QE3 to be announced on Tuesday ( ? + ! )"

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#1 Sat, Jun 18, 2011 - 11:55am
silvernomics
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QE3 to be announced on Tuesday ( ? + ! )"

With a hat tip to the person who posted a link to the Schiff video, this is an article I have just posted on my blog:

>>>>>>>>>>>>>>>>>>

This is what happened to silver when QE2 was announced last August:


Over the last few months, as the end of QE2 this month approached, mining shares were selling off out of fear that a deflationary air pocket lay beyond June and would slam the miners much like in late 2008. The received wisdom has been that the Fed would need for the economy to tank over the summer in order to generate the political cover to announce QE3.

There is another possibility, however. And its realisation has started to viralise based on this tweet:

https://twitter.com/#!/PIMCO/status/80276536510521344

That is a tweet from Bill Gross of Pimco, the world's largest holder (of trillions of $) of bonds. Except he doesn't hold them anymore as he liquidated them all recently, presumably in anticipation that the policy of defaulting on debt by inflating it away would continue.

What Gross meant is made clearer by the inestimable Peter Schiff in a recent short Youtube video:

https://www.youtube.com/watch?v=o4bgoqVDydI

What Schiff is saying is that this time round they will not be explicit about the QE - they will not be stipulating a closed-ended figure (in the case of QE2, $600bn) finishing at a certain time (in the case of QE2, June 2011). Instead, Bernanke is going to dole out wording tantamount to an open-ended, unlimited blank cheque, of purchases to achieve the same ends as QE2.

There are two reasons why this is likely. Firstly, they will have learnt from QE2 that announcing explicit, finite treasury purchases is not rewarded by the market with docility and acceptance but by sharply re-pricing commodities higher. So QE3 has to be rolled out more obliquely. And secondly, they simply have no choice but to segue straight into QE3, because the budget and the economy is now entirely reliant upon it and would slump to unfathomable lows if it were withdrawn.

That's the background for people like Jim Sinclair and James Turk predicting that we are going to have a surprise explosion to the upside in gold and silver this summer. I have been following Sinclair for eight years, ever since his "$1650 gold by 2010" prediction back in 2003, and I have never heard him as agitated as in this interview:

https://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/6/16_...

The dynamic in precious metals in the last few months has been hedge funds being long gold and shorting the mining shares aggressively as a hedge. It has reached the stage now where the miners are heavily oversold. The trend change will occur at such time as the market recognises that inflation rather than deflation is on the horizon, at which point the first hedgies will begin to close out their shorts and lock in their profits before the miners start to rise.

We may just be on the precipice of that now. It may start gradually, as the market slowly wakens to the Gross-Schiff contention. But this is, fundamentally, the difference between 2008 and 2011: in 2008 everyone was caught on the hop by the deflationary shock, whereas the countering policies now are in place and the time for their implementation has been set and is known in advance.

The mainstream media may trumpet the end of QE in the coming days, but the market will not take long to recognise that nothing has ended; rather, that all endings to QE have been removed. That is a seriously radical turnabout, and it's why Sinclair says in the link above that you would have to be out of your mind if you are thinking of exiting precious metals.

Edited by: silvernomics on Nov 8, 2014 - 5:07am
Sat, Jun 18, 2011 - 12:14pm
Spinny
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First let me say this. I'm

First let me say this. I'm not selling any of my physical. But i'm sure as heck not trading paper right now either. The results of this weeks meeting will be interesting but I don't see them changing course until we see some SERIOUS deflationary pressures emerge. This opinion is widely embraced over at ZH.

They will stick to there guns with the end of QE until we see a downturn in the economy and stock market. They can certainly always surprise us but I don't see anything new coming our way until end of summer/fall.

I don't know about an explosion to the upside but I do know there is a heck of a lot more conviction in the gold/silver market than with equities.

There will have to be inflation concerns/currency crisis to see the rocket reemerge imho.

What is the biggest public fallacy about market behavior? That markets are supposed to make sense. ~ Richard Dennis
Sat, Jun 18, 2011 - 12:17pm (Reply to #2)
silvernomics
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Tuesday is just talk, and the

Tuesday is just talk, and the question is interpretation.

The trend will crystallise when the first post-QE2 purchases come in. When is the earliest that could happen?

Sat, Jun 18, 2011 - 12:40pm
caramel
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i'm in the boat that we'll

i'm in the boat that we'll see serious threats of deflation coupled with renewed verbiage from US politicians that the world will end if the debt ceiling isn't raised & when there's political cover, the Fed will then announce a massive QE3 program, perhaps open-ended. I don't think we'll see QE3 until the debt ceiling is raised. Aug 2nd's the alleged deadline date, so we may see it raised sooner. FOMC meets next week and don't think we'll see any new news from them.

