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A Major Bank Admits QE4 Has Started, And That Stocks Are Rising Because Of The Fed’s Soaring Balance Sheet

December 31, 2019

A Major Bank Admits QE4 Has Started, And That Stocks Are Rising Because Of The Fed’s Soaring Balance Sheet

There was a period of about two months when some of the more confused, Fed sycophantic elements, would parrot everything Powell would say regarding the recently launched $60 billion in monthly purchases of T-Bills, and which according to this rather vocal, if always wrong, subsegment of financial experts, did not constitute QE. Perhaps one can’t really blame them: after all, unable to think for themselves, they merely repeated what Powell said, namely that  “growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis. Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy. In no sense, is this QE.“

As it turned out, it was QE from the perspective of the market, which saw the Fed boosting its balance sheet by $60BN per month, and together with another $20BN or so in TSY and MBS maturity reinvestments, as well as tens of billions in overnight and term repos, and soared roughly around the time the Fed announced “not QE.”

And so, as the Fed’s balance sheet exploded by over $400 billion in under four months, a rate of balance sheet expansion that surpassed QE1, QE2 and Qe3…

… stocks blasted off higher roughly at the same time as the Fed’s QE returned, and are now up every single week since the start of the Fed’s QE4 announcement when the Fed’s balance sheet rose, and are down just one week since then: the week when the Fed’s balance sheet shrank.

…click on the above link to read the rest of the article…

One Bank Finally Admits The Fed’s “NOT QE” Is Indeed QE… And Could Lead To Financial Collapse

November 15, 2019

One Bank Finally Admits The Fed’s “NOT QE” Is Indeed QE… And Could Lead To Financial Collapse

After a month of constant verbal gymnastics (and diarrhea from financial pundit sycophants who can’t think creatively or originally and merely parrot their echo chamber in hopes of likes/retweets) by the Fed that the recent launch of $60 billion in T-Bill purchases is anything but QE (whatever you do, don’t call it “QE 4”, just call it “NOT QE” please), one bank finally had the guts to say what was so obvious to anyone who isn’t challenged by simple logic: the Fed’s “NOT QE” is really “QE.”

In a note warning that the Fed’s latest purchase program – whether one calls it QE or NOT QE – will have big, potentially catastrophic costs, Bank of America’s Ralph Axel writes that in the aftermath of the Fed’s new program of T-bill purchases to increase the amount of reserves in the banking system, the Fed made an effort to repeatedly inform markets that this is not a new round of quantitative easing, and yet as the BofA strategist notes, “in important ways it is similar.”

But is it QE? Well, in his October FOMC press conference, Fed Chair Powell said “our T-bill purchases should not be confused with the large-scale asset purchase program that we deployed after the financial crisis. In contrast, purchasing Tbills should not materially affect demand and supply for longer-term securities or financial conditions more broadly.” Chair Powell gives a succinct definition of QE as having two basic elements: (1) supporting longer-term security prices, and (2) easing financial conditions.

Here’s the problem: as we have said since the beginning, and as Bank of America now writes, “the Fed’s T-bill purchase program delivers on both fronts and is therefore similar to QE,” with one exception – the element of forward guidance.

 …click on the above link to read the rest of the article…

Warning: ‘They Need The Markets To Implode’ To Usher In Cashless System

December 7, 2017

Warning: ‘They Need The Markets To Implode’ To Usher In Cashless System

stockmarketcrash

Market analyst Lynette Zang predicts in the next market meltdown, “real estate, stocks, and bonds will all crash.” When asked when this will happen, Zang says, “Enjoy your Christmas,” but in 2018, all bets are off.

Greg Hunter interviewed Lynette Zang, Chief Market Strategist at ITMtrading.com, and her assessment of the 2018 economy is dire.  Zang predicts, “In 2018, I don’t think they can hold these things together. I think we will see a major market correction in 2018. When that happens, that will cause the derivative implosion. We have to feel a lot of pain. . . . I think we are going to go into hyperinflation, and I think we will start to see that in 2018 because I think we will see these markets implode. I think we will see QE4 (money printing) for sure. . . . We have QE right now propping it up, according to the Fed’s own documents.”

