off bank failures and dispose of the toxic mortgage-backed securities that were a root cause of the financial crisis. But before long, the Fed began buying up every distressed investment on Wall Street, even those that were in no danger of widespread defaults: commercial real estate loans, credit- card loans, auto loans, student loans, even loans backed by the Small Business Administration. What started off as a targeted effort to stop the bleeding in a few specific trouble spots became a gigantic feeding frenzy. It was “free money for shit,” says Barry Ritholtz, author of Bailout Nation. “It turned into ‘Give us your crap that you can’t get rid of otherwise.’ ”
The impetus for this sudden manic expansion of the bailouts was a masterful bluff by Wall Street executives. Once the money started flowing from the Federal Reserve, the executives began moaning to their buddies at the Fed, claiming that they were suddenly afraid of investing in anything — student loans, car notes, you name it — unless their profits were guaranteed by the state. “You ever watch soccer, where the guy rolls six times to get a yellow card?” says William Black, a former federal bank regulator who teaches economics and law at the University of Missouri. “That’s what this is. If you have power and connections, they will give you a freebie deal — if you’re good at whining.”
This is where TALF fits into the bailout picture. Created just after Barack Obama’s election in November 2008, the program’s ostensible justification was to spur more consumer lending, which had dried up in the midst of the financial crisis. But instead of lending directly to car buyers and credit-card holders and students — that would have been socialism! — the Fed handed out a trillion dollars to banks and hedge funds, almost interest-free. In other words, the government lent taxpayer money to the same assholes who caused the crisis, so that they could then lend that money back out on the market virtually risk-free, at an enormous profit.
Cue your Billy Mays voice, because wait, there’s more! A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don’t pay the Fed back, it’s no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.
This is the deal of a lifetime. Think about it: You borrow millions, buy a bunch of crap securities and stash them on the Fed’s books. If the securities lose money, you leave them on the Fed’s lap and the public eats the loss. But if they make money, you take them back, cash them in and repay the funds you borrowed from the Fed. “Remember that crazy guy in the commercials who ran around covered in dollar bills shouting, ‘The government is giving out free money!’ ” says Black. “As crazy as he was, this is making it real.”
This whole setup — in which millionaires and billionaires gambled on mountains of dangerous securities, with taxpayers providing the stake and assuming almost all of the risk — is the reason that it’s insanely premature for Wall Street to claim that the bailouts have actually made money for the government. We simply can’t make that determination until the final bill comes in on all the dicey securities we financed during the bailout feeding frenzy.
In the case of Waterfall TALF Opportunity, here’s what we know: The company was founded in June 2009 with $14.87 million of investment capital, money that likely came from Christy Mack and Susan Karches. The two Wall Street wives then used the $220 million they got from the Fed to buy up a bunch of securities, including a large pool of commercial mortgages managed by Credit Suisse, a company John Mack once headed. Those securities were valued at $253.6 million, though the Fed refuses to explain how it arrived at that estimate. And here’s the kicker: Of the $220 million the two wives got from the Fed, roughly $150 million had not been paid back as of last fall — meaning that you and I are still on the hook for most of whatever the Wall Street spouses bought on their government-funded shopping spree.
The public has no way of knowing how much Christy Mack and Susan Karches earned on these transactions, because the Fed has repeatedly declined to provide any information about how it priced the individual securities bought as part of programs like TALF. In the Waterfall deal, for instance, we know the Fed pledged some $14 million against a block of securities called “Credit Suisse Commercial Mortgage Trust Series 2007-C2″ — but that data is meaningless without knowing how many units were bought. It’s like saying the Fed gave Waterfall $14 million to buy cars. Did Waterfall pay $5,000 per car, or $500,000? We have no idea. “There’s no way of validating or invalidating the Fed’s process in TALF without this pricing information,” says Gary Aguirre, a former SEC official who was fired years ago after he tried to interview John Mack in an insider-trading case.
In early April, in an attempt to learn exactly how much Mack and Karches made on the TALF deals, Sen. Chuck Grassley of Iowa wrote a letter to Waterfall asking 21 detailed questions about the transactions. In addition, Sen. Sanders has personally asked Fed chief Bernanke to provide more complete information on the TALF loans given not only to Christy Mack but to gazillionaires like former Miami Dolphins owner H. Wayne Huizenga and hedge-fund shark John Paulson. But Bernanke bluntly refused to provide the information — and the Fed has similarly stonewalled other oversight agencies, including the General Accounting Office and TARP’s special inspector general.
