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The inevitable QE 4…

October 16, 2014

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Discussion
48 Comments
    Oct 16, 2014 16:52 PM

    no Gary.. wrong… there will be no QE4..

      Oct 16, 2014 16:03 PM

      I am not so sure Sally, There may not be a choice!

        Oct 16, 2014 16:28 PM

        This whole q about QE4 sure is a puzzler. If the Fed is planning QE4 offline, why then do tapering now? Makes no sense. Yet w/the derivatives market now north of $750T (trillion), with all that debt, how can they not continue QE?

        Also if we’re now tapering, and QE is now almost done, how come the market didn’t fall earlier? Makes me think that something is replacing tapering right now, and that net net we’re not tapering at all?

        Oct 16, 2014 16:29 PM

        Heck we’ve already had two Fed governor come out in the last two days and float hints that it may be in the cards.

          Oct 16, 2014 16:33 PM

          Gary, I can bet they will not call it QE 4. They can even call it Belgium Supply.

          Oct 16, 2014 16:43 PM

          Gary, since Europe is in dire situation and Germans are against QE, how about doing currency swap and buy each other’s bond?

      Oct 16, 2014 16:06 PM

      it may not be called QE4 but money printing has to continue otherwise government has to live within their means. It is too late.

      Oct 16, 2014 16:07 PM

      WE ARE ALL QE LAVES SALLY ! LA LA LA LAND IS NOW !

      Oct 16, 2014 16:08 PM

      QE is the only tool left and will be used forever along with low interest rates.

    bj
    Oct 16, 2014 16:03 PM

    The plunge Protection Team is at the ready to buy, buy, buy–at least until after the elections.

    Corporate Board rooms are at the ready for stock buybacks to protect end of their year bonuses.

    The Fed is at the ready to print, print, print because Goldman Sachs and JP Morgan won’t have it any other way.

    Oct 16, 2014 16:15 PM

    I seem to remember people thinking that the policy elites wouldn’t let Lehman collapse, or that the “bazooka” Paulson supposedly had in July 2008 had fixed the markets. And then the proverbial bus went off the road.
    I also seem to remember (even though I’m not that old) traders claiming that markets couldn’t go down in 1987 because there were computer trading programs (still not quite sure how those worked) to smooth out any volatility.
    We all know how that ended, even if the markets did eventually go higher years later.
    Many, many fortunes have been lost by people thinking that the central planners are omnipotent and that trades are somehow “insured” by this or that entity or new technology or whatever.
    It is amazing how much sentiment has changed since the dark days of early 2009 when it comes to people’s faith that financial assets can’t go down– or won’t be allowed to drop.

      Oct 16, 2014 16:30 PM

      For our little people, our financial asset not only may go down, it can go to zero. However, people seem to care about nominal value. A managed economy favours people on the top.

    Oct 16, 2014 16:37 PM

    The Fed may initiate other ways to attempt to stimulate the markets—-an example would be to no longer pay interest to the banks holding excess reserves with the Fed. Their hope would be that the banks would then start to lend that money. The problem with that potential scenario is that you still need demand or borrowers.

      Oct 16, 2014 16:42 PM

      The question is the bank supposed asset in FED is real cash (dollar bills or electronic equivalent) or T-Bond? Do we know? If it is T-Bond, they cannot spend it before they sell it. If they sell , it will kill bond market.

      Oct 16, 2014 16:52 PM

      … and w/22% unemployment (shadowstats), there won’t be many buying new homes – the Fed must know this, so why put the squeeze on the banks when they know it won’t result in more lending? Something else must be going on …

      Back to more chess. 😉

      Oct 16, 2014 16:38 PM

      Hi Doc, forgive my naiveté and please help me learn from your opinion….Here it is Fed has two mandates; max employment and price stability. Regardless of whatever secret power / conspiracy behind its opaque wall or what it meant to secretly do, its poker face is to follow the mandates and shows the public it could maneuver them.