Zang says ever since the 2008 meltdown, the elite have just been buying time to set up a debt reset.

“I am 100% certain we are in the middle of a money standard shift.  Ultimately, they need the markets to implode. . . . In 2008, the debt based system broke.  It died, it was done.  The central banks, globally, put it on life support, and they have to create a new system.  In my opinion, they want us cashless, and they want everything in digital form.  They want to dematerialize wealth at least for the masses.  I am 100% certain that this Bitcoin craze, and all of this, is about getting people used to digital currencies.  So, when they shift us from the debt based system to the digital system, we are more comfortable with it and more familiar with it.”

…click on the above link to read the rest of the article…

Negative Interest Rates Already in Fed’s Official Scenario

February 2, 2016

Negative Interest Rates Already in Fed’s Official Scenario

But forget QE-4.

The Germans, with Teutonic precision, call them “Punishment Interest.” Negative interest rates are spreading from the ECB’s negative deposit rate across the bond market and to some savings accounts in the Eurozone. The idea is to enrich existing bond holders and flog savers until their mood improves. Stock prices are allowed to get crushed by reality.

Negative interest rates destroy one of the most essential mechanisms in an economy: the pricing of risk. Investors end up taking huge risks with no reward. Many of them will get cleaned out down the road.

In Switzerland, punishment interest already causes “perverse unpredictable effects,” as mortgage rates have started to soar. It’s wreaking havoc in Denmark and Sweden. Bank of Canada Governor Stephen Poloz let the idea float that he’d unleash punishment interest to destroy the Canadian dollar. The Bank of Japan announced Friday morning – timed for maximum market effect – that it too would inflict negative interest rates on its subjects.

In the US, Ben Bernanke has been out there preaching to the choir about them. Over-indebted corporate America, except for the banks, would love this absurdity; it would allow them to actually make money off their mountain of debt.

“Potentially anything – including negative interest rates – would be on the table,” Fed Chair Janet Yellen told a House of Representatives committee in early November.

Fed Vice Chair Stanley Fischer has been publicly obsessing about them for a while. Monday, during the Q&A after his speech at the Council on Foreign Relations, he said that negative interest rates are “working more than I can say I expected in 2012.”

It seems to be just talk. But negative interest rates are already baked into the official scenario for 2016.

…click on the above link to read the rest of the article…

Deja Vu All Over Again

December 14, 2015

Deja Vu All Over Again

Janet Yellen will increase interest rates for the first time in nine years on Wednesday. She isn’t raising them because the economy is strengthening. The economy just happens to be weakening rapidly, as global recession takes hold. The stock market is 3% lower than it was in December 2014, and has basically done nothing since the end of QE3. Wall Street is throwing a hissy fit to try and stop Janet from boosting rates by an inconsequential .25%. Janet would prefer not to raise rates, but the credibility and reputation of her bubble blowing machine is at stake. The Fed has enriched their Wall Street benefactors over the last six years, while destroying the real economy and the middle class.

The quarter point increase will be reversed in short order as soon as we experience market collapse part two. It will be followed with negative interest rates and QE4, as these academics have only one play in their playbook – print money. They created the last financial crisis and have set the stage for the next – even bigger collapse. John Hussman explains how their zero interest rate policy has driven speculators into junk bonds as the only place to get any yield.

Over the past several years, yield-seeking investors, starved for any “pickup” in yield over Treasury securities, have piled into the junk debt and leveraged loan markets. Just as equity valuations have been driven to the second most extreme point in history (and the single most extreme point in history for the median stock, where valuations are well-beyond 2000 levels), risk premiums on speculative debt were compressed to razor-thin levels. By 2014, the spread between junk bond yields and Treasury yields had fallen to less than 2.4%. Since then, years of expected “risk-premiums” have been erased by capital losses, and defaults haven’t even spiked yet (they do so with a lag).