Christy Mack and Susan Karches did not respond to requests for comments for this story. But even without more information about the loans they got from the Fed, we know that TALF wasn’t the only risk-free money being handed over to Wall Street. During the financial crisis, the Fed routinely made billions of dollars in “emergency” loans to big banks at near-zero interest. Many of the banks then turned around and used the money to buy Treasury bonds at higher interest rates — essentially loaning the money back to the government at an inflated rate. “People talk about how these were loans that were paid back,” says a congressional aide who has studied the transactions. “But when the state is lending money at zero percent and the banks are turning around and lending that money back to the state at three percent, how is that different from just handing rich people money?”
Those kinds of deals were the essence of the bailout — and the vast mountains of near-zero government cash turned companies facing bankruptcy into monstrous profit machines. In 2008 and 2009, while Christy Mack was busy getting her little TALF loans for $220 million, her husband’s bank hauled in $2 trillion in emergency Fed loans. During the same period, Goldman borrowed nearly $800 billion. Shortly afterward, the two banks reported a combined annual profit of $14.5 billion.
As crazy as it is to lend to banks at near zero percent and borrow back from them at three percent, one could at least argue that the policy may have aided American companies by providing banks more cash to lend. But how do you explain the host of other bailout transactions now being examined by Congress? Like the Fed’s massive purchases of securities in foreign automakers, including BMW, Volkswagen, Honda, Mitsubishi and Nissan? Or the nearly $5 billion in cheap credit the Fed extended to Toyota and Mitsubishi? Sure, those companies have factories and dealerships in the U.S. — but does it really make sense to give them free cash at the same time taxpayers were being asked to bail out Chrysler and GM? Seems a little crazy to fund the competition of the very automakers you’re trying to rescue.
And then there are the bailout deals that make no sense at all. Republicans go mad over spending on health care and school for Mexican illegals. So why aren’t they flipping out over the $9.6 billion in loans the Fed made to the Central Bank of Mexico? How do we explain the $2.2 billion in loans that went to the Korea Development Bank, the biggest state bank of South Korea, whose sole purpose is to promote development in South Korea? And at a time when America is borrowing from the Middle East at interest rates of three percent, why did the Fed extend $35 billion in loans to the Arab Banking Corporation of Bahrain at interest rates as low as one quarter of one point?
Even more disturbing, the major stakeholder in the Bahrain bank is none other than the Central Bank of Libya, which owns 59 percent of the operation. In fact, the Bahrain bank just received a special exemption from the U.S. Treasury to prevent its assets from being frozen in accord with economic sanctions. That’s right: Muammar Qaddafi received more than 70 loans from the Federal Reserve, along with the Real Housewives of Wall Street.
Perhaps the most irritating facet of all of these transactions is the fact that hundreds of millions of Fed dollars were given out to hedge funds and other investors with addresses in the Cayman Islands. Many of those addresses belong to companies with American affiliations — including prominent Wall Street names like Pimco, Blackstone and . . . Christy Mack. Yes, even Waterfall TALF Opportunity is an offshore company. It’s one thing for the federal government to look the other way when Wall Street hotshots evade U.S. taxes by registering their investment companies in the Cayman Islands. But subsidizing tax evasion? Giving it a federal bailout? What the fuck?
As America girds itself for another round of lunatic political infighting over which barely-respirating social program or urgently necessary federal agency must have their budgets permanently sacrificed to the cause of billionaires being able to keep their third boats in the water, it’s important to point out just how scarce money isn’t in certain corners of the public-spending universe. In the coming months, when you watch Republican congressional stooges play out the desperate comedy of solving America’s deficit problems by making fewer photocopies of proposed bills, or by taking an ax to budgetary shrubberies like NPR or the SEC, remember Christy Mack and her fancy new carriage house. There is no belt-tightening on the other side of the tracks. Just a free lunch that never ends.
Hey folks, I’m a newbie here & trying to learn a thing or two and ya just sprung a new one on me. What5 is PIGS??
PIIGS….portugal, ireland, italy,greece, spain……….all eur members whose financial obligations cannot be met since the ’08 crash….private and public
Cullen,
Yes, the downgrade itself is meaningless, although some its connotations might influence politics. It’s interesting that they put some deadline for deficit related decision much close than previously discussed 2020 to infinity. This is quite important.
And you are right markets behaving as if they reacting on the QE ending event… Except gold, of course….