FOMC then meets on August 9 and Sept 20 I believe; I suspect one of these dates will be the official trigger for QE3 and of course, they'll communicate their intention well before.

The Fed's spin for a massive/open-ended QE3 is quite easy - it's the same logic that they said got them into QE in the first place. Unemployment sucks & the economy sucks even more now. So they just need to spew the same stuff again. Oh and deflation kicked in again for a few months so they'll need to attack that and of course, inflation has not been a problem or 'transitory' so that works in their favour.

And of course there's Greece; so if there's fireworks in Europe, may provide further justification/banter for the Fed to support the global economy. And who knows, some speculate we'll see a muni/state debt crisis this fall so let's throw that in there. Why not.

Now, this might not be the ultimate storm but it could be a decent mini-storm for the justification for QE3 and b/w the money printing, inflation, chaos and loss of faith in some currencies due to default concerns, PM's and miners could end up doing very well.

Sat, Jun 18, 2011 - 12:42pm
atlee
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great post silvernomics. hat

great post silvernomics. hat tip to you

Sat, Jun 18, 2011 - 12:55pm
Captain Silver
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QE3, but in a while.

Hat tip!

They need the political conditions to be right for another publicly announced QE. I'm sure they'll try every trick in the book, but before an official QE3 is announced, there is going to have to be enough serious deflationary pressure that the "electorate" starts crying for a savior. I suspect that we'll see substantial downside movement in most asset classes before the spigot is officially opened again. now they may be able to slow the collapse using back alley monetary shenanigans.

Still long phys. The hyperinflationary collapse thesis remains intact longterm. Am out of the paper market completely. Investor, not a gambler.

Our monetary system has been hijacked by morons! Abandon ship!!!!
Sat, Jun 18, 2011 - 1:09pm (Reply to #6)
silvernomics
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The point of this line of

The point of this line of reasoning is that there will be no explicit QE3 announcement.

What we have this Tuesday IS the announcement.

The only question is when the first post-QE2 purchase happens (without any fanfare save some mumbling that it's the execution of the policy Bernanke outlined on 21st June 2011). And how quickly the market realises that monetary Weimarisation has transitioned into an unspoken routine.

Because it's more oblique than when Bernanke got up at Jackson Hole and shouted "QE2!", we may not see as instant a reaction in the metals. It could be the miners that lead.

Sat, Jun 18, 2011 - 1:17pm
silvernomics
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Maybe the best way to think

Maybe the best way to think about it is this:

What Bernanke is going to do on Tuesday is to re-brand the actions which were formerly known as QE.

And to do it in a way that will allow him to crack on with them without notice.

I don't think old Ben is planning on going back to Jackson Hole.

Sat, Jun 18, 2011 - 1:35pm
RRJJ
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+++

Best post I've seen on this forum so far!

Sat, Jun 18, 2011 - 1:38pm
R man J
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I guess posters at ZH....

....are confident that the Fed can keep interest rates down with their guarantees, and yet at the same time spin the news in such a way that investors don't think that means QE to infinity. 

Sat, Jun 18, 2011 - 1:49pm (Reply to #4)
dropout
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Exactly.

To brand it QE III would be political suicide for the Obama administration. Therefore it will be stealth QE to infinity, or until the bottom totally falls out of the USD as all confidence in the dollar is lost. I just made a short post with a link attached titled "Last Warning" from GEAB2020 which mirrors your comments. All eyes are now on Europe where the next major financial crisis is beginning to occur and will spread its contagion to North America, then hence around the globe.

It is this happenstance that has Jim Sinclair, Bill Gross, Peter Shiff and others sounding the warning of imminent financial danger. We will look back on this time period with gold at $1,550 and say, "Wow it was cheap then!"

Sat, Jun 18, 2011 - 2:00pm (Reply to #11)
Captain Silver
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But to brand it

OutLookingIn wrote:

To brand it QE III would be political suicide for the Obama administration. Therefore it will be stealth QE to infinity, or

But to brand it "Save Our Ass by Any Means (And by default YOUR entitlement Checks)" right before the election after barely keeping the patient on life support through the rest of the year might just work out for them with the sheeple. I still think there are a lot of political reasons for them to allow asset prices to slip. The scary thing to me is that it appears that they still think they're in control.

Our monetary system has been hijacked by morons! Abandon ship!!!!
Sat, Jun 18, 2011 - 2:03pm
Spinny
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I have read this thread a few

I have read this thread a few times and just don't see where you guys are pulling your whole ideas from.