      Max employment under the Fed’s available tools seems already there… – “face” unemployment is 6.5% (buying bonds, propping conventional markets, hiring.. at least tech companies are hiring/booming..:D mismatch of labor skills is nothing Fed could do imho)… what else it can do to create jobs given the tools it has? so I think that is it.

      Now Price Stability is what the Fed is losing on the deflationary fear would you agree?

      Fed explicitly says each country is on its own (it does not care what others get out of its action… maybe it cares somewhat as long as it relates to US) and important global commodities are priced in USD, maybe it is time for the Fed to claim the right on its price stability mandate to pull a trigger on any unconventional methods into putting a floor on key commodities to achieve its inflation target?

      CPI is one but I recall some commentators mentioned here on KE report gold is also the main index the Fed watches for inflation.

      If so, they are not going to do QE as in buying bonds but maybe FIF1 aka Forever Inflationary Force 1…. 😀

      Again… I admit there must be a lot of flaws in my thinking (I dont know what I dont know) but like Al always mentioned we dont have to bash each others… at least please help me learn something and correct my thought.

      Oct 16, 2014 16:30 PM

      The ECB is already doing that Richard but the only noteworthy effect is that excess capital is being driven out of Europe. That’s like squeezing a wet sponge. The liquids just drain away elsewhere.

        Oct 16, 2014 16:49 PM

        A Listener,
        🙂 Good to hear from you again!
        Jody D

          Oct 16, 2014 16:58 PM

          No Jody. You must be confused. I am new here 🙂

            Oct 17, 2014 17:54 AM

            Africa Listener? 😉

            Oct 17, 2014 17:03 PM

            Welcome A Listener!
            Jody D

    Oct 16, 2014 16:59 PM

    … could be as simple as Gary says, that the Fed governors are openly dropping hints to reset expectations, to prop the market up ahead of the elections.

    This may mean that there is no exit strategy from QE.

    The question then is, when will gold finally turn up? How long can this play out?

    Oct 16, 2014 16:04 PM

    Economic growth will be flat for years to come so only QE can prevent markets from crashing. Flat growth would be good for the planet reducing pollution levels.

    Oct 16, 2014 16:05 PM

    The Fed can launch QE4 but it wont solve any of the problems. The country is finished. Millions unemployed; the majority of the jobs being created are minimum wage; a huge percentage of people depend on the government/taxpayer for money (welfare, education, healthcare, etc); and let’s not forget the debt. You guys can avoid the issues all you want, but the glory days are over. And that goes for the rest of the western countries as well.

    Oct 16, 2014 16:08 PM

    I still have hope that smart minds are busy trying to figure out how to unwind all this, and that QE is buying them time. The end game of debt helps no one, and huts everyone.

    Oct 16, 2014 16:09 PM

    hurts everyone

    Oct 16, 2014 16:16 PM

    Here are some great quotes:

    1. “We will not have any more crashes in our time.”
    – John Maynard Keynes in 1927

    2. “I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.”
    – E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

    “There will be no interruption of our permanent prosperity.”
    – Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

    3. “No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.”
    – Calvin Coolidge December 4, 1928

    4. “There may be a recession in stock prices, but not anything in the nature of a crash.”
    – Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929

    5. “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”
    – Irving Fisher, Ph.D. in economics, Oct. 17, 1929

    “This crash is not going to have much effect on business.”
    – Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

    “There will be no repetition of the break of yesterday… I have no fear of another comparable decline.”
    – Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929

    “We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices.”
    – Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

    6. “This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.”
    – R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

    “Buying of sound, seasoned issues now will not be regretted”
    – E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

    “Some pretty intelligent people are now buying stocks… Unless we are to have a panic — which no one seriously believes, stocks have hit bottom.”
    – R. W. McNeal, financial analyst in October 1929

    7. “The decline is in paper values, not in tangible goods and services…America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin.”
    – Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

    “Hysteria has now disappeared from Wall Street.”
    – The Times of London, November 2, 1929

    “The Wall Street crash doesn’t mean that there will be any general or serious business depression… For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game… Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.”
    – Business Week, November 2, 1929