Cullen,
In one of the articles, Karl Denninger had postulated that gold is a risk trade more than an inflation trade and that seem to be very much true to me. People are flocking precious metals because they seem to be worried about falling value of fiat.
If it was a true inflation trade, then stocks and real estate would have been a better investments.
You may conclude that US is more at the risk of deflation and I respect your opinion, but the precious metals seem to be shouting “hyperinflation” in making.
Thank You!
It’s a fear trade. I think the Euro is contributing significantly to that. The Euro is viewed as a flawed fiat. That’s not the case, but the market views it that way.
If hyperinflation is on our doorstep then why are UST’s yielding 3.3%? This is so far from a hyperinflationary environment I don’t even understand how someone can make the argument….
If tsys were at 6%+ I might give that argument the time of day, but I just don’t see how anyone can say we are at risk of hyperinflation when the bond market is so clearly stating otherwise.
I am sorry – “fear trade” was more apt term. Thanks for correcting that.
One of the perceived mandates of Fed is to keep the interest rates low and they are manipulating the market to achieve that.
Under such circumstances, how credible of an indicator would the UST yields be to predict anything?
TPC,
It is not consistent to fundamental. Stop trying to seek anything fundamental in a market driven by algos at 80%…
Risk off => selling presure on equity => buying $$ and invest in bonds…
And in few days …
Sell bonds to the FED => buy equities back on the dip…
Nothing fundamental in it, just money flow.
Similar to the move on JPY just after the tsunami.
And for all the ones who bet on a default on Greek bonds AND 1700 on the SP, just take a watch at that:
http://www.markit.com/assets/en/docs/commentary/chart-of-the-day/2011/markit_chartoday_04182011.pdf
Hi Cullen,
Do you see gold prices falling sharply in a (steady/ controlled) deflationary environment?
No, because the Euro crisis (which is inherently deflationary) is seen as a fiat flaw.
Silver is more risky in my opinion because it has a real industrial use to it.
I should say, gold will outperform on a relative basis. If you really want to hedge yourself from a deflation scare then buy the USD vs the Euro.
I wonder if that thought might be confirmed by the recent (past ~60 days if I recall) decline in platinum and palladium. Could there be a chance that the speculative/fear investment in silver is obfuscating the pricing of risk from possibly slowed industrial growth? (Not to mention the risk of a hard landing in China… which is frankly what really scares the snot out of me from an investment standpoint moreso than even the dumbest US policies.)
If silver is very risky now as you said, I do not see why you long gold. These two always go together.
Cullen, if the Euro isn’t a flawed currency aren’t they at greater risk of hyper-inflation/debasement since they don’t have a coordinated common fiscal stinmulus option?
Pike,
The euro is a flawed currency because member nations gave up their monetary sovereignty. Member countries cannot create Euro’s so default is a real risk. If the ECB stepped in and said they would guarantee all debt then that would be different, however, that is not the case. Hyperinflation that results from money creation can only exist when the country can create its own money and members of the euro cannot.
My friends, Bernanke will do whatever is necessary to support the economy.
Obama is toast if the economy is in the tank. I actually expect big time short term stimulus plans to be paired with long term reforms to be pitched by the dems very shortly.
Gold will shine. One really needs to worry if it starts to go parabolic. Then something truly is amiss with the whole system. But yes, my statement has a hidden meaning, gold has nowhere approached the parabolic rate yet and it’s actually trading in a normal channel/range.
Interesting times ahead.
The dollar is no longer THE safe haven and every currency is vulnerable to the state of the US economy that is deteriorating. No matter what happens, no QE3 accompanied with huge cuts in the coming years, we´re well headed toward a recession (I am not even mentioning the consequences of the rise in oil prices). I even remember reading one of TPC´s article on how hisorically, big spending cuts are followed by recessions. Demand for silver and gold are the new havens and are not yet to decrease (especially for China) as inflation spreads.
One more comment.
Gold is not an inflation trade, per se. Gold is money that cannot be controlled by the government, which is why the governments and central bankers around the world hate gold.
Gold is a revocation of fiat money and these crazy government bastards. Anyone with a memory beyond 10 years knows exactly that. That’s why the Chinese citizens and those who see America’s crazy spending both want to own gold.
In other words, gold is a refusal to accept fiat as a store of value. True, fiat must be used as a tool of trade, but that is all.
The reason why I think the deflationists have it wrong, is how the currency system is structured.
There is no direct link to gold (and nor do I advocate the gold standard either – nothing can save us from government stupidity – just a fact of life.)