…click on the above link to read the rest of the article…

The Fed Can’t Fix It: “All That’s Left is a Reset, Shutdown of the System”

September 24, 2015

The Fed Can’t Fix It: “All That’s Left is a Reset, Shutdown of the System”

federal-reserve-wall-street-regulation

Did Janet Yellen make the right decision in delaying a Federal Reserve rate hike? Did the United States dodge a bullet? Of course not.

And the system is on course for a dangerous, hard landing.

As far as many experts can tell, there is no right way or good way out of this crisis under Fed control, and the exit isn’t likely to be smooth or pretty.

Not raising rates means yet another round of QE – QE Round 4 – which will lead to a further strain on the real economy as those on top get continued easy free, while interest rates on investments, pensions, insurance and savings sit at zero, or even go negative, destroying wealth. Derivatives continue to rule the day, and everything remains in jeopardy.

That’s why the Fed will eventually raise rates, at least just a little bit. But it will be too little way too late. The Fed has, in fact, lost control, according to many experts.

USA Watchdog reports:

 

Financial writer Bill Holter contends the recent announcement of the Federal Reserve not to raise rates means the “Fed Has Lost Control.” Holter explains, “Whatever the Fed does is wrong. The reason I say that is because no matter what they do, they can’t fix what they have already done. There is no policy at this point that can repair where we are at this point as far as debt ratios, derivative outstanding and the money supply exploding. Nothing that they do now can fix it. The only thing that remains is a reset.”

…click on the above link to read the rest of the article…

 

“Emerging Markets Are On The Verge Of Liquidation” Top Performing Hedge Fund Manager Warns; “QE4 Is Coming”

September 22, 2015

“Emerging Markets Are On The Verge Of Liquidation” Top Performing Hedge Fund Manager Warns; “QE4 Is Coming”

Until recently, John Burbank’s Passport Capital was one of the top 15 performing hedge funds in 2015. Recent events have only led to an even higher YTD P&L making Burbank one of the top performing managers of 2015: the $2.1bn Passport Global fund was up 14.6% at the end of August and the concentrated “special opportunities” fund was up 30.6%. The reason: in recent months Passport placed numerous commodity and emerging market shorts: trades which have generated substantial returns even as the rest of the “hedge” fund peanut gallery blamed either Bridgewater, or – in the case of Bridgewater – blamed the Fed.

Burbank did not blame anyone, and instead shorted the one company we said in March of 2014 would be the best bet on China’s collapse: Glencore. He has made a killing since, with both GLEN CDS soaring, and its stock price crashing 55% in 2015 alone to all time lows.

More apropos, having accurately foreseen the current events instead of just levering up on even more beta and praying the BTFDers return and bail out his underwater positions, Burbank’s opinion actually matters as does his outlook on what happens next.

What he foresees is not pleasant.

In an interview with the FT,  Burbank said years of QE had caused a misallocation of capital across the world, while the end of QE last year triggered a dollar rally with consequences that were only now beginning to be realized.

“The wrong people got the capital — emerging markets countries and corporates and a lot of cyclical companies like mining and energy, particularly shale companies — and this is now a major problem for the credit markets,” he said.

…click on the above link to read the rest of the article…

 

 

“Everyone Preparing for the Wrong Outcome”: Schiff Says QE4 is Coming, Not a Rate Hike!

September 9, 2015

“Everyone Preparing for the Wrong Outcome”: Schiff Says QE4 is Coming, Not a Rate Hike!

federal-reserve-printingpress-yellen

The printing presses are firing up all over again… err, at least the digital ledgers are, anyway.

Financial expert and infamous goldbug Peter Schiff was interviewed by Fox Business from the floor of the U.S. Stock Exchange.

Schiff warned viewers that “everyone is preparing for the wrong outcome with the U.S. economy.”

That outcome? The financial world has been waiting with feverish anticipation for “the big day” when the Federal Reserve finally raises interest rates – a quiet move big enough to shift economic tectonic plates.