    “…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…”
    – Harvard Economic Society (HES), November 2, 1929

    8. “… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.”
    – HES, November 10, 1929

    “The end of the decline of the Stock Market will probably not be long, only a few more days at most.”
    – Irving Fisher, Professor of Economics at Yale University, November 14, 1929

    “In most of the cities and towns of this country, this Wall Street panic will have no effect.”
    – Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

    “Financial storm definitely passed.”
    – Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

    9. “I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”
    – Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

    “I am convinced that through these measures we have reestablished confidence.”
    – Herbert Hoover, December 1929

    “[1930 will be] a splendid employment year.”
    – U.S. Dept. of Labor, New Year’s Forecast, December 1929

    10. “For the immediate future, at least, the outlook (stocks) is bright.”
    – Irving Fisher, Ph.D. in Economics, in early 1930

    11. “…there are indications that the severest phase of the recession is over…”
    – Harvard Economic Society (HES) Jan 18, 1930

    12. “There is nothing in the situation to be disturbed about.”
    – Secretary of the Treasury Andrew Mellon, Feb 1930

    13. “The spring of 1930 marks the end of a period of grave concern… American business is steadily coming back to a normal level of prosperity.”
    – Julius Barnes, head of Hoover’s National Business Survey Conference, Mar 16, 1930

    “… the outlook continues favorable…”
    – HES Mar 29, 1930

    14. “… the outlook is favorable…”
    – HES Apr 19, 1930

    15. “While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”
    – Herbert Hoover, President of the United States, May 1, 1930

    “…by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent…”
    – HES May 17, 1930

    “Gentleman, you have come sixty days too late. The depression is over.”
    – Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

    16. “… irregular and conflicting movements of business should soon give way to a sustained recovery…”
    – HES June 28, 1930

    17. “… the present depression has about spent its force…”
    – HES, Aug 30, 1930

    18. “We are now near the end of the declining phase of the depression.”
    – HES Nov 15, 1930

    19. “Stabilization at [present] levels is clearly possible.”
    – HES Oct 31, 1931

    20. “All safe deposit boxes in banks or financial institutions have been sealed… and may only be opened in the presence of an agent of the I.R.S.”
    – President F.D. Roosevelt, 1933

    Oct 16, 2014 16:28 PM

    You cant reverse a collapse when things like Walmart lowering earnings expectations, Netflix not living up to expectations. The dream is ending and as we all no we can fall back a sleep and get back into the same dream. The market inflation is done. People will soon be putting there money back into reality (commodities are part of reality).

    Oct 16, 2014 16:49 PM

    You are making a good case for stocks Gary and I believe you are correct that the bulk of declines have now ended. QE4 is a non starter though. The system is already pumped full of liquidity and most of it is sitting as excess reserves so what point would another round achieve?

    Oct 17, 2014 17:35 AM

    Anybody like to weigh in on this mega megaphone pattern from Kimble?

    https://finance.yahoo.com/tumblr/photoset-dow-could-be-breaking-support-of-giant-mega-phone-115124516.html

    Oct 17, 2014 17:10 AM

    Guys,

    Everything you all are talking about regarding qe and fed policy and tops and bottoms will come down to November 4th. I’ve mentioned this several times on here. After November 4th expect the fed to come out and major news to hit. We are two to three weeks away. Don’t know what it will be but it will be major news. Im 100% sure of that. They are holding the fort until that day. Once elected officials are in and votes are in the truth shall be released. Deflation will ramp up from here till that day. Deflation will not stop passed that day.. Inflation will get kicked started sometime after. Im really in the camp that see’s gold/miners down hard into fomc. Depending on news that can be the catalyst to put the floor on gold.

    We shall see if the forces of gravity take her far below 1180.

      IT IS always political………………how else are these thieves going to pull the wool over everyone’s eyes…………………The game plan never changes, until the sheep figure out who has the rod………

    Oct 17, 2014 17:36 AM

    HUI gap 188=very close

    Oct 17, 2014 17:31 AM

    Houston we have a gap fill at 188 hui 🙂