What
took Ben Bernanke sixty minutes of mumbling about tools,
word-twisting, and data-manipulating to kinda-sorta admit - that in fact
he is lost; Ron Paul eloquently expresses in 25 seconds in this
Bloomberg TV clip. Noting that "we are creating money out of thin air," Paul sums up Bernanke's position perfectly "We've Lost Control!" From mal-investment to Bernanke's frustration and the unintended consequences, the full 5-minute interview is a must-watch.
The Fed's Balance At The End Of 2013: $4 Trillion
What happens next...What Does A $4 Trillion Fed Balance Sheet Mean For Gold And Oil
Earlier we explained why Bernanke's actions
today mean that the Fed Balance Sheet will likely grow to over $4
trillion by the end of 2013. Critically this flood of liquidity will
raise the nominal price of every asset (from whimsical pieces of
stockholder paper to barbarous relics and black gold). Some of these
assets, like stock prices and high-yield credit spreads do have
point-in-time 'value limits' to their price - though at times it seems a
dream that fundamentals would ever matter again; but some have less of
a binding constraint - such as gold. Should the Fed proceed, as seems
likely, and do its worst/best to blow its balance sheet wad then we
estimate Gold will be priced at least $2250 per ounce by the end of 2013 (of course higher if the Fed sees no evidence of recovery). Meanwhile, deeper underground, the world's mainstay source of energy, WTI Crude oil, could jump to record highs over $150 per barrel (which just happens to coincide with the 'pegged' value of oil in gold).
It will be interesting indeed to see how the world's socio-economic
infrastructure hangs together should that occur - can't happen?
Different this time? Indeed it is, now that Ben hit the big red 'panic'
button.Commodity Sector Looks Set to Leg Higher
The long term monthly chart provides an excellent perspective of the hard
asset sector. Note how back in 2008 when the credit crisis first erupted
and a deflationary mindset took over, that the sector crashed to earth in a
brutal fashion. It took two doses of QE to jam it north, the first ending
before the second round was announced. Of course, the second round of QE
provided the fuel to send the index soaring to a new record high.
Once again deflationary expectations took over due to the European
Sovereign debt crisis, a slowing Chinese economy and of course, a US
economy in the t... more »
HUI Technical Chart
The HUI is closing in on a KEY technical resistance level on its weekly
chart at the 50% Fibonacci Retracement level of its last year summer high
and this years trough. That level is basically right at the high made in
today's session as it comes in beginning at the 504 level. If the HUI
closes the week through this level on a good strong note, look for the
index to move towards the 540 level. Note that all of the major moving
averages, whether the shorter term 10 and 20 week or the 50 week moving
average are either turning higher or flattening out and beginning to turn.
Stock Market Rally nothing but Rampant Paper Asset Inflation
Well, the Fed wants the stock market higher in time for the election (it
seems Mr. Bernanke wants to retain his position as head of the Fed) and
they got it.
Take a look at the following charts of both the Dow and the S&P 500, each
of which is setting at more than 4 1/2 year highs based on what???
Impressive rally isn't it considering it has all been orchestrated by Fed
QE programs. The problem is revealed however when viewing the following
charts.
Thirteen years ago, it took a bit more than 42 ounces of gold to buy the
DOW. In the year 2007, when the DOW made a brand new ... more »
Which One would You Want to Own???
Now that the Fed has made it abundantly clear that they intend to further
debauch the US Dollar so as to keep Wall Street happy, watch for gold to
once again begin outperforming against US Treasuries. Notice that each
previous round of QE, has sent the yellow metal higher against the price of
the long bond as the latter appropriately responds to an increase in
inflation expectations by such activity.
Compared to previous QE's, this round is relatively modest by comparison as
a $40 billion per month price tag still is less than $500 billion annually.
Still, there is Operation Twist o... more »
QE to infinity....
Good
evening Ladies and Gentlemen:
Gold closed the comex session up a whopping $38.50 to $1769.10. Silver
also responded to finish up $1.49 to $34.72. The news that caused the
spark in the precious metals and the Dow was the Bernanke announcement
of QE to infinity. He announced that the Fed will purchase up to 40
billion dollars of mortgages per month indefinitely.It will also
continue with
Email from Junior Mogambo Ranger (JMR)
September 13, 2012
Mogambo Guru
I was immediately intrigued with a particular email I recently received
when I noticed that it was, for a pleasant change of pace, not
venom-spewing hate mail or a death threat, like, for example, this other
one from this morning.