The reason we had the Great Depression, instead of a tough recession, was that our money WAS gold back then, thus everyone bought our money as a store of value – thereby reducing the amount of dollars available for spending, investment, etc.
Today, what is contracting is the shadow banking system. This is why Bernanke is doing the exact right thing. He is counteracting the huge private deleveraging going on. I actually think he should do more and buy directly $1T of corporate bonds.
So, while there are deflationary headwinds for sure, the cure for that is pushing a computer button. When the “boss” (Obama) tells you to do that per your mandate (i.e., support the economy), what the hell else are you supposed to do, especially considering major deflationary headwinds in big sectors of the economy.
The rise in gold is not really due to Bernanke’s policies I think (although perhaps it does help some justify their investment/psychologically), the rise in gold is due to a 5 year old with a calculator who can figure out that all politicians are full of shit and the currency will eventually be rejected or repriced without our having a say in it, if the course is not changed in 5-10 years.
It surely is coming if we cannot deal with this. Someone mentioned earlier that SS and Medicare were really not that much of a drain. I say that is insanity. SS is ok, but the healthcare issues will completely destroy the finances of the nation.
But such is life. My view is buy gold unless it looks like the pubs are going to take the White House again, then one must evaluate whether they are going to be scumbag politicians or really try to make a difference and make the hard choices. I wouldn’t bet a lot on the latter.
Even if the FED stops QE2 the Treasury still has to borrow $T+ next year to fund the government, at even higher interest rates if the FED isnt going to keep rates artificially low with QE. fundementals are still really bad and the dollar will still decline. Gold and Silver will remain great bets for awhile…
You guys are too intellectual! Just trade the trend!
U could pull the trigger on both, everything will go up or down.
U have a good chance of one to one odds however,either way you will
lose as the whole market is confused and will punish the weak and
helpless.
Who ever told you anything was fair in the first place?
Most markets are emitting false, suppressed and/or conflicting signals. This is to be expected with increasing intervention and manipulation. Quantitative easing is both, as are many bank actions. Of course treasury yields will be subdued.
I think this is the reason Gold went up today.
http://www.zerohedge.com/article/golden-tipping-point-university-texas-takes-delivery-1-billion-physical-gold
qe ending?? are you crazy??? oil at $3 is destructive to this economy. the last i looked we are well past $3. we are heading south. sure they may end qe2, but i guarantee qe3 or whatever they call it is a lock! they will not allow the stock market to tank beyond a correction of minor % now while housing continues down the drain. they will when they are ready to do more damage to our freedoms and our finances. they aren’t ready yet. qe ending?? FAT CHANCE! BUY METALS AND OIL AND GAS sit back and get rich by taking profits every so often and buy things with those profits that will retain or increase in value with the massive coming inflation. if you aren’t the kind of person who needs xanax and you see what’s coming this is a great time to be alive!.
If this article is factually true, what will happen to equity and bond prices when CITI and other banks begin unloading their toxic assets?
http://www.zerohedge.com/article/scramble-yield-paradoxically-forces-citi-go-back-mark-market-accounting
It seems to me that bond prices should fall per the law of supply and demand. Could equity prices fall too as the yield seekers seek out the low-priced bonds?
An end to QE 2 for…..about 3 months and a -15% stock route then hello QE 3.
“An end to QE 2 for…..about 3 months and a -15% stock route then hello QE 3.”
Bingo QYSC. Bankster Plan:
1: Fudge inflation data to mask price increases.
2: After QE2 ends, twiddle thumbs and play Angry Birds as markets correct.
3: At first hint of deflation, scream bloody murder, even as real wages fall.
4: Profit.
Though I do wonder how long they’ll have to wait after QE2 stops to announce QE3. As their argument gets more difficult to make due to inflation, they’ll probably have to wait longer. Let the markets correct, then cry foul.
Everything sounds like a replay of 2010…
InvestorX
There are extremely powerful deflationary forces in the world economy that have been temporarily suppressed by central bank activity. Now, the ECB is allowing rates on Greek debt to blow through the roof without stepping in and is also raising Euro rates; the Chinese are tightening; the Fed seems to be signaling that QE2 will end with no commitment to QE3; and the fear trade (as evidenced by gold and silver) is in a major bull phase. When hedge funds and university endowments start taking physical delivery of gold (as they are now), it recalls why FDR moved against gold in a deflationary environment. Gold can boom during deflation. Also consider that when the Fed guarantees every investment against loss, it renders its guarantee ultimately meaningless because such unlimited guarantee destroys the money illusion and reveals the keystroke basis of modern money. At some point the Fed goes too far for mass psychology (if not for MMT), and the realization will dawn that we must restructure and permit deleveraging. That means the dollar and treasury debt (and GNMAs)increase in value; PMs hold up to a large degree; and equities drop a lot.
