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Archive for September, 2012

2012/09/28: QE-Infinity ‘Pie in the Face’ metaphor

September 28, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

The massive central bank QE-Infinity influence already seems to be waning just two weeks after ringleader Buzz Lightyear “To Infinity and Beyond” Bernanke inspired the latest asset price surge. While others either preceded (ECB) or quickly followed the Federal Reserve’s leadership in this area, there is little doubt that initiating the steps the FOMC took two weeks ago was easily the most extensive and extended (i.e. “…highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens…”) central bank commitment to massive liquidity expansion. That said, there is still the question of whether this will do much good with a broken ‘monetary policy transmission mechanism’ (i.e. the real root of economic weakness being in misguided fiscal and regulatory regimes.)

And beyond the sheer consideration that it may fail to influence the economy as expected, there are significant risks of not just that failure but of more general central bank authority dilution. That has been reviewed in this blog and our full research both previous and over the past two weeks. It includes the concerns of some very well respected regional Federal Reserve bank presidents and other economic observers, complaints from other countries this is nothing more than a protectionist, beggar-thy-neighbor ‘currency war’ strategy, and the degree to which (at least so far) the impact is as transitory as many of the skeptics had warned.

It seems that the anticipation of the Fed’s QE3 was much more influential than the actual fact. As we have noted recently, now that the central banks are ‘all in’ on this major liquidity expansion effort, the real risk is it may impugn their ability to effectively intervene in a future crisis. And that is where we draw the analogy with the old Pie in the Face comedy routine, which we will discuss below.

But first, review of another key factor is relevant: the degree to which the Fed becoming ‘the market’ in long-dated US bonds and agency debt is pernicious. Among the most consistent critics of the implementation of this policy has been Newedge Senior Director Larry McDonald. As he noted two weeks ago today (i.e. the day after the Fed QE3 announcement), “There’s a new hedge fund… and it’s the Fed.”

For quite a bit more on that and McDonald’s views on Spain, and that dysfunction in the mortgage securitization market and much else, click into the video clip of his appearance on the Fox business News ‘After the Bell’ show that Friday.  It seems that events since then have borne out his assessment.

And if the Fed is indeed nothing more than a new hedge fund in town…

 

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2012/09/26: Quick Post: Courtesy Brief Update: QE disdain and Spain create equities pain

September 26, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

Short & Sweet again on the specific market comments in this post, because today’s TrendView Brief Update is a pointed discussion of the most important trend implications of the recent sharp criticism of quantitative easing efforts. Along with the tumultuous situation in Spain yesterday, the equities were no longer trusting that the central bank QE-phoria was enough to bolster the markets all on its own.

From a technical trend perspective there is the very sharp downward acceleration of the previously limited correction in the December S&P 500 future after the explosive, QE-driven rally earlier this month. In light of the positive balance in the economic data this week (especially out of the US), it is surely the loss of confidence in the effectiveness of quantitative easing efforts that explains the sudden reversal of the previously firm equities trend activity.

This gets back to the question we have posed on many occasions over the past two years

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2012/09/25: Quick Post: Weekly Perspective available… end of month data and Europe focus

September 25, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

Very short and sweet today, because all of the perspective is still much the same as our expectations last week that QE3 can give equities boost market boost, but does it help the global economy? Even though the equities spent all of last week in a more reactive mode on the downside, they are likely still good as long as they hold some key near-term lower supports.

The quarterly financial futures expiration rollovers are upon us again as well. The early month expiration of the German Bund future was followed last Wednesday by the US T-note and T-bond, as well as Thursday’s S&P 500 future expiration. All of which has an impact due to the discounts to the September contracts.

That said, this is another late week influence week…

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2012/09/24: Quick Post: Weekly Calendar available with QE influence still positive

September 24, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

The weekly Report & Event Calendar is available through the link in the right hand column. The Technical Projections and Select Comments from last week are already available and still relevant via the link in the right hand column. The Summary Perspective on Key Influences will be posted later this evening, and we hope you find that useful as well.

 

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2012/09/21: Quick Post: Courtesy Brief Update: ‘Buzz Lightyear’ Bernanke

September 21, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

Short & Sweet again on the specific market comments in this post, because yesterday’s TrendView Brief Update is a pointed discussion of the most important trend implications of the seemingly ever-expanding quantitative easing efforts. From a technical trend perspective there is the very orderly and limited correction of the December S&P 500 future after last week’s explosive, QE-driven rally.

In light of the negative balance in the economic data this week (especially out of Europe and China), it is surely the confidence in the volume (if not the net effectiveness) of quantitative easing efforts that helps to underpin the equities rally. Other central banks either joined the party (Bank of Japan on Wednesday) or reaffirmed their commitment to monetary largesse this week. Of course, all that is occurring under the cover of leading ‘easy money’ guru Ben Bernanke, who is nothing less than the ‘Buzz Lightyear’ of quantitative easing: “To infinity and beyond.”

And for now he seems to have carried the day in spite of the relatively limited potential for rewards and significant risks accompanying this highly aggressive further liquidity expansion policy. We will have much more for you on that from highly respected sources early next week. But in the meantime…

 

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2012/09/19: Quick Post: US solutions after election? NOT Likely!!

September 19, 2012 Leave a comment

 © 2012 ROHR International, Inc. All International rights reserved.

Very Quick Post indeed after the notice of our Summary Perspective being available earlier today. Yet, it seemed important to share our perspective on some US political matters that impact the potential Fiscal Cliff. Substantially that is the degree to which there is much talk of, Nothing will happen until after the election.”

As we have noted previous, that carries with it the implication (or at least encourages people to draw the inference) that somehow after the election the highly partisan US Congress and Executive branch will find a way to heal their differences, and it will all be put in order. That’s quite a hostage to fortune.

And especially so in the context of one aspect that highlights the warped US political zeitgeist. The Financial Times was kind enough to publish my opinion on that today in the Letters section…

 

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2012/09/19: Quick Post: Weekly Perspective now available… Critical Horizon Thursday AGAIN!!

September 19, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

Very short and sweet today, because a good deal of the perspective is still the same as our assessment in last Thursday’s post Fed Head Extends Anti-Dread Meds. QE3 may be quite a tonic for assets, but whether it encourages any real improvement in the US and global economy is another matter altogether.

Mr. Bernanke seems to have taken the bait from Senator Schumer that he needs to “get to work.” And along with his natural instincts (and possibly a bit of self-serving additional prominence for the Fed), he seems to have caved-in mightily to the sense that the Fed ‘do something’… whether or not it actually accomplishes anything in the real economy.

In fact, there was already an article on the front page of Monday’s Financial Times articulating the degree to which the backlog in mortgage processing by banks may mean there will not be any benefit to prospective home purchasers. And along with that there are not likely to be enough mortgage-backed securities (MBS) created to satisfy the QE3 buying program if it lasts for any length of time. And it is already creating market distortions.

That is also very consistent with the observation by Newedge Senior Director Larry McDonald, “There’s a new hedge fund… and it’s the Fed.” For quite a bit more on that and McDonald’s views on Spain and the dysfunction in the mortgage securitization market, and much else…

 

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