It reads "Dear Stupid Mogambo Idiot (SMI), I think you should just shut up
your stupid loud mouth, like your wonderful wife tells you. And help out
around the house sometimes, too, but you never do because you are just an
irritating, lazy old man who spends his time complaining about the stupid
Federal Reserve cr... more »
Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates
The headline might as well have read "Bernanke reluctant to return to
Princeton kicked the can down the road." An aside observation, perhaps the
Republican strategists should have thought about the consequences of
standing against Bernanke (at least publicly) a little longer. Gold and
silver's sharp reaction illustrates the real consequences of today's Fed...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]
FOMC: This Is The Beginning Of "The Big Print" - Unlimited QE
*The fact that enough people still listen to Cramer is the perfect
indicator of just how stupid part of our population is and it explains how
we - the people - let our country lapse into systemic collapse. At it's
base level, Government intervention in our lives prevents the Darwinian
mechanism of natural selection from doing what it's supposed to do. That
Cramer still sells his crap and that CNBC is still on the air is a perfect
testament to that*...Dave in Denver
For the first time since QE first started, today's FOMC announcement
stunned me. Not because I was expecting somet... more »
The Fed and the ECB determine to Destroy the Middle Class
While Wall Street cheers the actions by the Fed to further enlarge its
already bloated Balance Sheet, those of us who live on Main Street should
get accustomed to further increases in our food and energy costs. What I
find rather perverse, is the statement by the FOMC that "longer term
inflation expectations remain stable". Yeah, maybe on the salaries and
wages front but sure as hell not on the raw materials front.
Take a look at where hedge fund money is now flowing - right back into the
hard or tangible assets category again. Get used to higher gasoline and
heating oil prices and ... more »
Doug Casey On The Good, The Bad, And The Ugly Of Today's Journalism
"Yellow journalism" – which seems almost the only kind we have these days dominates our newsflow,
but the truth is out there. As with everything else though, it's
subject to Pareto's Law. So, 80% of what's out there is crap, and 80%
of what's left is merely okay. But that remaining 4% of quality, uncensored, free information flow is extremely valuable. The
terminal corruption of the major news corporations and the lack of
interest in seeking the truth among the general population augurs very
poorly for the prospects of the US and the current world order.
This creates speculative opportunities, but prospects for mainstream
investments are not good. Western civilization is truly in decline and
far down the slippery slope.Howard Marks On Uncertainty And The Fallacy Of 'Risk-On / Risk-Off' Investing
Oaktree's Howard Marks is mildly more positive than normal - due mainly to his belief that most people are not uber-bullish (though perhaps less so after today) - but his latest letter expounds in succinct detail on all the risks that await us (notwithstanding nominal price eruptions courtesy of QuEnfinity). Critically, he notes:Summing up: "The world seems more uncertain today than at any other time in my life."These days we hear little about anything other than macro considerations. Thus investors believe more than ever [as security movements are highly correlated] that the route to investment success lies in correct judgments about the macro future - giving rise to 'risk-on, risk-off' investing.
Playing the market in the short-term based on macro forecasts is one of the many things in investing that could add greatly to results if it could be done right... but it can't, certainly not consistently!
