| User Info
| When All You Have Is A Hammer (QE3) in forum [Market-Ticker]
|
Digitlman
Posts: 335
Incept: 2011-03-04
|
If QE3 gets approved, I'm driving to DC, and I will not be holding a protest sign in my hand.
|
Randy123
Posts: 5789
Incept: 2008-09-24
Earth
|
Thank You God, you are 100% right Gen. QE means higher rates....No QE means deflationary abyss and lower rates. End of story
----------
China is the Enemy. Wake Up.
New Normal. Same As The Old Awful.
|
Void1a
Posts: 43
Incept: 2011-02-22
Banned
|
A few thoughts on possibilities:
1. "We f'ed up." Chips fall as they may. However, I STRONGLY doubt that wrongdoing/failure will ever be admitted (when has it?). I'd like to hope that the country will be angry that so much money was spent for such little overall positive result, but I'm sure they will go back to wondering what's on TV.
2. "We didn't do enough". QE3 in some form.
3. Market tanks, people scream for more QE.
I completely agree with Karl on the details/realities, but I'm not sure those involved will quit this path - and quite likely because we're so far down this path - until the next crisis which could be larger than 2008 and I think will look different. I just think that those involved will take us to the cliff with the financial state of this country and whether through malice or stupidity (and enormous amounts of both are on display in politics today), will send it over. This country has no overall direction, and you have politicans willing to play dangerous games with the country's financial status just for political theater.
I guess the overall thing is I'm curious where it's apparent that these people will EVER admit failure. Whatever one's thoughts about Peter Schiff, he once said about these problems and politicans, "The reason that the politicans are doing this is because they don't want to face the pain; they don't want to deal with reality. Well, the more they do this, the more painful reality becomes. So, if they can't deal with the pain (of reality) today, why would they deal with twice as much pain in the future? That's the flaw, in thinking that they're just going to do something later on to stop it - they're not. If they really had the guts to do it anything, do it right now."
As for QE/etc, we are lab rats in a financial monetary experiment, and those involved are going to play it out until the end.
|
Flappingeagle
Posts: 1229
Incept: 2011-04-14
|
Let's talk QE3. Am I right in assuming there can be no QE3 unless the debt ceiling is increased? If no more debt is allowed, and QE is debt, then one possible reason QE3 has not been announced is that it can't happen without an increase in the debt ceiling and then, it may have to be structured based on how much the debt ceiling is raised.
I am really beginning to buy into the Automatic earth deflation argument. I don't think the banksters will destroy the method of doing business i.e. the US Dollar. What QE2 effectively did, at least what I'm suspecting, is that it gave the banksters time to make sure someone else was the empty bag holder when deflation hits.
----------
Here are my predictions for everyone to see:
S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu.
"You can't build a house of cards on a shaking table." - Tony Johns
The January 2015 AMZN put at $130 (cost $4.25) will be a winner.
|
Roskosb
Posts: 3
Incept: 2009-02-12
Florida
|
Is there any talk about rolling back some of the Bankruptcy means test stuff? It occurs to me that if they quietly did someting like that it would allow a bunch of us who find themsevles with upside down home loans to exit somewhat gracefully.
Sure, there would be the credit hit - but nobody could come after you for walking away or all of the other possibilites from the other 'stop paying' solutions. With this approach it would transfer the bulk of the risk equation back on the lenders, instead of on us servants.
It's a quiet way to put an end to the extend and pretend stuff which has consequences long held sufficient in this country for this sort of act. Painfull, but not deadly, with time limits on how long these negative effects could last. Unlike the current no-end-in-site sort of problem.
|
Bluebird
Posts: 1381
Incept: 2008-05-02
|
Bernanke and The Federal Government will never admit they have failed. Rather, they will say something like all their policies were working and they never saw it coming.
|
Swrichmond
Posts: 327
Incept: 2009-02-12
|
"In short this is a negative sum game for The Fed and so-called "economists." The gambit that has been run since 2008 is to believe that if we just "stimulate" for a while the private sector will pick back up and it will all be ok, as the government and Fed will be able to step back." That gambit's been run lots of times before, and it apparently has worked until now. That's the reason the status quo players are still believing in it this time. The fact is, it never really worked. In essence, every recession since 1980 has resulted in a new, higher baseline federal deficit. This is the reason why some economists now admit that the middle class' real incomes have been stagnant or falling since the mid-70's: we have insufficient growth of real productivity, just monetary growth. http://seekingalpha.com/article/262620-w.... |
Bertdilbert
Posts: 2666
Incept: 2008-12-22
CA
|
"That gambit's been run lots of times before, and it apparently has worked until now."
