Post by jeffolie on Sept 14, 2010 11:32:55 GMT -6
Goldman did this by predicting $1 trillion in Treasury bond purchases in November.
=====================================================
One week ago I titled a thread: Gold up, Euro down, stress all around
I wrote: Today's European stress over lying banks may be why the Euro is falling and gold may be rising as an alternative safe haven.
----------------------------------------------------------
Today, one week later: Gold up, Euro up, Yen up
Why the reversal in one week for the currencies, and why the continued rise in GOLD?
Denninger again points to the news and add commentary:
=================================================
Want To Know What Fueled That Reversal This Morning?
It was this....
“We’re talking about a moderate impact,” Hatzius said today in a conference call, discussing the effect should the Fed stage a new round of bond purchases, a policy known as quantitative easing.
“It would be significant enough from the perspective of economic forecasters but wouldn’t really be enough to make the difference between an economic outlook that is deeply negative to extremely positive,” Hatzius said. A total of $1 trillion in bond purchases would improve stability in financial markets and increase real GDP by 0.3 percentage point to 0.4 percentage point, he said.
Of course this is seen as a prediction, given that it came from Goldman, and so everyone piles into everything and sells dollars against it. The result is a FX chart set that looks like this:
And gold, copper, oil, and of course equities all scream higher.
The problem here is that monetization like this does not work.
How do we know? Because we have a nation that did this exact thing over the last 20 years - Japan - and they failed to both stem the slide in their equity markets and exit their deflationary conditions.
Of course the mouth-breathing impact of a move like this in the FX markets is going to be outsized, and it was. The dollar dropped 1% in an almost straight-line from the point where these comments were "released" (and no doubt were front-run - there was some buying done last night in the pit right near the close by some of these banks), but the question becomes one of forcing eventually (that is, the market starts to basically force The Fed to do what it wants, lest it have a "tantrum") and whether the benefits are real or not.
The retail report this morning makes clear that the "benefit" of such activity is not only muted, it is likely absent. Of particular note were the increases in sales of food and gasoline. This is not a positive thing, it is a negative one, as gas prices (and oil prices) have been generally positive over the last few months and I have also noted plenty of food price increases as well, as have others.
Yet we all need to eat, and most of us need to drive. The retail report also showed a slowing in the purchase of electronics - that is, discretionary purchases.
Whether Bernanke recognizes the danger of these sorts of machinations, or whether he's firmly stuck in a world where he can add yet another 30% to his balance sheet without serious negative consequence for the American Middle Class, is open to question.
But before buying into the belief that these moves today are "recovery" based, one had better look at the currency picture, because a quick glance there shows not expectation of recovery, but rather computer-driven panic.
Then you have CSCO "announcing" a dividend. Care to bet whether they'll fund it by issuing 1% debt, thereby basically paying the dividend with nothing? Nice, right up until the debt becomes difficult to roll in a rising rate environment and suddenly you have a wee problem and are forced to either cancel the dividend or cut into operating profits and more importantly, R&D. (For his part Chambers said today "Economy has gotten 'bumpy'; reiterates observing 'mixed signals' in the global economy - investor day comments." Uh, "bumpy" eh?
If Wall Street and CNBS wonder why the retail investor has increasingly given up and refuses to put his money into the stock market, instead choosing to either sit in cash or in bonds (which might be even more dangerous) you only need to look at the raw distortion that was introduced by this "report" - not even an official news release from The Fed, but rather the act of an organization that is seen as "connected" and thus can "push" The Fed around, to see the reason.
Of course nobody is going to investigate whether Goldman was acting in front of their own "news release", and thus whether they effective "made their own news" from which they profited - and whether that's even against the law!
market-ticker.org/
=====================================================
One week ago I titled a thread: Gold up, Euro down, stress all around
I wrote: Today's European stress over lying banks may be why the Euro is falling and gold may be rising as an alternative safe haven.
----------------------------------------------------------
Today, one week later: Gold up, Euro up, Yen up
Why the reversal in one week for the currencies, and why the continued rise in GOLD?
Denninger again points to the news and add commentary:
=================================================
Want To Know What Fueled That Reversal This Morning?
It was this....
“We’re talking about a moderate impact,” Hatzius said today in a conference call, discussing the effect should the Fed stage a new round of bond purchases, a policy known as quantitative easing.
“It would be significant enough from the perspective of economic forecasters but wouldn’t really be enough to make the difference between an economic outlook that is deeply negative to extremely positive,” Hatzius said. A total of $1 trillion in bond purchases would improve stability in financial markets and increase real GDP by 0.3 percentage point to 0.4 percentage point, he said.
Of course this is seen as a prediction, given that it came from Goldman, and so everyone piles into everything and sells dollars against it. The result is a FX chart set that looks like this:
And gold, copper, oil, and of course equities all scream higher.
The problem here is that monetization like this does not work.
How do we know? Because we have a nation that did this exact thing over the last 20 years - Japan - and they failed to both stem the slide in their equity markets and exit their deflationary conditions.
Of course the mouth-breathing impact of a move like this in the FX markets is going to be outsized, and it was. The dollar dropped 1% in an almost straight-line from the point where these comments were "released" (and no doubt were front-run - there was some buying done last night in the pit right near the close by some of these banks), but the question becomes one of forcing eventually (that is, the market starts to basically force The Fed to do what it wants, lest it have a "tantrum") and whether the benefits are real or not.
The retail report this morning makes clear that the "benefit" of such activity is not only muted, it is likely absent. Of particular note were the increases in sales of food and gasoline. This is not a positive thing, it is a negative one, as gas prices (and oil prices) have been generally positive over the last few months and I have also noted plenty of food price increases as well, as have others.
Yet we all need to eat, and most of us need to drive. The retail report also showed a slowing in the purchase of electronics - that is, discretionary purchases.
Whether Bernanke recognizes the danger of these sorts of machinations, or whether he's firmly stuck in a world where he can add yet another 30% to his balance sheet without serious negative consequence for the American Middle Class, is open to question.
But before buying into the belief that these moves today are "recovery" based, one had better look at the currency picture, because a quick glance there shows not expectation of recovery, but rather computer-driven panic.
Then you have CSCO "announcing" a dividend. Care to bet whether they'll fund it by issuing 1% debt, thereby basically paying the dividend with nothing? Nice, right up until the debt becomes difficult to roll in a rising rate environment and suddenly you have a wee problem and are forced to either cancel the dividend or cut into operating profits and more importantly, R&D. (For his part Chambers said today "Economy has gotten 'bumpy'; reiterates observing 'mixed signals' in the global economy - investor day comments." Uh, "bumpy" eh?
If Wall Street and CNBS wonder why the retail investor has increasingly given up and refuses to put his money into the stock market, instead choosing to either sit in cash or in bonds (which might be even more dangerous) you only need to look at the raw distortion that was introduced by this "report" - not even an official news release from The Fed, but rather the act of an organization that is seen as "connected" and thus can "push" The Fed around, to see the reason.
Of course nobody is going to investigate whether Goldman was acting in front of their own "news release", and thus whether they effective "made their own news" from which they profited - and whether that's even against the law!
market-ticker.org/