"The point of this line of reasoning is that there will be no explicit QE3 announcement.

What we have this Tuesday IS the announcement.

The only question is when the first post-QE2 purchase happens (without any fanfare save some mumbling that it's the execution of the policy Bernanke outlined on 21st June 2011). And how quickly the market realises that monetary Weimarisation has transitioned into an unspoken routine."

I don't understand this statement at all. Where are you getting Tuesday being the beginning of QE to infinity from?

I understand the idea of "operation twist" but I dont get what you are talking about at all? Please explain further....

What is the biggest public fallacy about market behavior? That markets are supposed to make sense. ~ Richard Dennis
Sat, Jun 18, 2011 - 2:07pm (Reply to #13)
silvernomics
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Spinny, watch the Schiff

Spinny, watch the Schiff video.

Sat, Jun 18, 2011 - 2:24pm (Reply to #12)
silvernomics
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"Don't switch horses mid-stream!"

Captain Silver wrote:

 to brand it "Save Our Ass by Any Means (And by default YOUR entitlement Checks)" right before the election after barely keeping the patient on life support through the rest of the year might just work out for them with the sheeple. I still think there are a lot of political reasons for them to allow asset prices to slip. The scary thing to me is that it appears that they still think they're in control.

Right. This is a possibility. The theory being, create a panic to induce the voters to think that they shouldn't switch horses mid-stream, particularly away from a horse adept at "crisis management".

So we won't know whether the first purchase will be in July, August, November. All we can know is how it is likely to be branded and justified on Tuesday. The million dollar question is how quickly the market prices in the implication of what is said. Everything is so viral these days.

Nb per this link

https://www.wnd.com/index.php?fa=PAGE.view&pageId=312393

I'm not even sure Obama is planning on seeking a second term. If that's the case there would be no reason not to print earlier.

Sat, Jun 18, 2011 - 2:29pm (Reply to #15)
Captain Silver
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Hmmmm

silvernomics wrote:

Right. This is a possibility. The theory being, create a panic to induce the voters to think that they shouldn't switch horses mid-stream, particularly away from a horse adept at "crisis management".

Hmmm... For timing, isn't the latest Keynesian hack theory that the QE takes at least 18 months to be felt in the broader economy? I guess using that logic, anything is possible in the next couple of months.

Our monetary system has been hijacked by morons! Abandon ship!!!!
Sat, Jun 18, 2011 - 2:36pm (Reply to #16)
silvernomics
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The announcement of QE2 took

The announcement of QE2 took about eighteen seconds to be felt in the markets!

Sat, Jun 18, 2011 - 2:41pm
CookieMonster
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operation twist

This was reported on zerohedge a week ago right? Why hasn't the market already reacted?

I think it has in that we haven't seen a waterfall yet. While I expect a rally this week, perhaps on news of such asset purchases, the buying will not start immediately in July, correct?

I think we'll see the waterfall then. Ben knows the fund managers are trying to call his bluff. He's got to bring them to their knees first to validate this bullshit.

CookieMonster
Sat, Jun 18, 2011 - 2:41pm (Reply to #17)
Captain Silver
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Oh yeah

silvernomics wrote:

The announcement of QE2 took about eighteen seconds to be felt in the markets!

Oh yeah, just trying to figure out what TPTB are "thinking" (I use that term loosely)

Our monetary system has been hijacked by morons! Abandon ship!!!!
Sat, Jun 18, 2011 - 2:43pm (Reply to #18)
Captain Silver
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Frontrunning?

CookieMonster wrote:

This was reported on zerohedge a week ago right? Why hasn't the market already reacted?

I think it has in that we haven't seen a waterfall yet. While I expect a rally this week, perhaps on news of such asset purchases, the buying will not start immediately in July, correct?

I think we'll see the waterfall then. Ben knows the fund managers are trying to call his bluff. He's got to bring them to their knees first to validate this bullshit.

Yeah, I've been surprised how undecided the market has been this week. Haven't seen any coordinated front running. Must have left Bill Gross out in the cold this time.

Our monetary system has been hijacked by morons! Abandon ship!!!!
Sat, Jun 18, 2011 - 2:45pm (Reply to #6)
CookieMonster
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cptn silver - they've known for weeks

i agree completely w/ you.

i'm a gambler and i want to see ben bring this hedgies to their knees. watch a pop this week on the announcement of gross' tweet on cnbc. the big boys have known about this for weeks otherwise we woulda seen a waterfall already rather than this stair climb down. folks will be buying into the bull trap on the news and that get screwed once it becomes apparent that this new form of stimulus is a ways down the road.

CookieMonster

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