Yeah, as long as you can drop interest rates and increase leverage to create more money, which allows more debt into the system. After you max low the interest rates and leverage has been maxed, you have worked yourself into a box. At that point the magicians have run out of tricks in the bag to pull from forward demand.
It is now handed over to the government to create money. Unlike the private banking sector that requires a monthly payment when money is borrowed, the government is borrowing the money for the monthly payments. There is no sign that the government is ever going to be able to make the monthly payments from direct income. If it ever comes to that, the International bankers will part out the Federal government as they are doing in Greece.
----------
Dear Euroland: Relax, Germany has a plan for your money!
Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
|
Void1a
Posts: 43
Incept: 2011-02-22
Banned
|
Additionally, in terms of those with a target on the S & P of 400-500 (at which point CNBC will be hosted by tumbleweeds), if it gets to that point, the market won't cease to exist, but it may as well be "last one out turn out the lights."
|
Thomasblair
Posts: 35
Incept: 2009-04-03
AL
|
Quote:Let's talk QE3. Am I right in assuming there can be no QE3 unless the debt ceiling is increased? I'd guess he can be the buyer for the US to roll maturing Treasuries. Smack me back if this is wrong. |
R2judge
Posts: 578
Incept: 2008-04-13
Burbank CA
|
The Fed's statements and the expectations of the "herd" are that when QE is going on bond yields will go down and price up (since The Fed "is the market.") But empirically, exactly the opposite has in fact happened - twice.
------------
Rosenberg is saying he believes the FED will go after the 10 year next time around, clamping it down.
|
Drumm23
Posts: 1216
Incept: 2008-02-14
Nurburgring
|
Quote:Rosenberg is saying he believes the FED will go after the 10 year next time around, clamping it down.
I think he's right. Reading that famous Bernanke speech, Ben alludes to exactly that - pick a target rate for the Ten Year and commit to clearing any and all debt trading below that price (above that yield). Knowing how insane Ben is, he could easily go for 2%.
----------
"If you don't know what you want...you end up with a lot you don't." — C. Palahniuk
|
Genesis
Posts: 130796
Incept: 2007-06-26
|
If he does the banks all collapse.
----------
I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
|
Dashingdwl
Posts: 9764
Incept: 2007-06-26
los angeles
|
Going to need a bigger QE hammer. We will get QE3, though. May not call it QE, bu there will be a program that provides for quantitative easing.
Bank on it.
----------
When you are hard and disciplined, you can be principled. People fear you because they have no leverage against you. It's the truest form of Liberty.
|
Gen_maximus57
Posts: 4580
Incept: 2007-09-03
Tampa
|
The chart is slightly misleading, alot of the drop in rates is due to "front running" QE and selling to the FED.
Which is exactly Bill Gross and others are doing. Buy low, sell to the FED.
|
Drumm23
Posts: 1216
Incept: 2008-02-14
Nurburgring
|
Quote:If he does the banks all collapse.
How so Gen? Because they lose earning the steepness on the curve?
----------
"If you don't know what you want...you end up with a lot you don't." — C. Palahniuk
|
Genesis
Posts: 130796
Incept: 2007-06-26
|
Correct.
Whalen has been all over this, and he's right. The bottom line is this - while numerically the curve is steep, in terms of absolute dollars it SUCKS. If he caps off the TNX at 2% then lending becomes unprofitable instantly and the entire edifice in the banks comes apart.
What he SAYS he'll do yields to the EFFECTS of what he would like to do.
----------
I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
|
Mannfm11
Posts: 3556
Incept: 2009-02-28
DFW, Tx
|
There won't be any QEIII. If there is, interest rates will go up, not down. In the scheme of things, $25 billion a week is a spit in the ocean with a hundred trillion in treasury linked derivatives out there. The Fed has almost nothing to do with long term rates other than the liquidity assistance they have provided those markets. Capital trades on risk and return, not supply and demand.
There is more to this. The amount of money the Fed would have to take out of the system to move short term rates just a little is huge now. I can imagine the complications they are running through their mind in how they would achieve that result in the mess they have created. Does anyone believe that they are going to compound this problem? The money isn't being used by the banks, save to write hot checks by the TBTF group that are for all legitimate purposes, broke. Japan has been running budget deficits close to 10% of GDP for years and their CB hasn't done a QE in a long time. Their currency is also one of the biggest shorts of all time with the carry trades that have gone on around the world. They have been trapped at near zero and their 10 year bonds trade at half the rate ours does and their government is a relative twice ours in debt.
