What Quantitative Easing?

10 Year Treasuries are trading as if the whole QE thing never happened. Courtesy of visible and invisible hands which have made holders dump their bonds and chase after an insane market.

Totally unconflicted commentary from Paul McCulley of Pimco: "The data is indicating we are in the bottoming process. The rate of decline is slowing." Took the words right out of Grasso's mouth.

Time for QE 2.0? Why not - the Treasury and the Fed are not known for getting things right the first time around... or fifth...

Comments

[Moon Kil Woong:]

True, the Fed is not known for ever being right except back when Volker saved the US. The Fed is more prone to lie than tell the truth. When they say they are looking at 2% inflation that probably means that they have no more political clout to print endless more money to stop deleveraging and deflationary pressures.

After all, even the Treasury probably doesn't like the prospect of loosing a potential US$ trillion on PIPP which is just a failed gambit at acounting fraud. The screams of more foul play are sure to be heard years after PPIP is put into place and the losses must show up in the government balance sheet. If Obama was smart he would block PPIP since the losses will probably come home to roost around the next election.

If you want a nice way to doom a Presidential election, just let the Treasury and Fed keep squandering money and causing economic mayhem. You would think everyone would learn not to let them off their leash after what they did to Bush Jr.

History does seem to repeat itself.

Apr 22 06:45 PM

[The Geoffster:]

If we could print money indefinitely, we would. Nobody believes it's not inflationary. The question is how soon and how bad. Short TLT.

Apr 22 06:46 PM

[RiskReturnO...:]

10-Year T-Bill yield has been fluctuating between 2.5% and 3.0%. Best trade is to long TBT when yield starts to get to the 2.5% level, and lighten up as yield approaches 3.0%.

However, once 3.0% yield is broken, then long more TBT as the next stop will be 3.5% and will get there VERY quickly. This may also trigger the next rise in gold, so if the stars all line up, GLD will have a chance to break out of 95-100 resistance and Oil can break out of $40-$50/barrel trading range.

Apr 22 09:15 PM

[Avoiding Alpha:]

agreed. it seems a very obvious point but if the solution to creating wealth is just printing more money and redistribution of capital why not just do it all the time?

a 3rd grade illustration:
If you are in the camp that believe that a hurricane is good for an economy (because it employees construcion workes and "stimulates" the local retail sector) why not just drop a small bomb on the city every year to keep creating wealth?


typos courtesy of blackberry


On Apr 22 06:46 PM The Geoffster wrote:

> If we could print money indefinitely, we would. Nobody believes it's
> not inflationary. The question is how soon and how bad. Short TLT.

Apr 22 09:40 PM

[bricki:]

I think QE is going to be a continuous ongoing thing rather than occurring in stages. There is just too much government paper coming to market, and the recovery is going to be L____ shaped so the pressure to keep rates down will be intense.

Apr 22 09:46 PM

[Jasper M:]

I kinda thought this would happen. I bought TLT, and was already experiencing buyers remorse, 6 weeks before the bazooka came out, and blasted my holding back into the green. I took that opportunity to sell it, 4.5%, and never looked back.
The fact that the T-bond markets are acting so squirrelly (supposed to be boring, but I've made 22% in cap gains on them in under 3 years) is a sign of the level of recklessness of the Fed's action. An indictment, even.
SA's Bond Expert (I recommend) has had some interesting comments about some of the particulars, which lead me to believe the Fed is fighting itself: On the one hand, if they want to help mortgage borrowers, they want to buy the 30 year bond, to drive down those rates. On the other hand, if they want to please their bankster masters, they want to buy shorter, driving those rates down, so the banks can make $ off the spread.

Apr 22 11:36 PM

[Rohan C. Pease:]

BLOOMBERG TERMINAL = (software)HARDWARE; runs~1700/mo.

- I guess you could just lease a Ferrari instead, or maybe both if you start with the terminal.

Apr 23 01:56 AM

[manya05:]

Avoiding Alpha - you pre-suppose that dropping yearly bombs to stimulate the economy destroys wealth because you are thinking of a closed system. The economy is not. Every time there is a hurricane in Florida, or an earthquake or fire in California, the rest of the country (through the feds and insurance companies) bails them out and the local economies are indeed stimulated. The same for the US, as long as foreign sovereigns keep bailing us out, printing money is good, it creates wealth, and keeps us going on consuming without really producing anything. Your scenario, and the real problem, begins the day foreign governments shut off the tap. That day may be approaching, but is not here yet. Mostly because they do not yet know what else to do, once they figure out an alternative, we are in deep trouble.

Apr 23 02:39 AM

[ronslim:]

manya05,
Destruction of wealth is destruction. The US gov is destroying wealth at an unfathomable rate and it is our wealth being sucked away if we as people keep our word to the foreign holders. If we default then it is their wealth being squandered. Between the Fed and the brightest 500 leaders in universe I think we are already in deep trouble.


On Apr 23 02:39 AM manya05 wrote:

> Avoiding Alpha - you pre-suppose that dropping yearly bombs to stimulate
> the economy destroys wealth because you are thinking of a closed
> system. The economy is not. Every time there is a hurricane in Florida,
> or an earthquake or fire in California, the rest of the country (through
> the feds and insurance companies) bails them out and the local economies
> are indeed stimulated. The same for the US, as long as foreign sovereigns
> keep bailing us out, printing money is good, it creates wealth, and
> keeps us going on consuming without really producing anything. Your
> scenario, and the real problem, begins the day foreign governments
> shut off the tap. That day may be approaching, but is not here yet.
> Mostly because they do not yet know what else to do, once they figure
> out an alternative, we are in deep trouble.

Apr 23 09:18 AM

[Chris Lau:]

The Fed will have to keep dumping money into the system until there is inflation. It's either that or deflation. I see the latter is a more likely outcome.

Apr 23 12:17 PM