Home > Uncategorized > 2013/10/22: Commentary: QE-Infinity. Good for what ails you…

2013/10/22: Commentary: QE-Infinity. Good for what ails you…

© 2013 ROHR International, Inc. All International rights reserved.

COMMENTARY: Tuesday, October 22, 2013.

QE-Infinity.  Good for what ails you…

 CNBCsquawkEVANSintvwLIESMAN-131021

 …unless you’re the US dollar.

The current situation is easy to assess, even if there are seeming inconsistencies with the classical intermarket influences. And it all boils down to the Fed’s seemingly endless commitment to QE… as in QE-Infinity. It shows up in the multi-asset class response to the quite a bit weaker than expected US Employment report today.

 

And that is all laid out quite clearly by one of the dominant doves (or is that a contradiction in terms?) Chicago Fed President Charles Evens was interviewed by Steve Liesman on CNBC early Monday, and we had already incorporated his views in the top of the week Trendview Video analysis from yesterday morning. He seems to clearly articulate what all of the doves (and those who are neither expecting nor necessarily want any reform in Washington DC) have already implied:

Quantitative Easing to a maximum degree that many joked was Buzz Lightyear Bernanke’s plan to take QE to ‘infinity and beyond” is indeed edging toward ‘QE-Infinity’. While the near-term influences driving that indeed seem rational, where in the world (or more appropriately the whole universe) does the Fed find the rationale to stop?

Two questions came up in the interview that are not part of the concise video synopsis. The first is whether the Fed will actually still be able to stop QE altogether by mid-2014 as it seemed to imply previous, and many expect. That was merely dodged.

Yet more important was Liesman’s pointed question on whether there is a practical limit to the size of the Fed’s balance sheet? It was especially telling in that he even cited levels like $5 trillion? $12 trillion? The almost incredible answer…

[The Weekly Report & Event Calendar is available via the link in the right-hand sidebar.]

 

…from Evans was (paraphrased), “I don’t really see it in those terms.”  And he went on to imply that it could end up anywhere… like “pick a number.” And that was once again based on economic conditions and the state of the employment situation. Breath taking.

That is not to dismiss the degree to which the likely further shenanigans in Washington DC this fall might be a further drag. And there is a rightful focus on the fiscal drags that also most certainly impact the US economy. But isn’t there some point at which the Fed (and the US economy) must grasp the nettle and face the prospect of a bit less central bank stimulus that has not really done much more than enrich the investor class since mitigating the crisis in 2009?

And finally wean the babies in Washington DC (Schumer, etal.) from relying on further nourishment for the economy from Mama Fed to make up for their childish lack of ability to craft incentives for investment and hiring? In fact, at most points over the last several years they have done just the opposite… on both sides of the aisle, where the latest Republican tantrum is merely the most recent dysfunction.

 

Conclusion

Unless and until the Fed actually pares back their now almost maniacal levels of stimulus, nobody will know how the US economy is really doing. In the meantime the govvies rally on bad news right along with the ‘bad news is good news’ equities anticipatory ‘more QE (yum, yum)’ rally extensions. And the US dollar suffers against all other currencies, with the notable exception of the already depressed yen.

For all of our market conclusions we suggest a revisit to the TrendView Video analysis from Monday morning. That also includes a write-up of the trend tendencies for all the asset classes which are being fulfilled by the current influence from the weaker than expected US Employment report today… QE-Infinity is your friend if you’re a bull.

Thanks for your interest.

p.s. As we are just back to blogging after a lengthy hiatus, some of the information on the blog is a bit dated. We will be clearing that up soon, and all of the current critical information (Calendar, Perspective, Technical Projections) is up to date.

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