Voting Is A Sap's Game
With
the U.S. presidential election right around the corner, Americans are
getting themselves all in a tizzy to go to the voting booth and remind
the holders of public office who they work for. Because it’s a
presidential election, the stakes are looked to as even higher as the
media paints the contest between Barack Obama and Mitt Romney as a
conflict with extreme consequence. The statist tramps known as mainstream journalists are championing the race as a great ideological battle. The fact that the candidates differ little on policy and vision
is purposefully avoided. To the political and intellectual
establishment, the show must go on. Their way of life depends on it. No
matter how hard boobus Americanus is kicked in the teeth with his own
inability to have an effect on government, he still feverishly casts
his ballot with faith locked into the system. As Gary North puts it, “democracy is window dressing for elite control.” Sadly,
unless there is a radical change of thinking, mankind’s intellect will
finally begin to resemble that of a dog who after being beaten
unmercifully, happily returns to his master’s side ready once more for
another round.Peregrine Financial CEO To Go Home
Remember
Peregrine Financial, the firm that just like MF Global, ended up
vaporizing $200 million in client money after it was revealed that its suicide-challenged CEO
Russell Wasendorf was stealing operating cash for two decades under
the nose of the CFTC? Yes? Good. Because in four days, said CEO will be
relaxing in the comfort of his own home. It seems odd to us that the
man who caused hundreds of clients to lose up to all of their life's
savings, will be hanging out on his leather sofa, if only until such
time as a one-way first class ticket to a non-extradition country is
consummated. But who knows: perhaps this is all part of the "New
Fairness Normal" where fraud and crime is if not rewarded, then
certainly ignored.Up
In case you missed it. Markets soared on the back of possibly the darkest day in central-planning banking largesse. Gold and Silver were the biggest winners, though stocks will get all the attention we are sure. Treasuries initially sold off on the news that this was an MBS program (and mortgage spreads collapsed from already record tights) but by the close, Treasury yields had almost round-tripped to pre-FOMC levels. For the first hour or so after the news, all assets moved in sync and correlations soared across risk-assets, but as the afternoon wore on, FX carry consolidated, Treasuries retreated (and 2s10s30s fell), dragging risk lower leaving stocks up near their highs in a world of unicorns and free-money. Notably, it appeared that stocks caught up to high-yield credits' recent exuberance and then found little ability to push ahead. HYG (the high-yield bond ETF) remains notably rich to real bond prices. VIX tumbled under 14% (down almost 2 vols) but notably the term structure of vol collapsed even more - as it seemed the QuEnfinity prompted longer-term hedges to be lifted. A remarkable day in many ways as the S&P crosses over 14x P/E and AAPL over 20% of the Nasdaq-100.
The Punchline In His Own Words: Bernanke Advocates Blowing Asset Bubbles As The Antidote To Depression
If there was one absolutely must see moment exposing everything that is broken with the Fed's brand new policy of QE-nfinity, it was this exchange between Reuters' Pedro da Costa and the Chairman. It explains, beyond a reasonable doubt, that the only goal the Fed now has is to reflate the stock market bubble to previously unseen levels, to focus on generating jobs although not for everyone but only for Wall Street, consequences be damned, because by the time the consequences arrive, and they will (just recall that subprime is contained) they will be some other Fed chairman's problem. Bernake's term mercifully runs out in January 2014.
Citi On QE3 - Less Flavor, More Calories
There
is an ongoing debate among market participants over the reasons for
asset elevation - global growth expectations? liquidity hose-pipes?
European tail-risk reductions? or some combination of the three. Citi's
Steven Englander attempts to uncover the changing face of the Fed's QE
impact - with some very specific findings this time around. Gold is by far the winning asset relative to the S&P and even currencies. This is consistent
with a view that there will be a lot of liquidity in the system but
that neither US nor global prospects are as attractive as they were in the past.Psychoanalyzing The Fed
There is one last irony in Bernanke's constant promotion of his powers to unleash QE. Having talked up the market for years with his promises/threats of QE, the market has priced in ever higher doses of QE, in effect bidding expectations of QE's effectiveness to the sky. Bernanke has lost the power to surprise the market. Having raised expectations to the sky, he must deliver something beyond the stratosphere to surprise the market. But he doesn't have anything capable of matching the absurd expectations he's inflated, never mind exceed them. The only surprise left is a negative one. Chairman Bernanke and his fellow doves will soon realize the consequences of over-promising and under-delivering. It works better the other way around, but now it's too late.EURUSD Hits 1.30 - Unch Year-To-Date (While Gold Up 13.5%)
All
that devastation, all that chaos, and the USD is now equally as
weak/strong as the EUR compared to the start of the year... meanwhile,
Gold is 13.5% stronger versus them both.Fed Releases Latest Economic Forecast Which Will Be Proven 100% Wrong
With a few minutes to go until Ben speaks, the entirely useless projections are out (as noted before by Reuters that the Fed has been constantly wrong in its forecasts). The stunning punchline is that according to the Fed things are not as bad as one would have expected given the dramatic open-ended shart-fest that Bernanke is portraying. In fact, things are improving per the FOMC! Though we assume that these projections are self-defeating since they likely include this new policy. Be interested to see the pre-policy projections.- *FED OFFICIALS SAY GROWTH WILL IMPROVE FASTER THAN JUNE OUTLOOK
- *FED: 2012 GROWTH OF 1.7%-2.0% VS 1.9%-2.4% IN JUNE
- *FED: JOBLESS END OF 2012 AT 8.0%-8.2% UNCHANGED FROM JUNE
- *FED: JOBLESS END OF 2013 AT 7.6%-7.9% VS 7.5%-8.0% IN JUNE
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