If Mr. Market is afraid, he is putting on a brave face. The Fed’s QE ended on Wednesday. On Thursday, the Dow rose 221 points.
This is good news for Janet Yellen. She must think she has made a clean getaway. She has fled the scene of the biggest financial heist in history with no cops in sight. They’re not even aware a crime has been committed!
This grand larceny involved $3.6 trillion. Counterfeit – every dollar of it. Not a penny of it was ever honestly earned or earnestly saved… or dug out of the dirt and turned into coins.
No… We’re talking about the crime of the century… committed in broad daylight… with millions of witnesses. But hardly a single soul understood what was going on.
We begin by asking: How many TVs, luxury apartments, spaghetti dinners and parking places are there?
The BOJ Jumps The Monetary Shark—–Now The Machines, Mad Men And Morons Are Raging
This is just plain sick. Hardly a day after the greatest central bank fraudster of all time, Maestro Greenspan, confessed that QE has not helped the main street economy and jobs, the lunatics at the BOJ flat-out jumped the monetary shark. Even then, the madman Kuroda pulled off his incendiary maneuver by a bare 5-4 vote. Apparently the dissenters——Messrs. Morimoto, Ishida, Sato and Kiuchi—-are only semi-mad.
Never mind that the BOJ will now escalate its bond purchase rate to $750 billion per year—-a figure so astonishingly large that it would amount to nearly $3 trillion per year if applied to a US scale GDP. And that comes on top of a central bank balance sheet which had previously exploded to nearly 50% of Japan’s national income or more than double the already mind-boggling US ratio of 25%.
Okay admit it, who got the jitters and shorted bullion (or anything else) this morning? My SLV calls just went green for the first time [edit; and I took the green, very modest though it was]. Looks like an asset party spanning across markets (as Uncle Buck gets heavy) to me.
Problem is, we have some interest rate manipulators in high places making an announcement tomorrow and a market full of casino enthusiasts trying to figure out which button to push in response.
I’d have preferred a thick and pervasive negativity heading into that statement, but whatever. It may make sense to flatten out a bit or hedge into the statement. I will not even be in front of a screen at 2:00 tomorrow.
While we wait for our Employment Report tomorrow, there is plenty of excitement overseas.
The dollar continued to strengthen today, with the dollar index reaching the highest level since the middle of last year (see chart, source Bloomberg).
As with the rest of the dollar’s strengthening move, it was really not any of our own doing. The dollar is simply, and I suspect very temporarily, the best house in a bad neighborhood right now. In the UK, the Scots are about to vote for independence, or not, but it will be a close vote regardless. In Japan, the Yen is weakening again as the Bank of Japan continues to ease and Kuroda continues to jawbone against his currency.
A large increase in the money supply will always lead to large increases in prices somewhere in the economy. However, monetary inflation affects different prices in different ways at different times, so the pertinent question is: which prices? The answer to this question is important from the perspective of almost everyone and is always obvious with the benefit of hindsight, but it is often difficult to determine ahead of time. Also, depending on which prices are affected the inflation will sometimes be widely perceived as a problem and at other times be widely perceived as a benefit or a non-issue.
As we manage the breakout in the Semiconductors, the recovery in the fallen momentum items and a general return to a market melt up scenario, let’s again thank policy making for the global – not just US – stock market party. The ECB cuts rates; click graphic for full MarketWatch story…
“The European Central Bank reduced interest rates Thursday and installed a negative rate on bank deposits for the first time in its history, as officials scramble to keep ultralow inflation from gaining traction and derailing the euro zone’s fragile recovery.”
“Ultra low inflation”? Should that not be something desirable? Well, as in the US, not in the Age of Inflation onDemand. These creeps have got market participants so brainwashed as to believe that there is such a thing as low inflation (read: deflationary pressure) being bad. It is only bad because decades of levering up inflation have made it bad.
At the risk of sounding like a socialist, a theme one might sense in my writing about Fed policy and its slam dunk for asset owners, let me just say that I obviously agree with Thomas Piketty in his now widely known assertion that this policy benefits the few, the asset owners and to put it in highly technical terms, screw everybody else.
[Video removed due to technical glitch; it can be seen at the link below]
I would add as usual note that it was Fed policy that created the hazards that became the ‘Great Recession’ and would-be ‘Depression 2.0′ that “The Hero” saved us from. This little tidbit always seems to get left out of public debates on the subject, including the video above.
The Fed built the distortions that broke the system and the Fed is coming with the solutions that will break it again, in one way or another and in at one time or another.
Well, Loretta Mester looks a little hawkish anyway.
She also looks a little like…
To which I’d refer back to my first public article ever written back in the quaint days of Alan Greenspan’s trail blazing foray into financial market experimentation. FrankenMarket Lives. Pardon the Hyperinflation reference. It was the first thing I ever wrote! Young(er) and more naive.
Anyway, it all comes back around and makes sense if you give it enough time.
“We’re going inside ‘em… we’re going outside ‘em… and when we get ‘em on the run once, we’re gonna keep ‘em on the run!”
“My predecessor at the Fed, Chairman Ben Bernanke, demonstrated such courage, especially in his response to the threat of the financial crisis. To stabilize the financial system and restore economic growth, he took courageous actions that were unprecedented in ambition and scope.”
It takes a lot of courage to double down on the same stuff that created the financial crisis to begin with. Putting out fire with gasoline… yes, that takes courage.
“But he stood up for what he believed was right and necessary.”
What, like policy-induced booms and busts rolling on and on and on? Okay, so we’re on a boom and Bernanke is a hero currently. What does that have to do with these kids’ futures? He stood up for the here and now and did a great job in bailing out the people who wrecked the system (and asset owners in general) at the expense of Grandma and other savers.
“But his grit and willingness to take a stand were just as important. I hope you never are confronted by challenges this great, but you too will face moments in life when standing up for what you believe can make all the difference.”
Yes our economy is built on such a sound foundation that we dare not even think of implementing a moderation of ZIRP, Grandma be damned. Let her jump into the risk pool with everyone else. QE tapering is next to nothing without a ZIRP phase out.
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run” –FOMC
These people apparently know the paradox of their own policy in that it tends to bring about liquidations because everything has been built after all, on the will of man (and woman), not on productive endeavor, savings and real investment.
Yellen also provided three real-life examples of people impacted by the jobs crisis, and emphasized that “although we work through financial markets, our goal is to help Main Street, not Wall Street.”
Oh really? So what, you plan to back this up by employing more of the policy (ZIRP) that has benefited Wall Street so well over the last 5+ years, at the tragic expense of Grandma? Taper? Why, tapering is another positive for Wall Street. At least the investment and commercial banks. Hold ZIRP + Taper QE = Theoretical Carry Trade Spread. Janet, please; do you think we are simpletons?