Market sell off can resume. Next up August 26th @ Jackson Hole bitchez.
Gold just launched
And so it must be asked, if no QEx is forthcoming, who will be buying the 50% - 70% of our debt that the Fed was swallowing on a weekly basis? Unless I missed a memo somewhere, China is choking on what they already have.
Even at these levels of induced fear, there's only so much private demand out there seeking the 'safety' of Treasuries and I would guess not near enough to keep the lights on in the dear old USAA+.
On the other hand, perhaps all the Bernank needed to do today was buy 3 weeks until the meeting in the Hole...
Possibly, all the B needed to do was instill a kind of "reverse fear." I think that rip your face off end-of-day move did quite nicely in that respect. Wasn't that a pregnant pause (in retrospect) between 2:15 when the announcement came out and about 2:40 when the dark clouds parted to let the B shine through? I wonder how much that kind of massive manipulation costs on an hourly basis.
On the other hand, how much has volume decreased over the last 2.5 years? Does high-frequency trading make up for the lower "real" trading volume? I don't know. I almost (lol, not really) feel sorry for Wall Street.
It's virtually a done deal; QE by any other name is still QE - and that is the subtext on the Fed statement today. Goldman this afternoon said the Fed presented an easing bias when it indicated that it is prepared to employ additional easing steps as appropriate. In other words, there will be barrels of liquidity until the election is out of the way.
Besides, this is the classic strategy to reduce the debt burden when it is out of control. And it makes equities preferable to bonds, which are granting no yield for the next two years.
We could see QE 3 announced (but not so named) at Jackson Hole in late August; any further deterioration in the US economy will make it that much easier to justify. I’m not sure two weeks is enough for more economic erosion to happen, but the jobs data are almost guaranteed to remain dismal, and manufacturing is unlikely to get a bounce into the fall. So my guess is the Fed will be printing large scale in the autumn.
The general consensus out there is that Bernanke is trying to smash down the yield on treasuries (which he accomplished) in order to push as much money as possible into equities thus continuing the illusion that the economy is still in recovery mode. At least that's what people THINK.
As I've said repeatedly, everything Bernanke and the Fed does is INTENTIONAL. Bernanke knows that this won't work. All it does is get more suckers to buy into this phony rally. The financial oligarchs will make money on this short lived rally and make even more money shorting the market as it sells off leading up to QE3.
All day I heard the morons on CNBS saying that stocks with high dividends are a great buy. As pailin pointed out, what good is a puny dividend when your actual investment trades down 15-30+ percent?
This rally will last a few days. Maybe a week at best. But absolutely nothing has changed. It's rather ironic that the FOMC statement basically confirmed that the economy is falling apart yet equities skyrocketed.
Also when in history has the stock market plummeted about 20 percent in about 11 days only to have a massive rally that takes out previous highs? Unless I'm mistaken the answer is never. As we saw with the end of QE1, the more volatile the market is, the more unstable it is. Having a 600 point fluctuation within a span of approximately 2 hours definitely doesn't sound like a strong and stable market. Sounds to me like a market that's getting ready to collapse.
Once the excitement wears off (could be as soon as tomorrow) people will once again flee equities and pile into gold and silver. We will have a stronger dollar over the next few weeks. The S&P will be crashing down to 1000 and by then QE3 will be the savior.
As many of you have already pointed out the $2+ trillion question is who the hell is going to buy treasuries? The entire world isn't being cute anymore with its absolute hatred of the US dollar. The Fed is now the last willing buyer.
Many people I've listened to think that the stock market rally can go on for weeks or months. I don't. The Fed will have to resume buying US debt very soon or else the US government will have to turn off the lights, withdraw its troops from Libya, Pakistan, Syria, Yemen, Afghanistan, Iraq, etc...And that sure as shit ain't happening.
Aaand stawks are down sharply at the open less than 24hrs after the new Fed strategy is rolled out. In case you were wondering, yes both gold and silver are up, with the metal of kings yet again testing Santa's angel. Is it wrong to smile at our own demise? Pax
What is this Santa reference that I keep hearing. Who is this person?
well, it's the autumn, and we still haven't had the ink spill that some of us (including me) expected by now. Granted, the US and the EU have continued to deteriorate at breathtaking speed, but still Bernanke is not squeezing the trigger. Apart from back channeling a fortune to help sustain european banks, he has really been quite focused on choosing the moment for the domestic booster rocket. Any guesses on how much longer he will wait before unleashing more printing?