The Stock Is Dead, Long-Live The Flow: Perpetual QE Has Arrived

[TakeAStepBack]

The Stock Is Dead, Long-Live The Flow: Perpetual QE Has Arrived | ZeroHedge

Two months ago, as we were carefully reading the latest Goldman explanation of how the firm had completely missed something Zero Hedge predicted back in January, namely the record warm winter's impact on skewing seasonal adjustments for payroll data (which has since validated our day 1 of 2012 predication that 2012 will be a carbon-copy replica of 2011, and which has made the comedy value of another Goldman masterpiece, that of Jim O'Neill's idiotic "2012: Not a Repeat of 2010 or 2011" soar through the roof) we stumbled upon something we knew was about to get much, much more airplay: Goldman's quiet and out of place admission that what matters for a country's central bank is the flow of its purchases, not the stock (another massive economic misconception we have been trying to debunk since the beginning). Recall these words: "...we have found some evidence that at the very long end of the yield curve, where Operation Twist is concentrated, it may be not just the stock of securities held by the Fed but also the ongoing flow of purchases that matters for yields..." This is how we summarized this observation two months ago (pardon the all caps): "UNLESS THE FED IS ACTIVELY ENGAGING IN MONETIZATION AT EVERY GIVEN MOMENT, THE IMPACT FROM EASING DIMINISHES PROGRESSIVELY, ULTIMATELY APPROACHING ZERO AND SUBSEQUENTLY BECOMING NEGATIVE!"

All caps aside, what this means is simple: if it is indeed flow that matters (and it is), then Fed intervention can never stop, period. If the stock of a central banks' assets is irrelevant, the Fed can have $1 on the left side of the balance sheet or $1 quadrillion: it does not matter - if the market expects the Fed to stop buying assets tomorrow, then the crash is as good as here. That has precisely been the biggest flaw with the Fed-accepted stock model, per which Bernanke can buy up a few trillion in MBS and the stock market will be flat as a frozen lake. Alas, this is increasingly becoming obvious is not the case. Hence flow.

Which is why today, two months later, and a week before Bernanke will almost certainly announce the NEW QE, we were not surprised at all to see that Goldman has actually made the case for flow in the form a of a white paper titled "Flow Effects at the Ultra-Long end of the Curve."

I'm thinking my position to audit the federal reserve is at this point unfavorable. We've passed the point of return on this and the only way people will learn that these policies are economic train wrecks is literally let the bottom drop out. We reap what we sow.

 

[Sallow]

Except they are not economic train wrecks.

Austerity doesn't work. It never worked. During times of great economic distress it was government spending that got economies out of it.

And most of that spending was done on wars.

We've got to figure out a better way.

 

[iamwhatiseem]

Except they are not economic train wrecks.

Austerity doesn't work. It never worked. During times of great economic distress it was government spending that got economies out of it.

And most of that spending was done on wars.

We've got to figure out a better way.

And giving $billions to banks and Wall Street ain't it.
Which is what this administration is setting up to do for the 3rd time.

 

[Sallow]

Except they are not economic train wrecks.

Austerity doesn't work. It never worked. During times of great economic distress it was government spending that got economies out of it.

And most of that spending was done on wars.

We've got to figure out a better way.

And giving $billions to banks and Wall Street ain't it.
Which is what this administration is setting up to do for the 3rd time.

There are absolutely no other alternatives. Republican obstructionism has saw to that. Along with GW Bush lowering interest rates to zero.

It's either this..or the market tanks.

 

[iamwhatiseem]

Except they are not economic train wrecks.

Austerity doesn't work. It never worked. During times of great economic distress it was government spending that got economies out of it.

And most of that spending was done on wars.

We've got to figure out a better way.

And giving $billions to banks and Wall Street ain't it.
Which is what this administration is setting up to do for the 3rd time.

There are absolutely no other alternatives. Republican obstructionism has saw to that. Along with GW Bush lowering interest rates to zero.

It's either this..or the market tanks.

Jesus....ok I give up. I don't know why I ever thought you had the sense to be able to see things as they are and not blind to everything you don't agree with.
Damn.

 

[Sallow]

And giving $billions to banks and Wall Street ain't it.
Which is what this administration is setting up to do for the 3rd time.

There are absolutely no other alternatives. Republican obstructionism has saw to that. Along with GW Bush lowering interest rates to zero.