Everyone assumes that equities must fall during serious deflation. I think that is misguided given the current situation we are in.
In fact, I look for new highs in the market if government truly does starting defaulting on debt or restructuring it.
Microsoft will pay you back.
Cullen, I’m not understanding your logic here. From the piece you quoted:
“It is unlikely to limit its options by ruling out asset purchases beyond the second $600bn “quantitative easing” programme – or “QE2” – that is due to finish by the end of the second quarter.”
Then you said, “If the QE2 trade is ending today’s market action is fairly consistent with what I would expect to see.”
The fed saying they are NOT ruling out asset purchases beyond QE2 means QE3 is definitely on the table, no? What am I missing?
Far from being a safe haven, gold is a TRAP. Governments know where people who – so rightly! – fear fiat currencies hide their money. Gold in whatever guise, and precious metals generally, will be stolen too.
Incredible? Maybe just possible in a banana republic but not, never in America?
Except that your President Roosevelt (the sainted FDR, not the self-confessed imperialist Teddy) forced your citizens, under threat of severe penalties, to sell their gold to his government for a pittance, immediately before he raised the price by 50%.
I made an error in my previous comment, for which I apologise. FDR devalued the dollar, and thereby increased the dollar value of the gold he had just forced the American people to sell to his government, by 60%, not 50%.
I would short the long treasuries and munis,which is what Porter recommends. This may go against you occasionaly,but when the FED stops its loose money policy,it will be “Katie bar the door!” I do worry about how the metals will perform durinf this period,because tight money evwentually causes DEFLATION,which is bad for the metals. I wouls also short the market indexes.
oops, a little early on that call for no more QE…
as i expected, they will do whatever it takes to continue it, no matter how small, until they get the signal to go balls deep again…
bloomberg confimrs QE lite v2.0…
http://www.bloomberg.com/news/2011-04-19/bernanke-may-reinvest-maturing-debt-to-avoid-cold-turkey-end-to-stimulus.html
Valid point, but gold is up about 32% over the past year, while silver is up about 144%. The over the past month you have about 6% versus 23%, so the curve is steepening even more divergently- kind of like the housing price bubble versus other the value of other forms of real estate, maybe?
(Date from here.)
Whoops, this was intended to be a reply to hfm’s question about gold versus silver as risky assets.
As soon as the Congress agrees to any kind of defict reduction plan the dollar will go parabolic- for about 6 months until the enourmous amount of money in circulation starts to buy less and less and people begin to realize that the “plan” isn’t really working as the government’s debts must be repaid, and that is an impossiblity given the current structural entitlement and warmongering mess. That’s when gold will really take off, in the meantime so many of us will lose our shirts and bail out of the metals- much too late and much to early. I hope I am wrong.
QE lite(reinvestment of maturing debt held by the Fed) will continue indefinitely. The Fed does not want to reduce the size of its balance sheet after QE2 ends, because it tried that after QE1 ended and volatility (the Flash Crash) spiked. That will be about $20 billion per month; it probably isn’t nearly enough to keep levitating equities but it might be enough psychological fuel to put a floor under them after some initial turmoil in May-June.
The Porter Stansbury video is not to be taken as real market advice. It’s simply a marketing device. It uses fear to prey on individuals who don’t really know anything about the markets.
The individual who made this video is just as bad as the mainstream media when it comes to preying on the ignorant.
I have not visited this site before. All the above comments point to a lack of understanding of what Fascism consists. Once understood, one may find they are not part of the world elite loop, nor will one ever be invited to the party except to bureaucratically wait tables or vote for pre-ordained candidates under various party flags to keep the slaves working. Therefor, one can earn elite status, remain a preoccupied tax slave to their contrived games, or escape which is the hardest to do. Even the US offers four tax legal escape venues while remaining in the US–yet not one was mentioned above. What if the ‘markets’ were nothing more than a method for the elites to generate tax revenues for their own ends on the way up, sell puts as the Fed does with bonds to take the rest on the reversal? Interesting –LG
Amazing… have you people find out how big the cesspool is and where it spreads to? It kills me to see some of you are still asking the same damn questions hoping someone can assure and guarantee you a safe haven!
God can only help you if your lazy free-will will move your ass!