But contrary to conventional wisdom about when the Federal Reserve will raise interest rates, and thus turn the page on a new era of the economy, Schiff says they can’t and won’t raise rates anytime soon – though they should have several years ago.

It didn’t happen months ago when many expected it. It won’t happen now in September, and likely not for a long time.

Why?

Because the Federal Reserve can’t raise rates without collapsing the bubble economy.

“I was saying they weren’t going to raise rates. Not because they shouldn’t, but because they can’t, because they will prick this bubble economy that they worked so hard to inflate,” Peter Schiff told Fox Business.

Instead of letting certain markets fail as they should have, they were propped up by the Fed. And these zombie banks and businesses have been sucking life out of the real economy – at great expense to average people.

“The economy has never been good. We’ve really been in a recession, I think, for the entirety of the recovery. I think the policies that the Federal Reserve has used to prop up the stock market and the real estate market have hurt the real economy. That’s why things are actually getting worse. But on Wall Street, yeah, things look good. But if the Fed takes away those monetary supports, we’re going to be in a bear market. We’re going to be in a deeper recession. We’re going to resume the financial crisis that was interrupted by this monetary policy.”

…click on the above link to read the rest of the article…

Will the Fed Have to Save Emerging Markets with QE4?

September 3, 2015

Will the Fed Have to Save Emerging Markets with QE4?

The risk-off tide is rising, and sand castles of QE will only hold the tide back for a brief period of apparent calm.

A funny thing happened on the way to permanently expanding global markets: unintended consequences. Borrowing cheap, abundant U.S. dollars seemed like a good idea when the dollar was declining, and few voiced any concern when $9 trillion was borrowed in USD-denominated debt around the world in the years since 2009.

Few saw the possibility of the USD rising, or that if it did appreciate against other currencies, that the blowback would destabilize the global economy.

It turns out a strengthening USD has triggered capital flight as other currencies devalue. Anyone propping up their currency to stem the flood tide faces another unintended consequence–a faltering export sector: China: Doomed If You Do, Doomed If You Don’t (September 1, 2015).

Meanwhile, the Imperial economy is suffering its own spate of unintended consequences, notably rising yields, a.k.a. quantitative tightening. As emerging markets and nations attempting to defend their currency pegs to the USD sell U.S. Treasury bonds (which have been held as foreign exchange reserves), the yields on the Treasuries rise as a matter of supply and demand.

As supply increases, sellers must offer higher yields to entice buyers to soak up the inventory.

This increase in yields reverses the primary effect of quantitative easing, i.e. declining yields/interest rates in the U.S.

This dynamic undermines both the emerging markets and the U.S. Emerging markets are not really restored to growth by selling Treasuries; the strong dollar continues to crush their currencies and dampen growth, as assets must be sold to pay back debt borrowed in USD.

Rising rates threaten the feeble U.S. “recovery” as well.

So what’s the solution to this inconvenient dynamic? QE4, of course. Why would the Federal Reserve launch QE4, if not to push rates down in the U.S.?

…click on the above link to read the rest of the article…

Why QE4 Is Inevitable

August 28, 2015

Why QE4 Is Inevitable

One narrative we’ve pushed quite hard this week is the idea that China’s persistent FX interventions in support of the yuan are costing the PBoC dearly in terms of reserves. Of course this week’s posts hardly represent the first time we’ve touched on the issue of FX reserve liquidation and its implications for global finance. Here, for those curious, are links to previous discussions:

And so on and so forth.

In short, stabilizing the currency in the wake of the August 11 devaluation has precipitated the liquidation of more than $100 billion in USTs in the space of just two weeks, doubling the total sold during the first half of the year. 

In the end, the estimated size of the RMB carry trade could mean that before it’s all over, China will liquidate as much as $1 trillion in US paper, which, as we noted on Thursday evening, would effectively negate 60% of QE3 and put somewhere in the neighborhood of 200bps worth of upward pressure on 10Y yields. 

…click on the above link to read the rest of the article…

 

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