"Below we see the stock market action in blue shade during QE1, QE2 (please note the vertical line that designates when Bernanke gave the "all clear for QE2" signal at Jackson Hole, WY in August 2010), and Operation Twist. When those operations were not in full swing the market fell from 9-11%. That contrasts with double digit gains of anywhere from ~15 to 35% when the Fed is easing. Is it really that simple?" I posted a similar theory in June 2011 on my blog. Yes, Mark, it is that simple. Unfortunately Bernake printing money forces real goods like GAS, OIL, GOLD and FOOD (none of which count in headline inflation calculations by the way) to go up proportionally as well as the stock market he so cherishes. People that don't own stocks get higher costs for everything without the benefits. Wall Street happy, Main Street not so much. To illustrate, I've grabbed some date-sequenced headlines that are pretty self-explanatory, with all the links at the bottom of the post those who want 'em.
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| S&P 500 with QE areas shaded All declines were halted by announcing more QE, not through any normal bottoming process. |
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| Market Volatilty when QE ends |
4/1/2012
"The era of quantitative easing-a process by which central banks buy assets such as government bonds to inject funds in the markets-may be coming to an end, according to a survey of fund managers."
4/3/2012
"Investors awaited minutes from the U.S. Federal Open Market Committee's March 13 meeting, due at 2 p.m. EDT (1800 GMT), that may provide clues on any potential quantitative easing. Federal Reserve policymakers on Monday signaled little appetite for further monetary steps to stimulate U.S. growth in an economy that is gradually strengthening."
NEW YORK (Reuters) - Major stock indexes extended losses on Tuesday after minutes from the latest Federal Reserve meeting showed policymakers appear less keen to launch a fresh round of monetary stimulus as the economy improves.
NEW YORK (CNNMoney) -- U.S. stocks sold off sharply Tuesday afternoon, after the Federal Reserve indicated it was unlikely it would offer more stimulus anytime soon.
4/4/12
Dow futures down 116 points
Oil dropped for a second day amid rising crude stockpiles and speculation the Federal Reserve may refrain from more monetary stimulus to boost the U.S. economy.
LONDON (Reuters) - Gold prices fell 1 percent on Wednesday after minutes from the U.S. Federal Reserve's March meeting suggested a fresh round of monetary stimulus was unlikely as the U.S. economy gradually improves, and as the dollar strengthened.
FRANKFURT (MarketWatch)—The U.S. dollar rose further against several major rivals Wednesday after Federal Reserve minutes showed more asset purchases were unlikely
European stocks, U.S. index futures and commodities fell after the Federal Reserve signaled it may refrain from more monetary stimulus and Spain sold less debt than targeted. (By tomorrow the headline will be Spain, not the Fed halting the printing presses, that caused markets to fall. We know better though...)
“The perception is that you’re taking away the safety net of excess liquidity that lifted asset prices,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. (Umm..what was that? Excess liquidity from the FED lifted asset prices? The media said it was robust economic growth and a resurgent U.S. consumer. Who knew?) “Given the exceptionally good run we’ve had year-to-date, people are reassessing their risk-reward scenarios.” (Umm...what was that? Without the FED printing more money and manipulating the stock market higher Wall Street doesn't want to be in the stock market? Weird.)
(Reuters) - Wall Street stocks were looked likely to open lower open on Wednesday, despite good private sector payrolls data, as investors digested minutes from the latest Federal Reserve meeting published Tuesday suggesting further monetary stimulus action is unlikely. "My conclusion is the employment growth trend that we've seen over the last year remains in place and we probably will see a decent employment number on Friday when the Department of Labor reports non-farm payrolls," said Fred Dickson, chief market strategist, D.A. Davidson & Co. Lake Oswego, Oregon.
"It's kind of surprising there didn't appear to be any market reaction to it." (Acutally, Fred, it is not surprising at all.)
"Supportive policies by the U.S. central bank have been a primary catalyst for the S&P 500 stock index's surge of 30 percent since October" (and 123% rise since March 2009)"
4/9/2012
Hedge Funds Cut Commodity Bets on Fed’s Stimulus Signals
(Bloomberg) "Minutes from the March 13 Fed policy meeting released April 3 showed policy makers will probably hold off on increasing monetary accommodation unless the U.S. economic expansion falters. The Standard &Poor’s GSCI gauge of 24 commodities rose more than 80 percent from December 2008 to June 2011 as the central bank set rates at a record low and bought $2.3 trillion of debt in two rounds of quantitative easing."
Quantitative Easing = Money Printing. Creating Dollars out of thin air. However, these dollars don't go to you and me. They go to the banks, ostensibly to lend to us peasants to get the economy going. Banks like Goldman Sachs and JP Morgan who happen to have the largest TRADING DESKS in the world. Banks that make a lot more money in a completely rigged stock market (JP Morgan did not have ONE losing trading day the last quarter of 2010 or the first quarter of 2011) than lending to Mom and Pop.
Bottom line: add up the highlighted RED statements to understand what happens on MAIN STREET when the Fed engages in Quantitative Easing (an 80% rise in the cost of everything you have to buy to live like food and fuel. Thus, an inescapable tax that everyone, no matter how poor, must pay). Add up the GOLD statements to understand what happens on WALL STREET when the Fed engages in QE. (a 123% risk-free ride up in the Stock Market and all-time high bonuses for traders who can't lose) Understand that both events are the result of DEVALUING DOLLARS BY PRINTING THEM. You have 2.3 Trillion more PAPER dollar bills chasing the same commodities and stocks IN 2012 than you did in 2008. Speculators are simply responding to Fed policy. Speculators can't print 2.3 Trillion dollars, but they do understand that it's only paper and the cost of everything else must go up as a result.
Whose side of the street is our government and the FED on?
More jobs, lower gas prices, lower food prices and a stronger dollar via no QE would put them on Main Street's side. Fewer jobs, a weakened dollar, higher commodities and concentrated wealth into the hands of a few via a manipulated stock market puts them on Wall Street's side. Period.
http://marketmontage.com/2012/04/01/is-it-really-as-simple-as-dont-fight-the-fed/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+marketmontage%2Fxyz+%28Market+Montage%29
http://finance.yahoo.com/news/money-printing-era-may-ending-183752638.html?l=1
http://finance.yahoo.com/news/wall-street-starts-second-quarter-013101442.html?l=1
http://finance.yahoo.com/news/wall-street-starts-second-quarter-013101442.html?l=1
http://money.cnn.com/2012/04/03/markets/stocks/index.htm?section=money_markets&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_markets+%28Markets%29
http://www.bloomberg.com/news/2012-04-04/oil-falls-a-second-day-on-supply-as-fed-may-halt-stimulus.html
http://finance.yahoo.com/news/gold-edges-sell-off-fading-004301268.html?l=1
http://money.cnn.com//2012/04/04/markets/premarkets/index.htm?section=money_markets&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_markets+%28Markets%29
http://www.marketwatch.com/story/dollar-broadly-higher-but-slips-versus-yen-2012-04-04?siteid=rss&rss=1
http://www.bloomberg.com/news/2012-04-04/asian-stocks-australian-dollar-drop-on-fed-won-falls.html
http://www.reuters.com/article/2012/04/04/us-markets-stocks-idUSBRE83105P20120404?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28News+%2F+US+%2F+Business+News%29
http://www.bloomberg.com/news/2012-04-08/hedge-funds-cut-wagers-as-fed-signals-less-stimulus-commodities.html
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