It's either this..or the market tanks.

Jesus....ok I give up. I don't know why I ever thought you had the sense to be able to see things as they are and not blind to everything you don't agree with.
Damn.

Not blind.

Blindness is watching a record number of filibusters and nonsense bills being pushed through congress and thinking this is BAU.

That's blind.

 

[TakeAStepBack]

This isn't a partisan issue. The alternative to giving banks massive bailouts and "stimulating" the economy through monetary inflation, using monetized debt no less, is not the only answer to the problem. In fact, the correction is exactly what the market needs. Which means stop running the policies that got us here in the first place. It's the definition of insanity.

 

[TakeAStepBack]

But leave it to the political hacks to muck up an economic discussion with matters that do not have anything to do with it.

 

[Toro]

The OP is more or less correct. Whenever central banks have been expanding, stocks have gone up. When they aren't expanding, stocks have gone down.

 

[Toro]

But leave it to the political hacks to muck up an economic discussion with matters that do not have anything to do with it.

That's how it usually goes.

 

[TakeAStepBack]

But as I said in the OP, I rescind my support to now audit the fed. it will likely mean congress will move to curtail their authority to run the game that is now passed the point of no return. And politicians will make sure that, like sallow, an important economic matter is addressed with political favoritism to elections, instead of country.

Let the bottom drop out. But make no mistake, it's going to get pretty bad. Protectionism, price controls, capital confiscation, usurp taxations...it's all coming. the question will only be how severe and what will govt. attempt to do to sew up the hemoraging.

 

[Sallow]

This isn't a partisan issue. The alternative to giving banks massive bailouts and "stimulating" the economy through monetary inflation, using monetized debt no less, is not the only answer to the problem. In fact, the correction is exactly what the market needs. Which means stop running the policies that got us here in the first place. It's the definition of insanity.

Of course it's a partisan issue.

The policies that got us here in the first place were from the last administration.

Bush spent like there was no tomorrow..except he didn't pay for anything. He also didn't leave any way to pay for it.

We have the lowest tax rates now..then we did almost a century ago. There have been no new taxes levied. That's Un-constitutional.

And it's fiscal insanity.

 

[TakeAStepBack]

You know how I can tell when someone is economically inept? They spew partisan shit over a discussion that has no political wall to splatter said shit on.

The policies from the Clinton years, up through the Bush years and now in the Obama years is the exact same policy. Monetary expansion. The point of the article, which I doubt you even read, let alone would understand, is that the point of no return has come. There is no way to shut of the feds QE policies at the long end of the curve involving operation twist. In other words, this shell game only continues as long as the fed continues flow. Stocks don't mean shit now. It's passed that point.

 

[Sallow]

You know how I can tell when someone is economically inept? They spew partisan shit over a discussion that has no political wall to splatter said shit on.

The policies from the Clinton years, up through the Bush years and now in the Obama years is the exact same policy. Monetary expansion. The point of the article, which I doubt you even read, let alone would understand, is that the point of no return has come. There is no way to shut of the feds QE policies at the long end of the curve involving operation twist. In other words, this shell game only continues as long as the fed continues flow. Stocks don't mean shit now. It's passed that point.

Inept?

What are you suggesting here? We go back to a "gold" standard? How about barter?

You toss around terms like "government confiscation" and the like..it's hard to take you seriously.

The bottom line is..no government no business. Simple as that.

Go from there.

QE is stimulative. So is infrastructure repair. So is lowering interest rates. So are wars. So are lowering taxes. So are alot of things..the President cannot do.

You seem to think there is some magical hand somewhere that will repair the damage done over the last 30 years if only it would be "allowed" to work.

And nothing could be further from the truth.

 

[Papageorgio]

This isn't a partisan issue. The alternative to giving banks massive bailouts and "stimulating" the economy through monetary inflation, using monetized debt no less, is not the only answer to the problem. In fact, the correction is exactly what the market needs. Which means stop running the policies that got us here in the first place. It's the definition of insanity.

Of course it's a partisan issue.

The policies that got us here in the first place were from the last administration.

Bush spent like there was no tomorrow..except he didn't pay for anything. He also didn't leave any way to pay for it.

We have the lowest tax rates now..then we did almost a century ago. There have been no new taxes levied. That's Un-constitutional.

And it's fiscal insanity.

