Once QE ends all the market distortions due to QE will be unwound as well. It will not be pretty, but those that have built their investment houses on the sandy foundations of QE will quickly see their folly.
If QE worked, then the fear of ending QE would not exist, because the economy (and stock markets) would be so healthy that casting off QE would be seen as a relief, like a young child finally having that itchy cast removed from their broken arm, now that it has healed and feels strong.
Instead, the market shrieks in panic when even a whisper of tapering QE is heard, because QE is the only thing holding this market up. Unlike the young child who has healed, this market is an old lady with a walker - she can never go anywhere without it again. Tell her you're going to take her walker away and see how she reacts.
QE has not made the economy stronger. It has not restored consumer confidence, business confidence, or market confidence. It has temporarily averted a debt-deflation where assets are repriced to their true values and ownership changes from weak hands to strong hands. That process will happen eventually, it has just been delayed by a illusionary game where the banker creates a lot of new money and everyone pretends that it is real and that they have some of it and are therefore wealthy. Eventually the banker will want to be paid back, as they always are.
The Fed seems a little stuck right now between taper talk and trying to remind everyone that they are a "little crazy" and just might increase QE at the next meeting.
A 15% to 20% drop right about now would give them all the cover they need to do nothing at the June meeting, or maybe even ramp it up a little, just to prove that they're still willing to "go both ways" if needed.
20% is just back to 1320 on the S&P, which is just about where it was in early June last year. The big boys have made (or will make) profits on this rally and are probably prepared for a drop, and with a new QE promise the ramp back to 1700 can commence.
Another -10% pause in October, and then 1750 by Christmas.
The Fed has is going to try to be "credibly noncredible" while also remaining completely in control, which is just nonsense.
What they probably should do is just lay out an automatic schedule for tapering QE - maybe reduce it by $5 billion a month for the next 17 months. Then, when that's finally gone, they can begin the rate rise/hold/lower dance that used to be the only Fed Kabuki we had to worry about.
Equity futures turn sharply lower overnight, possibly in reaction to weak manufacturing data out of China and a mini-crash in Japan that left the Topix -6.9%. Factory activity in China shrunk for the first time in 7 months, reflecting "slower domestic demand and ongoing external headwinds." S&P futures currently -1.1% to 1637.50 after dropping below 1634 when European markets first opened. [View news story]
Stocks had already shed their Bernanke-testimony gains from this morning and they head even lower following the release of the FOMC minutes showing a "number" willing to begin tapering QE as soon as the next policy meeting. S&P 500 (SPY -0.4%), Nasdaq 100 (QQQ -0.6%). The dollar (UUP +0.4%) moves to a new session-high, and Treasurys (TLT -1.3%) continue to sell off. [View news story]
But, but, but --- some people at SA say the market is going up on fundameeeeeentalllllls!
What happened guys? A 280 point intraday slide in the Dow - have the fundamentals changed that much since breakfast!?
I cannot wait "until" the price of gold goes under $1000. I've always wanted to accumulate 10 pounds of Kruggerrands, and would rather pay as little as possible for them. I'll buy continuously as the price falls, because it won't go to zero.
I guess the day the FRB of NY calls the dump trucks in to haul off all that "worthless metal" cluttering up the basement of their vault is when I'll have to worry about holding gold.
Sounds like my "gold fantasies" are a combination of Lethal Weapon II and Die Hard III...
Russell 1,000 Or Bust - Japan And Switzerland Pump The Balloon [View article]
Taking a beating on my TZA 30.77 position. But not selling yet - the swings just in the last 15 minutes indicate a real battle going on in the HFT trenches.
Bernanke lit up another crack rock this morning and is starting to pass the pipe around with that goofy smile on his bearded face, hoping everyone will "beam up" as usual.
But has this party just gone on too long? At some point even the hardest-core addict needs to eat something and maybe get some sleep. Can this market really keep advancing at 0.5% or more a day, week after week, month after month, with never a 1% correction, let alone 5% or 10%?
Holding TZA for now but I'll dump if it looks like Ben's Zeus-like string pulling keeps the hapless mortals dancing, drinking, and revelling...
Physical Gold Market Feeding Off Paper Market Selling [View article]
Western markets panic selling paper derivatives of gold, while developing Asian markets slowly accumulating the real thing.
Maybe just the inevitable transfer of real wealth between the tired western economies that dominated the nineteenth and twentieth centuries, and the rising economies of the developing world (which have seen almost all of the growth in industrialization of the last forty to fifty years).
If physical gold was just a "barbaric relic" of ancient times, then the Federal Reserve Bank of New York would not expend so many resources protecting whatever it is sitting in their Manhattan vault. They do, though, so clearly a big pile of physical gold still has real meaning and power in this modern global financial system.
How many ounces of physical gold have moved from western hands to Asian hands in the past few years? 5%, 10% of the world's supply? How much more will be transferred? Will a vault at a Bank of China location or somewhere in Dubai someday hold most global central bank gold supplies, as the FRBNY vault does today?
Markets Dance As Bernanke 'Makes It Rain' [View article]
"The "sell in May and walk away" correction was far too expected this year, and has likely been pushed off until later in the summer. The market does not crash when everybody expects it to"
So the market crashes when nobody expects it to? Does anyone expect the market to crash in May? Seven trading days left after today - and nobody expects anything but a constant rise for all seven? Got it.
