QE

Stacking The Next QE On Top Of A $4 Trillion Fed Floor

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By Daniel Amerman – Re-Blogged From Gold Eagle

The Federal Reserve is currently communicating to the markets that it will likely pivot, and pause two strategies. The first pivot is to stop increasing interest rates. The second pivot is to stop unwinding the Fed balance sheet.

While the interest rate pause is getting the most attention – the balance sheet pause could be the most important one for investors over the coming years.

As explored herein, the impact of pausing the unwinding the balance sheet is to create a new floor at about $4 trillion in Federal Reserve assets. And if the business cycle has not been repealed and there is another recession – the Fed fully intends to go back to quantitative easing, potentially creating more trillions of dollars to be used for market interventions, and to stack another round of balance sheet expansion right on top of the previous round.

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Why Housing Won’t Bounce With Lower Rates

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By Dave Kranzler – Re-Blogged From Silver Phoenix

“Our advice is to own as little exposure U.S. equity exposure as your career risk allows.” – Martin Tarlie, member of portfolio allocation at Grantham, Mayo, Van Otterloo investment management.

The following is an excerpt from the latest Short Seller’s Journal:

Economy is worse than policy makers admit publicly – Less than four months ago, the FOMC issued a policy statement that anticipated four rate hikes in 2019 with no mention of altering the balance sheet reduction program that was laid out at the beginning of the QT initiative. It seems incredible then that, after this past week’s FOMC meeting, that the Fed held interest rates unchanged, removed any expectation for any rate hikes in 2019, and stated that it might reduce its QT program if needed. After reducing its balance sheet less than 10%, the Fed left open the possibility of reversing course and increasing the size of the balance sheet – i.e. re-implementing “QE” money printing.

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The Fed’s Failure is a Fait Accompli

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By David Haggith – Re-Blogged From The Great Recession Blog

Here is a single chart that proves how completely the Fed’s end-game for its recovery failed, which means the fake recovery, itself, is failing. It’s not hard to figure out what happened here.

Talk about a euphoric rise at the end of the Trump Rally heading into 2018, followed immediately by a massive blow-off top. When you compare the size of the blow-off to the total size of the S&P 500, it looks almost like Mount Saint Helens blew its top off.

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Federal Reserve Confesses Sole Responsibility for All Recessions

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By David Haggith – Re-Blogged From Great Recession Blog

In a surprisingly candid admission, two former Federal Reserve chairs have stated that the Federal Reserve alone is responsible for creating all recessions in the United States.

First, former Fed Chair Ben Bernanke said that

Expansions don’t die of old age. They get murdered.

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Silver Price – 1993 And 2001 Repeat

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By Gary Christenson – Re-Blogged From Silver Phoenix

The M2 measure of money supply has increased about 6.7% per year since 1971 when President Nixon severed the last hint of gold backing the dollar. The subsequent deluge of digital dollars levitated prices for oil, trucks, hamburgers, the S&P 500 Index, silver and almost everything else. Examine the log scale graph of M2 and smoothed silver prices. M2 rises, while silver prices increase to unsustainable levels, fall too low and then rise again.

In late 2018 silver prices are too low! They hit bottom in December 2015 and have risen since then. First slowly, then rapidly, as Hemingway said…

Analysis: Silver prices are too low.

Silver prices rise along with M2, but they are now well below trend. This graph shows that silver could rise above $30 in 2019.

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Has The Fed Already Gone Too Far?

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By Michael Pento – Re-Blogged From PentoPort

It is crucial for investors to understand that the Federal Reserve has not yet turned dovish and the Fed “Put” it not yet in place. Wall Street sometimes hears what it desperately needs, but that does not make it fact. While Jerome Powell has moved incrementally towards the dovish side of the ledger in the past few weeks, the Fed is still firmly in hawkish territory. If, however, Mr. Powell was actively reducing the Fed Funds Rate (FFR) and expanding the balance sheet, then we would have a dovish Fed. However, by just indicating that the FOMC might be close to finishing its rate hiking campaign, while still selling nearly $50 billion of bonds every month from its balance sheet, the Fed is still tightening monetary policy–and in a big way.

However, “The Fed is now dovish, so it’s a good time to buy stocks” mantra from Wall Street is a dangerous one indeed. This argument is false on two fronts. First, as already mentioned, Jerome Powell is still tightening monetary policy through its reverse QE process. Second, the fact that the Fed may be cutting rates soon doesn’t mean the stock market automatically goes up. The Fed began cutting rates in September of 2007 and reached 0% by December of 2008. Was it a good time to buy stocks during that time? No, it was a very dumb idea that cost you half of your investable assets. The market actually peaked around the same time the Fed began cutting rates and didn’t bottom until March 2009, three months after interest rates hit 0%.

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Some Predictions For 2019

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By Michael Pento – Re-Blogged From Pento Portfolio Strategies

Bond Yields Continue to Fall in First Half of Year

The epoch bond bubble continues to build and become a dagger over the worldwide economy and markets. Wall Street Shills are fond of claiming that global bond yields remain at historically low levels due to central bank manipulations, but this argument is no longer tenable. It was once true, but QE on a net global basis has now gone negative. And the data shows the amount of U.S. publicly traded debt relative to GDP is much greater today than it was prior to the start of the Great Recession—even after adjusted for the size of the Fed’s balance sheet–in other words, taking into account all the debt the Fed has purchased and is still rolling over.

The amount of publicly traded debt in the U.S. has soared to 58% of GDP. This is up from 29% in 2007 when the U.S. 10-year Note was yielding 5%. The Fed is now selling $50b of bonds each month, with an extra $7.8T in publicly traded debt that it doesn’t own; and that equates to nearly 2x the amount of debt compared to GDP than what existed just prior to the Great Recession. This debt must now be absorbed by the private market and at a fair market price, instead of just purchased mindlessly by the Fed…and yet yields are still falling. This means investors are piling into sovereign debt for safety ahead of the global economic crisis even though they understand that debt is, for the most part, insolvent.

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