Issues that started over 80 years ago, policies enacted by both parties over that time, got us here. The partisan BS is part of the problem.

The tax rate has been the lowest ever under Obama, what the hell is he thinking?

Bailing out is not going to do a thing, we needed to let the markets correct themselves and no one in government is going to do that. That would be very risky in the political arena.

 

[iamwhatiseem]

But as I said in the OP, I rescind my support to now audit the fed. it will likely mean congress will move to curtail their authority to run the game that is now passed the point of no return. And politicians will make sure that, like sallow, an important economic matter is addressed with political favoritism to elections, instead of country.

Let the bottom drop out. But make no mistake, it's going to get pretty bad. Protectionism, price controls, capital confiscation, usurp taxations...it's all coming. the question will only be how severe and what will govt. attempt to do to sew up the hemoraging.

I am guessing you are like me - as Toro called it "retail investor"...someone who has money they need to invest if nothing else to protect it from inflation as the years go by. Historically stocks have overwhelmingly been the best choice for giving a consistent return on your investment.
Enter Greenspan, Summers and Rubin. Skipping the details of what the did - let's stick with the results of what they did along with the mortgage industry - they changed the markets into the "bubble mentality". So now the markets climb at a GIANT clip...climbing and climbing with no regard for the reality of what the stock values are selling for compared to what they represent. In the bubble market - if you know what you are doing you stand to make enormous profits very quickly.
However bubbles burst. But again, if you know what you are doing - market crashes can be a great thing - if you pull your money out early - enter back in when the market is down - you will double the already enormous profits you had. An example of this is 2009 - when the economy was horrific - the market players had the best year in the markets history.
If you are the guys making the money - you want to repeat 2008 and 2009 again and again.
As long as the government is willing to hand $billions to the market - why would the players want to be honest?

 

[TakeAStepBack]

The bottom line is..no government no business. Simple as that.

Go from there.

QE is stimulative.

The bottom line is, government is building a massive bubble. One that there is no relief available for a "bailout". Government does not make an economy either, so you're dead wrong. If that were true, when price controls and consumption caps have been imposed in the past an in other countries, a black market simply emerges for actors to acquire goods and services and to bring products to market.

If QE and stimulus worked, why have we done it twice without any positive results? Why yet again another round?
I'll tell you. Because you can not cure the sympotms of massive inflation with more massive infaltion. The idea that deflation is the arch enemy to an economy is false. It os the arch enemy of the federal reserve and politicians. For without more inflation to offset the ailments of the inflationn that came before, the govt. and the federal reserve MUST concede to 1,000s of years of economic law. That is not favorable. So off the cliff we go.

 

[TakeAStepBack]

But as I said in the OP, I rescind my support to now audit the fed. it will likely mean congress will move to curtail their authority to run the game that is now passed the point of no return. And politicians will make sure that, like sallow, an important economic matter is addressed with political favoritism to elections, instead of country.

Let the bottom drop out. But make no mistake, it's going to get pretty bad. Protectionism, price controls, capital confiscation, usurp taxations...it's all coming. the question will only be how severe and what will govt. attempt to do to sew up the hemoraging.

I am guessing you are like me - as Toro called it "retail investor"...someone who has money they need to invest if nothing else to protect it from inflation as the years go by. Historically stocks have overwhelmingly been the best choice for giving a consistent return on your investment.
Enter Greenspan, Summers and Rubin. Skipping the details of what the did - let's stick with the results of what they did along with the mortgage industry - they changed the markets into the "bubble mentality". So now the markets climb at a GIANT clip...climbing and climbing with no regard for the reality of what the stock values are selling for compared to what they represent. In the bubble market - if you know what you are doing you stand to make enormous profits very quickly.
However bubbles burst. But again, if you know what you are doing - market crashes can be a great thing - if you pull your money out early - enter back in when the market is down - you will double the already enormous profits you had. An example of this is 2009 - when the economy was horrific - the market players had the best year in the markets history.
If you are the guys making the money - you want to repeat 2008 and 2009 again and again.
As long as the government is willing to hand $billions to the market - why would the players want to be honest?

I couldn't have said it better. But there is an end to being "drunk" on the bubbly. That is where we are now standing. The intersection to a change is in the rear view mirror. There is no place safe left to park money. This spiral will not end until it has completely hit the floor.