The 7 Reasons Why People Hate QE [View article]
If QE worked, then the fear of ending QE would not exist, because the economy (and stock markets) would be so healthy that casting off QE would be seen as a relief, like a young child finally having that itchy cast removed from their broken arm, now that it has healed and feels strong.
Instead, the market shrieks in panic when even a whisper of tapering QE is heard, because QE is the only thing holding this market up. Unlike the young child who has healed, this market is an old lady with a walker - she can never go anywhere without it again. Tell her you're going to take her walker away and see how she reacts.
QE has not made the economy stronger. It has not restored consumer confidence, business confidence, or market confidence. It has temporarily averted a debt-deflation where assets are repriced to their true values and ownership changes from weak hands to strong hands. That process will happen eventually, it has just been delayed by a illusionary game where the banker creates a lot of new money and everyone pretends that it is real and that they have some of it and are therefore wealthy. Eventually the banker will want to be paid back, as they always are.
Where Is The Bubble? [View article]
Without a drop, it's hard to imagine them being able to do anything except "no change", or whispers of tapering.
Where Is The Bubble? [View article]
A 15% to 20% drop right about now would give them all the cover they need to do nothing at the June meeting, or maybe even ramp it up a little, just to prove that they're still willing to "go both ways" if needed.
20% is just back to 1320 on the S&P, which is just about where it was in early June last year. The big boys have made (or will make) profits on this rally and are probably prepared for a drop, and with a new QE promise the ramp back to 1700 can commence.
Another -10% pause in October, and then 1750 by Christmas.
More Fed - It Never Ends [View article]
The Fed has is going to try to be "credibly noncredible" while also remaining completely in control, which is just nonsense.
What they probably should do is just lay out an automatic schedule for tapering QE - maybe reduce it by $5 billion a month for the next 17 months. Then, when that's finally gone, they can begin the rate rise/hold/lower dance that used to be the only Fed Kabuki we had to worry about.
Japanese Equities Too Strong To Ignore [View article]
Equity futures turn sharply lower overnight, possibly in reaction to weak manufacturing data out of China and a mini-crash in Japan that left the Topix -6.9%. Factory activity in China shrunk for the first time in 7 months, reflecting "slower domestic demand and ongoing external headwinds." S&P futures currently -1.1% to 1637.50 after dropping below 1634 when European markets first opened. [View news story]
Gold Liquidation Now Accelerating [View article]
Plus they have that nice gold-copper shine - hard to duplicate (forge).
Stocks had already shed their Bernanke-testimony gains from this morning and they head even lower following the release of the FOMC minutes showing a "number" willing to begin tapering QE as soon as the next policy meeting. S&P 500 (SPY -0.4%), Nasdaq 100 (QQQ -0.6%). The dollar (UUP +0.4%) moves to a new session-high, and Treasurys (TLT -1.3%) continue to sell off. [View news story]
What happened guys? A 280 point intraday slide in the Dow - have the fundamentals changed that much since breakfast!?
Russell 1,000 Or Bust - Japan And Switzerland Pump The Balloon [View article]
Gold Liquidation Now Accelerating [View article]
I guess the day the FRB of NY calls the dump trucks in to haul off all that "worthless metal" cluttering up the basement of their vault is when I'll have to worry about holding gold.
Sounds like my "gold fantasies" are a combination of Lethal Weapon II and Die Hard III...
Russell 1,000 Or Bust - Japan And Switzerland Pump The Balloon [View article]
Russell 1,000 Or Bust - Japan And Switzerland Pump The Balloon [View article]
Russell 1,000 Or Bust - Japan And Switzerland Pump The Balloon [View article]
Bernanke lit up another crack rock this morning and is starting to pass the pipe around with that goofy smile on his bearded face, hoping everyone will "beam up" as usual.
But has this party just gone on too long? At some point even the hardest-core addict needs to eat something and maybe get some sleep. Can this market really keep advancing at 0.5% or more a day, week after week, month after month, with never a 1% correction, let alone 5% or 10%?
Holding TZA for now but I'll dump if it looks like Ben's Zeus-like string pulling keeps the hapless mortals dancing, drinking, and revelling...
Physical Gold Market Feeding Off Paper Market Selling [View article]
Maybe just the inevitable transfer of real wealth between the tired western economies that dominated the nineteenth and twentieth centuries, and the rising economies of the developing world (which have seen almost all of the growth in industrialization of the last forty to fifty years).
If physical gold was just a "barbaric relic" of ancient times, then the Federal Reserve Bank of New York would not expend so many resources protecting whatever it is sitting in their Manhattan vault. They do, though, so clearly a big pile of physical gold still has real meaning and power in this modern global financial system.
How many ounces of physical gold have moved from western hands to Asian hands in the past few years? 5%, 10% of the world's supply? How much more will be transferred? Will a vault at a Bank of China location or somewhere in Dubai someday hold most global central bank gold supplies, as the FRBNY vault does today?
Markets Dance As Bernanke 'Makes It Rain' [View article]
So the market crashes when nobody expects it to? Does anyone expect the market to crash in May? Seven trading days left after today - and nobody expects anything but a constant rise for all seven? Got it.