----------
The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
|
Lenguado
Posts: 1272
Incept: 2010-01-12
Orlando, FL
|
I choose, "an economic catastrophe"
Let's get the PARTY started...
----------
I just realized... they aren't saying, "Keynesian Economics" they're saying "Kenyansian Economics". Grass Huts for everyone!  Welcome to history’s first Double Dip Depression |
Tesla
Posts: 15543
Incept: 2008-04-03
State of Disbelief
|
Silly (election) season has started. There's a President who wants re-election as well as lots of CONgresscritters who'd like to continue to be barons and earls.
Neither the Fed nor CONgress is going to do nothing. They both are going to do "something", just to be able to say they did, even tho it will be ineffective or make things worse. So, what will they do ? What is possible that will kick the can until after Nov '12 ?
----------
"Even a dog knows the difference between being stumbled over and being kicked." -Justice Oliver Wendell Holmes
"Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." -Samuel Adams
|
Jmanng
Posts: 537
Incept: 2009-01-03
Boston, Massachusetts, USA
|
A loose monetary policy is still necessary at this time to keep the stock market from going down. I expect the Fed to announce QE3 in their next meeting.
|
Degaston
Posts: 2264
Incept: 2007-07-27
|
I'm confused. What does Gen mean when he writes "If he caps off the TNX at 2% then lending becomes unprofitable instantly".
Does Gen mean that if the 10 year treasury yield drops to 2% or 200bp per annum that lending becomes unprofitable instantly? I just ran a calculation where I see that you get a drop of 5% in underlying present asset price when the annual yield on a 10 year bond rises from 200bp to 253bp. Ooops!!
For every long-term fixed rate loan there are risks.
1. The risk of default losses. If a borrower doesn't make their payments and they default then there might not be sufficient collateral to compensate the lender. Even in cases where the borrower is making payments this risk is a significant concern IF the underlying collateral is less than the principal. For levered lenders (all of them) this could make them insolvent.
2. Even if every loan gets paid on time there is the risk of long-term interest rates rising causing the present value of a loan to depreciate significantly. For levered lenders (all of them) this could make them insolvent.
IMO the present market loans rates in the USA are way underpricing these risks. How they're doing it is through a combination of direct/indirect Fed Reserve + Fannie/Freddie interventions + the derivatives market. The federal issues are well-documented by Gen on a regular basis. So are the derivatives market ones but not emphasized as much. The problem in the derivatives market is that the counterparties are taking on way too much risk and they're getting away with it because of the implicit understanding they have with the Federal Reserve, Treasury, etc. that the Federal Reserve will cover their backs.
What's the counterparty risk? Just imagine what would happen if JP Morgan Chase were to guarantee paying 3-month LIBOR+150bp in return for 200bp fixed on 10T notional value for 10 years without any collateralization. If LIBOR is 25bp then they get 25bp or 25B of cashflow per year. Now suppose that LIBOR jumps to 125bp then their counterparty cashflow goes negative to -75B per annum for the rest of the 10 year terms on the Interest Rate Swaps. Oops!!
Well suppose you have a bank
NOT including we've already passed the point where all the risks in fairly priced. the key for the TBTF crowd hiding the risk will be through fixed for variable Interest Rate swaps on tens of trillions in underlying notional value.
----------
3/17/2013: Bullish on nothing - 100 percent in cash.
|
Jstanley01
Posts: 8182
Incept: 2008-07-30
San Antonio, Texas
|
Tesla wrote..What is possible that will kick the can until after Nov '12 ? Quote:Sometimes at Edwards they used to play the tapes of pilots going into the final dive, the one that killed them, and the man would be tumbling, going end over end in a fifteen-ton length of pipe, with all aerodynamics long gone, and not one prayer left, and he would be screaming into the microphone, but not for Mother or for God or the nameless spirit of Ahor, but for one last hopeless crumb of information about the loop. "I've tried A! I've tried B! I've tried C! I've tried D! Tell me what else I can try!"
-Tom Wolfe, The Right Stuff
----------
You can't cheat an honest man. ~P.T. Barnum
|
Tesla
Posts: 15543
Incept: 2008-04-03
State of Disbelief
|
Great quote, Js. So fitting.
----------
"Even a dog knows the difference between being stumbled over and being kicked." -Justice Oliver Wendell Holmes
"Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." -Samuel Adams
|
